VHI risk equalisation demands condemned

STATE-OWNED VHI Healthcare, the dominant private medical insurer, was accused yesterday of being anti-consumer.

The introduction of risk equalisation - whereby Bupa would be forced to pay millions in compensation to VHI because of the aging profile of its customers - would be bad for consumers and kill competition and innovation, according to VHI’s two main competitors.

Bupa Ireland and Vivas Health were appearing before the Joint Committee on Health & Children which is examining reform of the Irish insurance market.

After presenting its case to the Oireachtas body late last month, VHI launched a consultant’s report yesterday backing its claims. It continued to insist risk equalisation was essential for competition.

Bupa took on the VHI monopoly in 1997 and now claims a 20% market share. According to the Health Insurance Authority, 6% of former VHI members have moved to Bupa. Vivas entered the market last October.

Bupa managing director Martin O’Rourke said risk equalisation was unwarranted and unproven, as well as being against the consumer interest, market stability and competition.

“No adequate regulatory impact analysis has been carried out, there is no threat to market stability and any VHI problems are self-inflicted,” he charged.

If risk equalisation was implemented it could mean Bupa paying an estimated risk equalisation payment of over €200 million over the next four years to its competitors.

Risk equalisation was a subsidy, unconnected with consumer prices or community rating. It was a tax on efficiency and did not take account of revenues or risk.

Based on its last set of accounts, he said, VHI’s average subscription was €515, while Bupa’s comparable subscription was €365.

Mr O’Rourke denied Bupa ever threatened to quit the Irish business. “We can only be pushed out of the market. We have no intention of pulling out. There is no company on earth that can make a profit of €17m and can pay out €34m.”