Bupa seeks damages from State over VHI payment issue

HEALTH INSURANCE company Bupa, which withdrew from the Irish health insurance market several years ago, is seeking financial damages from the State.

The claim for damages arises from the decision of the Supreme Court in July 2008 to strike down a controversial risk-equalisation scheme introduced by the then government.

The High Court is due to hear the Bupa claim for damages from the State next month. The State is strongly defending the case and, as part of this, the Department of Health has identified more than 4,000 documents and produced a schedule of records running to 650 pages.

In its ruling in 2008, the Supreme Court found that the then minister for health Mary Harney had acted outside her power when requiring new companies in the private health insurance market to make risk-equalisation payments to the VHI to compensate it for its older and less profitable customer base.

Bupa has contended for some time that the Government’s risk equalisation scheme, under which it would have had to pay millions of euro through the industry regulator to its main rival VHI, was one of the reasons behind its decision to sell its Irish business to the Quinn Group.

Bupa maintained that if the risk- equalisation scheme had gone ahead it could have had to make risk equalisation payments totalling up to €161 million.

Bupa Ireland was the first health insurance company to set up here in competition to VHI, following the opening up of health insurance market in Ireland in the mid-1990s.

Some legal observers say that Bupa’s case in its bid for damages against the State could have been strengthened by the recent ruling of the European Court of Justice which found that Ireland had failed to fulfil its obligations under various EU directives in relation to the health insurance market.

The case, brought against Ireland by the EU Commission, centred on exemptions enjoyed by the VHI from certain EU rules on non-life insurance. In essence the case was over the fact that the VHI is not subject to regulation or “authorisation” by the Central Bank in the same manner as competitors.

The commission took the view that the VHI today differed considerably in terms of membership and activities from 1973, when the exemptions were granted.

The State has already paid out nearly €4 million in costs arising from the successful legal challenge by Bupa Ireland to the Government’s risk equalisation scheme in 2008.

Official Department of Health documents, which emerged earlier this year, showed that Ms Harney approved the payment of the legal costs in October 2010.