Risk equalisation essential to VHI future, chief warns
Vincent Sheridan is also confident that the Competition Authority will not recommend the break-up of the VHI. Its report is with Health Minister Mary Harney and is expected to be published next week.
The Quinn Group, which last week took over BUPA, said that as new entrants to the market they could avail of the derogation from paying into the risk equalisation scheme for three years.
The scheme allows insurance companies to operate community rating under which young and old people pay the same rates, despite elderly customers having more claims.
Under the second part of the scheme — risk equalisation — all insurance companies pay a percentage of the premiums from their younger customers into a fund operated by the Health Insurance Authority. Companies can then draw on the money to compensate them for having older and more expensive customers.
The VHI, with more than 80% of the market, also has almost all the country’s older insurers on its books. The scheme was due to kick in this year with BUPA paying about €60 million into the fund, and the VHI expected to benefit from it.
But BUPA, having lost its Court challenge to risk equalisation, announced it was pulling out of Ireland before it was due to hand over the money.
Last year the VHI made a loss of about €30m and Sheridan said it could not continue to survive such losses.
“We have had ten years already of carrying community rating, and now its almost too late.
“VHI cannot continue for too long making this loss. Risk equalisation is essential to us. We cannot hold out any longer”, he said.
The Court and the Health Insurance Authority said the risk equalisation was essential to allow community rating to operate, and this was also the experience of other countries with a similar system.
The Competition Authority has recommended that the Government break up the semi-state VHI.
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