Health insurance - Loophole in law could hurt Harney
Having enjoyed a monopoly for years, it appears the special status of the VHI group is on the verge of coming to an end. Financially, the consequences for more than 1,500,000 million subscribers would be dire if competing companies succeed in exploiting a loophole enabling them to avoid paying compensation to VHI.
From the public’s viewpoint, there is now a worrying cloud of uncertainty hanging over the health insurance market. Politically, Health Minister Mary Harney is in the dark as she awaits advice from the Attorney General on the legal implications of the threat by VIVAS to follow the example set by the Quinn Group.
Billionaire businessman Sean Quinn’s takeover of BUPA’s business in Ireland was made on the strength of legal advice that he could avoid paying the controversial community rating subsidy because, in effect, he is a new entrant to the market. The sense of euphoria that accompanied the lifeline for BUPA’s 500,000 subscribers and for 300 workers and their families, has been replaced by uncertainty among VHI subscribers.
Having carried out a “hit and run” on the Irish market, BUPA pulled out with handsome profits just in time to avoid having to meet the deadline for risk equalisation payments.
When the market was opened to so-called competition, the Government introduced a community rating regulation designed to cushion the VHI. Called “risk equalisation,” it was intended to force competitors to use profits from younger and healthier customers to subsidise VHI’s older client base.
Effectively, under community rating, a three-year deadline was for companies entering the Irish market after which they would be obliged to subsidise the VHI. Significantly, the regulation was endorsed when the High Court rejected a legal challenge from BUPA, forcing it to pay VHI €161 million in the first three years of risk equalisation.
As Ireland’s longest running health insurer, VHI has more elderly people on its books compared with more recent entrants to the market which have effectively cherry-picked younger clients. It goes without saying that they are more profitable since they are less likely to fall ill than older VHI subscribers.
Not surprisingly, loud demands for both Quinn and VIVAS to pay community rating charges on existing customers are coming from VHI.
If it turns out to be the case that a loophole exists, the stark reality is that VHI customers, already paying through the nose for cover, will face the bleak prospect of having to fork out even more money for health insurance.
Politically, these are worrying times for Ms Harney. Beset on all sides by the problems of the health service, she is nervously awaiting legal advice from the Attorney General on whether Sean Quinn has really found a loophole in the law and whether VIVAS can also avoid making risk equalisation payments.
If the argument goes against the minister, it means her vision of “a properly functioning health insurance market with community rating” will be shot down. With an election on the horizon that would be spell disaster for the embattled PDs.
For the Government, the possibility of VIVAS, or for that matter any other health insurer, changing its structure to avoid paying risk equalisation, would make a mockery of the community rating concept.
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