BUPA can profit despite risk equalisation, says VHI chief

BUPA Ireland could continue to make a profit and subsidise VHI’s older customer base, the head of the State-sponsored insurance body insisted yesterday.

Health Minister Mary Harney is to meet BUPA Ireland on Tuesday.

The insurance body requested the meeting on Thursday after the High Court rejected their claim that risk equalisation was anti-competitive and illegal.

There is now uncertainty over whether BUPA will continue in the Irish market or whether it will appeal the High Court ruling to the Supreme Court.

The minister has promised to bring forward measures that will remove several distortions in the market that operate to favour VHI.

Ms Harney plans to introduce legislation putting VHI on a commercial footing and requiring it to meet the same solvency requirements as other firms regulated by the Financial Regulator.

VHI chief executive Vincent Sheridan said the €161 million being mentioned as the amount BUPA would have to pay into the risk equalisation fund over the next three years was “off the wall”.

He said the Health Insurance Authority (HIA) had already told health insurers the amount to be paid into the fund for the first six months of this year was €7.7m.

He reckoned that BUPA would have to pay €80m over the three-year period and added that the scheme would only compensate the VHI for about 50% of the increased risk they took on.

He also believed BUPA would come to regret their statement after the High Court ruling that they could not operate under the risk equalisation scheme without incurring a loss.

“Of course they can continue to make profits and pay into a risk equalisation fund,” he said.

The HIA had already addressed the issue of whether BUPA could make a profit in the market and concluded they could but would have to raise their prices by 7%.

Mr Sheridan said the profit rate would be the same as that achieved by the company in Britain.

A spokesperson for BUPA Ireland said they would not be making any comment in advance of their meeting with Ms Harney.

The High Court will discuss the matter of costs involved in BUPA’s action and the stay on risk equalisation payments early next month.

A date will also be decided by the High Court next month for second judicial review hearing on the timing of Ms Harney’s decision last December to trigger risk equalisation in January 2006.