Insurer says it would be forced to quit market

THE health insurance company BUPA will have liabilities of €161 million 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 yesterday.

Paul Sreenan SC, for BUPA, told the court the scheme, which would involve the company 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 €11m this 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,” he said.

He said the VHI gross premiums in the year to the end of June 2005 were €890m and its gross underwriting surplus for that period was €25m. If risk equalisation was introduced BUPA would have to transfer €31m, bringing VHI’s profits up to €56m.

BUPA, with 417,000 members, earned premiums of €163m and its gross underwriting surplus was €22m. If risk equalisation was introduced BUPA would have to transfer €33m, causing a loss of €11m.

Mr Sreenan was opening proceedings in which BUPA Ireland Ltd and BUPA Insurance Ltd are challenging the legality of the risk equalisation scheme under Irish and European law.

BUPA is claiming the imposition of the risk equalisation charges is an interference with the right to private property under Article 43 of the Constitution and is a barrier to carrying on its business.

BUPA is also claiming that the imposition of the scheme is contrary to Articles 43 and 49 of the EC Treaty, because it limits its right of establishment and the freedom to provide services.

The State is claiming the risk equalisation scheme is constitutional and in accordance with European law.

Health Minister Mary Harney announced on December 23 last that the scheme would commence on January 1 last.

Mr Sreenan said the European Commission was notified in 2003 about the risk equalisation scheme and gave it its clearance, but made it clear 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.

Mr Sreenan said that at the end of June 2005 BUPA had 417,000 members, or 21% of the market, the VHI had 1.565 million members or 77%, and VIVAS had 6,500 members or 0.3%. With a number of other private schemes, the number of people in the market was just under two million.

He said BUPA employs 300 people at Fermoy, Co Cork.