Risk equalisation plan - Bupa void is unhealthy for clients

WITH companies lining up for Bupa’s lucrative business, following its decision to pull out of the Irish health insurance market, the British-owned group yesterday lost another hand in the high-stakes poker game surrounding the controversial issue of risk equalisation.

Under the risk scheme, Bupa was compelled to fork out around €1 million a week, effectively using profits from its younger, healthier customers to subsidise the cost of older VHI clients who are far more likely to claim on their policies.

Pending a Supreme Court appeal, yesterday’s High Court ruling means the Fermoy-based group, employing 300 people, will have to pick up the legal costs of the State, VHI and the Health Insurance Authority, a whopping €5 million bill for its unsuccessful court action against the risk equalisation scheme.

As things stand, three companies are vying to take over Bupa’s Irish business following its sudden decision to withdraw from the market in December, leaving its 450,000 customers mired in confusion.

Up to now, however, Bupa has declined to engage in talks with any of the interested parties, a possible sign it wants to retain its valuable foothold in the Irish market where it has been accused of cherry-picking younger customers, thus placing VHI at a competitive disadvantage.

Doubtless, its future in Ireland will ultimately hinge on the outcome of behind-the-scenes negotiations with Government. But if it sticks to the decision to leave, the question facing whoever takes on Bupa’s book is whether they would be liable for risk equalisation since January 2006, when the scheme began, or if payments would start on taking over the business.

Any lingering doubts about the profitability of Bupa’s market share are effectively dispelled as Vivas, Axa Insurance and an Irish-owned group, believed to be Quinn Direct, are busy knocking on the door of Health Minister Mary Harney in the hope of taking on Bupa’s customers.

In the latest twist in the saga, Vivas Health, the state’s smallest insurer, has confirmed it made several approaches to Bupa about taking over its 450,000 customers who have been left in something of a vacuum. As an integral part of its bid, Vivas wants the Government to clarify its position on risk equalisation and to say if a three-year exemption from the scheme would apply.

The latter is an unlikely scenario, however, as Ms Harney has already indicated that a new company acquiring all Bupa’s existing customers would not be eligible for the normal exemption from risk equalisation for the first three years.

Given the complexities of the insurance market, the answers to these and other questions will not become clear until Ms Harney has the results of an expert review on the potential profitability of health insurance in the context of risk equalisation.

In the meantime, the challenge facing VHI is to build up financial reserves as required by Government. Presumably, this is preparatory to privatising the State-owned group which, until Bupa’s arrival on the scene, had a virtual monopoly of over 1,500,000 customers.

Criticism of Bupa for not facilitating the smooth transition of its customers to another company is fully justified. While the question of their immediate cover may be assured, it is unconscionable that hundreds of thousands of people have been left facing an uncertain future, particularly at a time when the cost of health insurance in the Irish market is becoming ever more punitive.