BUPA threatens to leave Irish market

BUPA yesterday dramatically warned that it will take an “unequivocal decision” to immediately withdraw from the Irish market if risk equalisation goes ahead.

The private health insurance company told the High Court that if risk equalisation was triggered on January 1, it would mean that the company would have to pay about €161 million to the VHI during the two to three years it would take for its legal challenge to run its course.

BUPA claimed that this figure would be almost €100m more than its estimated profits of €64m during the same period. The company warned it would have no option but to pull out of the Irish market with immediate effect.

Tánaiste and Health Minister Mary Harney announced on December 23 that she intended to introduce risk equalisation for the first time. Under the scheme, the two other health insurers, BUPA and Vivas, will be compelled to pay up to 33m yearly to subsidise the VHI’s older customer base.

But BUPA, which employs almost 300 people in Fermoy and Dublin, successfully sought an injunction later that day preventing any steps being taken to implement it.

The temporary injunction was granted pending the substantive hearing of BUPA’s case against risk equalisation, which is due to commence in the High Court on February 7. The company argues the legislation and regulation both contravene EU law and the Constitution.

Yesterday, lawyers on behalf of the State and Ms Harney applied to overturn or vary the injunction to allow the scheme go ahead from New Year’s Day. After some six hours of submissions from both sides, Ms Justice Finlay-Geoghegan reserved her ruling on the application to this morning.

Health insurance is community-rated in Ireland which means that premia remain the same for all age groups. But newer entrants like BUPA and Vivas attract much more younger members than the VHI.

Risk equalisation was introduced to compel other private health insurers to compensate the VHI for the higher costs associated with its older customer base.

The State-owned company contends it pays out €93 in claims for every €100 in premium income, compared to €70 for every €100 for BUPA. The absence of risk equalisation, it argues, would give BUPA and Vivas an uncompetitive advantage and lead to losses of €25m for the VHI in 2006.

BUPA’s counsel, Michael Collins SC, submitted that it could take up to three years for its case to be completed.

He asked for a stay to be put on the scheme.

BUPA argued that it could not expose itself to the potential liability of having to pay €161m to VHI as it awaited the final determination of the Courts.

The State said that BUPA entered the Irish market in the full knowledge that risk equalisation might be introduced in future.

Opposition health spokespersons, including Labour’s Liz McManus and the Green Party’s John Gormley, have claimed that BUPA made windfall profits in the Irish market.

The company’s profits were €17m in 2004.

However, the company denies its profits were excessive.