LONDON-U.K. employers that offer private health care benefits could see premiums stabilize now that two more health insurers are establishing preferred provider networks.

PPP healthcare group P.L.C. and Norwich Union Healthcare announced partnerships with hospitals earlier this month in a bid to catch up with British United Provident Assn., the country's largest private medical insurer.

BUPA set up its own preferred provider network of 170 hospitals last April. Employers that offer employees only the preferred provider network option generally pay lower premiums than companies that do not require their employees to use the network providers.

Premium rates, employee copayments and scope of coverage can vary according to options the employer chooses.

Norwich Union Healthcare is negotiating with the National Health Service Trust Federation, the U.K. state health care provider, about forming a joint venture. Additionally, Norwich has linked up with Nuffield Hospitals, an independent U.K. network of 34 private hospitals, to form a preferred provider network and is seeking additional preferred provider partners to cover geographic areas the Nuffield group does not serve.

"Policyholders will receive no immediate benefits," said a Norwich Union Healthcare spokes-woman, "but it (the deal with Nuffield) should keep health care costs down so premiums will not go up as fast as they otherwise would."

PPP estimates it will see cost savings of 15% from the network it launched earlier this month. The network comprises four hospitals in Bournemouth, Poole, Nottingham and Sheffield, within a 160-mile radius of London.

PPP plans to form its own network of 150 hospitals during the next two years, working with a much smaller group than the 650 hospitals with which it deals now. The smaller network will allow the insurer to "build up a relationship with hospitals," said a PPP spokesman. Both private hospitals and NHS "pay beds"-private beds in public-service hospitals-will be invited to bid for a place in the network and will be judged on commitment to quality and cost.

For policyholders who elect to use the preferred provider hospitals, PPP has guaranteed a one-year price freeze on premiums, beginning at employers' next renewals, which it estimates will save the policyholder 15% compared with those who continue to use hospitals outside the network.

PPP's four private hospitals in London, which it owns in a joint venture with U.S. health care provider Columbia/HCA Healthcare Corp., will be incorporated into the network.

PPP and Columbia paid about (British pounds) 50 million ($85.6 million) each for the four central London hospitals last October and last month the Department of Trade and Industry approved the deal. The organization is looking at future hospital acquisitions, the PPP spokesman confirmed, though no deals are imminent.

PPP should reap substantial cost savings by implementing the network, said the spokes-man. Private hospitals in the United Kingdom are running at about 50% occupancy-some as low as 20%-with high fixed costs, he explained. Higher occupancy rates from directing customers toward the network hospitals should make policyholders' premiums more stable.

Meanwhile, BUPA Ireland, based in Fermoy, has reached an agreement with the Irish Department of Health to continue trading in the country (BI, Jan. 13).

The Irish health minister, Michael Noonan, had objected to what the regulators thought was the packaging of a non-community-rated health plan with a community-rated plan. Ireland requires community rating on health care coverage products.

A spokesman for BUPA Ireland said the company still is selling the community-rated Essential Hospital Plan and a plan that pays out cash for any purpose, based on the number of days a patient stays in the hospital, and is developing new plans for the market. Under the agreement, the marketing materials will make it clear the two plans are not linked.