BUPA loses first battle over massive payout to VHI

HEALTH insurer BUPA Ireland has failed to block the introduction of a scheme which will force it to pay millions of euro annually to rival insurers VHI.

However, the company’s threat to withdraw from Ireland subsided yesterday after BUPA Ireland said it was satisfied it would not have to begin compensation payments immediately.

Instead the private health insurer said it had a stay on payments until completion of its legal challenge to the validity of risk equalisation - a scheme which will require BUPA Ireland and VIVAS, who have young clients, to subsidise the VHI for its older, less profitable customer base. The challenge begins on February 7 and is expected to last around six weeks.

If BUPA loses its case in February, the company will have to pay the risk equalisation levy that built up while the case was underway.

BUPA believes the action will end up in the Supreme Court, and possibly in the European Court of Justice, and estimates the entire proceedings could take two to three years, leaving potential risk equalisation liabilities of up to e161 million.

Earlier this week, BUPA Ireland issued a stark warning that it would pull the plug immediately on its Irish operation if risk equalisation went ahead.

Yesterday it said risk equalisation would make its business “unviable” but that it would “continue to make every effort to protect the interests of our 440,000 customers and the almost 300 people working in the business”.

Fianna Fáil TD for East Cork Ned O’Keeffe said if BUPA Ireland was to pull out of its Irish operation, it would “devastate Fermoy”, where its Irish arm is based, and have “dire consequences for North Cork”, which has already suffered job losses at Dairygold and with the closure of the sugar plant in Mallow.

Prof Ray Kinsella, director of the centre for insurance studies at UCD, and long-time critic of risk equalisation, said the health insurance market in Ireland was “quite extraordinary”, given that VHI still has 80% of the market 10 years after deregulation and that new entrants VIVAS and BUPA have to fight their corner in the courts.

The Tánaiste welcomed the High Court decision and Labour party health spokesperson Liz McManus said the decision would level the playing field for the VHI in competing for new members.