Rushed law will backfire on customers

THE uncertainty pervading Ireland’s health-insurance market has given way to a profound sense of relief for tens of thousands of former BUPA customers and its 300 workers.

They will warmly welcome businessman Sean Quinn’s surprise reaction to Government emergency legislation aimed at closing a loophole in the law, effectively preventing him from saving tens of millions of euro every year by avoiding risk equalisation payments to VHI.

His willingness to proceed with the BUPA takeover is the best of news for almost half a million subscribers and ex-BUPA staff in Fermoy who found themselves in a limbo scenario yet again.

Following a remarkably swift review of his company’s options, the entrepreneur has decided to press ahead with the €150 million takeover of BUPA Ireland.

He is to be commended for this decision, a move regarded by many as patriotic. There could not be a better advertisement for his foray into health insurance, nor greater proof of its profitability.

However, his expression of dismay at the Government’s action, and his reference to the Quinn group’s financial strength, suggests that further legal challenges may lie ahead.

At a stroke, he has assuaged the deep sense of unease across the health insurance market after Health Minister Mary Harney’s rushed legislation.

On top of the intense pressures of life in a rapidly changing Ireland, the resulting uncertainty had made the situation stressful for many people, especially those coping with an illness and facing soaring medical bills.

Like it or not, this unsatisfactory scenario was a direct result of a lack of foresight by successive governments. However, the presiding Coalition must shoulder most of the blame for not closing off the risk equalisation loophole earlier.

In the event, the Government’s belated legislative move is aimed at copper-fastening the community rating system by compelling both the Quinn Group and VIVAS Health, the only other private operator in the Irish market, to compensate State-owned VHI for the disproportionate number of older and, by implication, higher risk customers on its books.

BUPA pulled out of the Irish market after losing its High Court challenge to the risk equalisation scheme.

A shrewd and innovative operator, and one of Ireland’s richest businessmen, Sean Quinn first spotted the loophole in the system and this was subsequently corroborated by legal advice.

That explains the note of urgency, verging almost on panic, which characterised the Government’s rushed legislation. Indeed, Ms Harney waited until after close of business at 5.30pm on Wednesday to ensure VIVAS could not sign on a new underwriter before the emergency legislation came into force.

Otherwise, the Government faced a ‘groundhog day’ scenario. As a new entrant to the market, the ex-GAA player was confident he would gain a three-year exemption from forking out millions of euro in risk equalisation payments to the VHI every year.

Effectively, the exemption clause has been abolished.

To be fair, the minister had no option but to eliminate this loophole. In an appalling vista, companies could avail indefinitely of the three-year exemption clause designed to give new health insurers a three-year break before starting risk equalisation payments.

However, from the punter’s viewpoint, the Government’s move could yet backfire. Doubtless, it will make the Irish market less attractive to new entrants.

Instead of giving the business a sharper edge, there is every risk it will make the Irish market less competitive and even more costly for subscribers than it is today.

If competition were killed off, it would be bad news for customers already paying through the nose for health cover.