BUPA pull-out - State should not be forced to alter plan

Where the commercial viability of one firm came into conflict with the greater good of the wider community, there was really only going to be one winner.

The withdrawal of BUPA Ireland from the health insurance market was a development not entirely unexpected because the company had signalled its intention to pull out if it were compelled to pay risk equalisation.

That it has come to its decision will be bemoaned as being detrimental to competition, but risk equalisation is necessary and equitable.

It is true for BUPA managing director Martin O’Rourke to assert that Irish consumers were the real losers as the market would be restored to a virtual monopoly, but the company was aware of the financial risk it ran.

Risk equalisation was established before the arrival of BUPA here, with legislation having been enacted in 1994. As well, the company is successful in Australia, a country which operates a policy of risk equalisation, where it enjoys over 10% of the market.

Therefore, the company made a decision to set up here cognisant of the financial risks it was likely to incur if the charges were applied, which they were.

Significantly, in the unsuccessful High Court action which BUPA took to suspend the introduction of risk equalisation, this was a factor referred to by Ms Justice Mary Finlay.

Currently, the VHI has about 80% of the market share here but that customer base includes older customers. By contrast, BUPA’s age profile of its 475,000 customers is much younger, so its costs are considerably less.

It would claim that risk equalisation is a subsidy scheme which protects the market dominant VHI from competition. That is a particularly narrow view of a method of protecting elderly people from expensive insurance coverage, and spreads the financial burden more equitably.

With its share of the market, BUPA maintains that the €161 million it would be required to pay the VHI over the next three years would be unsustainable.

Yet, VIVAS, which will remain in the insurance market with the VHI, will eventually face the risk equalisation payment and is making provision for it.

Understandably, its chief executive Oliver Tatton was critical of the advantages which the VHI enjoys, including its rather worrying ability to operate insolvently until at least 2012. There is also the issue of its exemption from consumer protection regulation, among others.

Some peace of mind could be afforded by VIVAS, in offering BUPA customers who switch to them no gap in cover and no medicals.

It is unfortunate that BUPA is to vacate the Irish market, and a matter of no small inconvenience for its customers, but the Government cannot, and should not, be forced to remove a strategy which ensures fairer insurance for all.

The most important consideration, in light of the decision by BUPA Ireland to withdraw from the health insurance market, is the predicament imposed on its 300 staff and 475,000 customers.

Its customers have an alternative insurer, or insurers, but the workforce face a bleak future, not to mention the economic impact which will be felt in Fermoy.