BUPA risk equalisation demand four times too much, says insurance study

BUPA’S subsidy payments to health insurance rival VHI could have been quartered if a fairer method of calculation was used, a consultant’s report has claimed.

The report by Goodbody Economic Consultants says the €33 million annual demand on BUPA, which prompted the company to announce its withdrawal from Ireland, could have been reduced to as little as €8.3m.

The report was commissioned by VIVAS health which faces making its first annual payment to VHI under the controversial risk equalisation scheme in October this year. Its chief executive Oliver Tattan said yesterday his company expected demands of at least €20m over the next three years.

He called on the Minister for Health to act on the risk equalisation controversy before the general election. “We must urgently look for some kind of clarity. Are we welcome in this market or are we not?” he said.

The Goodbody report found that the health insurance market in Ireland was uncompetitive, largely due to risk equalisation.

It also found that former State monopoly, VHI, which still has more than 80% of the market, has the added advantages of not having to make a profit and not having to maintain solvency reserves at the same level as the two private insurers.

Report author John Finnegan said risk equalisation should be in accordance with the internationally recognised Herfindahl-Hirschman Index (HII), which measured competition in markets. Applied to BUPA risk equalisation payments, the index would reduce the amount demanded by three-quarters.