VHI demands BUPA pay bill of €52m per year

HEALTH insurance giant VHI last night demanded the Government clear up the law on its rival insurers so that BUPA Ireland will have to pay its €52 million a year community rating bill.

Under laws to ensure everyone pays the same premium irrespective of age, BUPA is liable to pay the sum to compensate VHI for its higher number of older and more expensive customers.

But Quinn Direct, which is buying BUPA, has insisted it does not have to pay the sum as it is a new insurer and is entitled to a three-year payment holiday.

VHI chief executive Vincent Sheridan yesterday called on Health Minister Mary Harney to clarify the law on risk equalisation so all insurers in the health markets were clear about their obligations.

“Quinns have said they don’t have to pay because there is a loophole in the legislation but the minister must decide if the loophole exists or not,” said Mr Sheridan.

“If it doesn’t exist then there’s no problem (for us) but if it does then the Government needs to make it clear they will amend the legislation with immediate effect.

“If they don’t amend the legislation then community rating as a public policy objective will no longer exist.”

Last month Health Minister Mary Harney said anyone taking over BUPA would have to shoulder the costs of community rating.

But when Quinn Direct announced this week it was taking over BUPA, the minister said the issue would have to be decided by the regulator, the Health Insurance Authority (HIA).

The HIA said it had yet to come to a decision as it was awaiting formal notice from Quinn Direct about its intention to become a private health insurer.

The authority added that it could only apply the law and had no discretion on whether Quinn Direct was exempt from risk equalisation or not.

But VHI called on the Government to amend the law if necessary to support the policy of risk equalisation, which was upheld by the High Court last year.

Mr Sheridan said without risk equalisation the concept of people paying the same premiums regardless of age would disappear.

The health market would become prone to “hit-and-run” insurers, who would enter the market for three years, make money and then sell the business to avoid paying community rating liability, he said.

Health insurance consultant Aongus Loughlin yesterday said he believed Quinn Direct was in the private health insurance market for the long term.

As a health insurer Quinn Direct would have to meet certain conditions laid down by the Financial Regulator, which would also want to see evidence of commitment, he said.

“From a personal point of view no-one goes into the health insurance market for a quick turnaround.

“It’s not that sort of business and takes time to build up and even though they’re buying BUPA’s book of business it’s still going to be a learning curve for them.”

AIB-backed health insurer Vivas also called for an urgent Government review of the health market to sort out properly the problem of risk equalisation.

Chief executive Oliver Tattan said the Government must also tackle VHI’s dominance of the private healthcare market, saying its strength was preventing competitors entering the market.

He said he saw a role for risk equalisation in the future, but only when VHI came under the same regulations as BUPA and Vivas or if VHI’s market share was reduced.