BUPA moves to block health cover scheme
The injunction was sought in the immediate aftermath of a Government decision that would force BUPA to pay a multimillion euro annual subsidy to competitors VHI from January 1.
BUPA claims this would make its Irish business unviable because it would have to transfer funds estimated at more than twice its annual profits to the VHI.
In a statement yesterday, BUPA said it had taken out the High Court injunction to protect the interests of its customers, its 300 Irish-based staff and its business. The injunction is to prevent the introduction of a scheme known as risk equalisation (RE) under which BUPA would have to compensate the VHI, which has an older and less profitable customer base.
If the interim injunction remains in place, RE cannot be introduced until after February 7, when the High Court is due to hear a BUPA challenge against the introduction of the scheme.
Yesterday Health Minister Mary Harney, who triggered the scheme, said she was seeking the advice of the Attorney General.
If it is overturned, BUPA is looking at subsidising the VHI to the tune of €16.5 million for the first year of RE and €30m the following year. Insurers VIVAS said Ms Harney’s decision to trigger RE would “damage innovation and competition in the market and consumers are the ones that will ultimately pay”. However, VIVAS would not be forced to compensate the VHI until October 2007 at the earliest because of the rules governing RE.
Yesterday, Tom Murray, head of consulting with business advisers Farrell Grant Sparks, said if RE is introduced it should ensure “some level of reduction in premiums across the board”. His argument was based on BUPA and VIVAS having to price more competitively in the face of RE, rather than simply tracking VHI prices, as is current practice.
However, Vincent Sheridan, VHI chief executive, said while premiums were unlikely to come down, RE would “certainly act as a curb to the rate of increase”.
Over the past three year, VHI has increased premiums by 8%, 3% and 12.5%, respectively.
Ms Harney’s decision yesterday to trigger risk equalisation represents a u-turn on the position she adopted in June. She said she had waited until now because she wanted to have legislation in place which would force the VHI to operate more competitively.
The legislation, approved last week, will require the VHI to operate under similar conditions as apply to other insurers in the market, such as building up a level of reserves necessary to operate as a public limited company in six years’ time.
