EU court approves VHI/BUPA risk equalisation scheme

THE controversial risk equalisation scheme in Ireland — whereby elderly and ill people insured by the largely State- owned VHI are shielded from higher health insurance premiums — has been approved by the European Court of Justice.

BUPA, the British health insurer, challenged the system whereby it and other private health insurance companies must compensate the VHI for having a larger number of members who require regular medical and hospital treatment and who are therefore more expensive.

The company appealed to the European Court of Justice, saying the European Commission should not have allowed the Government to take this action as it breached state aid rules.

However, the judges in Luxembourg ruled that the Government was correct in having the risk equalisation scheme to ensure everyone could afford private health insurance under the community rating system.

The decision was welcomed by the Government and the VHI but was criticised by the other health insurers on the Irish market who said it would militate against greater competition in the area of private health insurance.

BUPA, which has since left Ireland, said it was considering whether to appeal or not.

The court, in dismissing BUPA’s case, said the risk equalisation system was a necessary and proportionate means of compensating the insurers that are required to cover at the same price all people living in Ireland, irrespective of their state of health, age or sex.

It ruled the Government had been correct when the Health Minister asked BUPA to compensate the VHI as it is prohibited from setting premiums according to the risk insured and from rejecting what it might see as bad risks.

The court ordered BUPA to pay the costs of both sides in the case.

The ruling confirms that other private health insurance companies, like Vivas and Quinn, which took over from BUPA, must pay into a fund to compensate the VHI for taking on more costly clients.

VHI chief executive Vincent Sheridan described the decision as very good news for consumers in Ireland. If the judgment had gone the other way it would have meant the end of community rating, which has been the basis of health insurance in Ireland for the past 50 years.

“Today’s decision is bad news for those who wish to use community rating as a means of generating windfall profits by way of regulatory arbitrage.

“It also marks another failed attempt by BUPA to destroy community rating in Ireland,” said Mr Sheridan.

He added that the decision would be welcomed across Europe as evidenced by the involvement of the Dutch government in the case.

BUPA sold its Irish business last year to Quinn Group and lost a number of cases against the risk equalisation scheme in the Irish courts.

It still has an appeal of a High Court decision pending together and is seeking a judicial review of Health Minister Mary Harney’s decision to trigger risk equalisation last February.

BUPA still has two court cases pending in Ireland. It is awaiting a judgment from the Supreme Court, appealing the High Court ruling which upheld risk equalisation, and it is pursuing a judicial review on the minister’s decision to trigger risk equalisation.

Quinn also has two judicial reviews pending — on the removal of the exemption for new entrants to the market and on the validity of the refund.

VHI has about 75% of the health insurance market, while Quinn has 17% and Vivas has 7%.

A spokesman for the BUPA Group said the company was studying the ruling in detail and would not be commenting further at this time.