BUPA: Risk equalisation scheme is 'unconstitutional', court hears

The health insurance company BUPA will have liabilities of €161m over three years and would be forced out of the Irish medical insurance market if the risk equalisation scheme is introduced by Health Minister Mary Harney, the High Court was told today.

Mr Paul Sreenan SC, for BUPA, told the court that the scheme, which would involve BUPA paying a subsidy to its main rival VHI to compensate for the VHI having a greater number of high risk, older and more expensive subscribers, would expose BUPA to losses of €11mthis year.

He said that over three years it would involve liabilities of €161m compared to an expected revenue of €64m.

"Looking at the figures one can see there is no realistic prospect of BUPA remaining in the Irish market nor would they do so. These liabilities would force BUPA out of the Irish market,'' he added.

Mr Sreenan was opening proceedings in which BUPA Ireland Ltd and BUPA Insurance Ltd are challnging the legality of the risk equalisation scheme under Irish and European law. The Minister for Health Mary Harney announced on December 23 last that the scheme would commence on

January 1.

Mr Sreenan said that under the 1994 Health Insurance Act the Minister was given the power to introduce the risk equalisation scheme but despite recommendations from the Health Insurance Authority she refused to do so until December 23 last year.

He said that the Minister is also the Minister responsible for the VHI who are BUPA's main competitor in the private medical insurance market and who are the dominant player in that market.

Mr Sreenan said it was BUPA's case that the scheme was unconstitutional and a breach of EU law because it breached fundamental directives on competition.

He said the risk equalisation scheme created machinery which would allow the Minister to take the entirety of BUPA's profits and give it to their main competitor to ensure its own position and its

ability to compete with any new entrant in the market.

He said that the Euoropean Commission was notified in 2003 about the risk equalisation scheme and gave it its clearance but made it clear that it was not taking a position on its legality.

BUPA has challenged the decision at the European Court in Luxembourg and that action is

awaiting determination by that court.

The case is continuing before Mr Justice Liam Mc Kechnie and is expected to last six weeks.