Bupa loses court bid to bar risk correction scheme

Health insurance company Bupa has lost on all grounds its High Court challenge to the introduction of the risk equalisation scheme in the health insurance market.

Mr Justice Liam McKechnie said yesterday he accepted the State's evidence that, without such a scheme, there is a threat to the stability of the health insurance market and that Bupa had entered the market knowing its regulatory framework.

The risk equalisation scheme, announced by the Minister for Health last year, would involve Bupa paying a subsidy to its main rival, VHI, to compensate for the VHI having a greater number of high risk, older and more expensive subscribers.

In a reserved 200-page judgment, Mr Justice McKechnie dismissed the Bupa challenge on all grounds. While the proposed scheme was not perfect , that was not the benchmark the court must use in deciding the case, he said.

The judge also found the scheme is constitutional and does not breach European law.

Mr Justice McKechnie took over two hours to read portions of his 200-page judgment in court and said that written copies would be available at a later date.

The hearing began last February and lasted several months. The issue of who will pay the costs of the action, estimated at up to €3 million, will be decided later.

Bupa had claimed that the imposition of the risk equalisation charges was an interference with the right to private property under Article 43 of the Constitution and was a barrier to carrying on its business.

It contended it would have liabilities of €161 million over three years and would be forced out of the Irish medical insurance market if the scheme was introduced.

The company had also alleged that the imposition of the scheme was contrary to Articles 43 and 49 of the EC Treaty because it limits its right of establishment and the freedom to provide services.

In his judgment, Mr Justice McKechnie said there was an element of anti-competitiveness to the scheme. He had concluded, even in the most optimistic situation, that Bupa would not be able to operate here without incurring losses if it was to meet the financial obligations which may be imposed on it under the scheme.

The judge said the court's task was not to identify what is or what would be the best insurance scheme for the country. Nor was the case about the preferment of the insurance schemes of either Bupa or the VHI.

The court's function was to decide if the State had discharged the onus of proof in relation to whether the scheme breached the Constitution or the relevant EU law provisions. The State had done so, he found.

He said there was reasonable evidence to suggest that Bupa has made profits from its entry into the Irish market and that it had made profits that are not available to comparable companies in other markets.

Mr Justice McKechnie reviewed the history of private health insurance in Ireland from 1957 when the VHI was established. He said that the VHI was non-profit making and was in effect a statutory monopoly. By 2005, more than 1.9 million people or 50 per cent of the population had private health insurance covered by VHI, Bupa and Vivas.

In 1994, the Government had introduced legislation following EU measures to introduce competition in the health insurance market in member states.

The risk equalisation scheme sought to equitably neutralise differences and to spread some of the costs of higher risk insured among the lower risk. The Health Insurance Authority was established in 2001 and received 10 submissions on the introduction of the risk equalisation scheme.

The judge said that Ireland had a unique mix of private and public care in its health care system to the extent that 50 per cent of its population had private health insurance in 2005.

The judge continued a stay - granted by Bupa against the Minister introducing the scheme - until December 7th when he will hear submissions on costs.