Risk equalisation would have cost Bupa over €37m

Bupa Ireland would have had to pay more than €37 million in risk equalisation payments in the 12 months to last June if the compensation scheme in the health insurance industry had been fully operational at the time, a confidential analysis carried out by industry regulator the Health Insurance Authority (HIA) has found.

In an unpublished report sent to Minister for Health Mary Harney, the HIA also says that over the same period Vivas Health would have had to pay nearly €2.5 million if its exemption from risk equalisation payments as a new entrant to the market had not been in place at the time.

The report says that the main beneficiaries from risk equalisation payments over the last year would have been the State-owned VHI and the scheme operated for ESB staff.

The Government introduced the controversial risk equalisation scheme for the health insurance industry last January.

However a stay put in place by the High Court pending the completion of a legal challenge launched by Bupa Ireland has meant that no payments have had to be made to date.

Under the rules of the scheme, companies will only have to make 50 per cent of the risk equalisation payments due in the first year of operation.

The report says that if the risk equalisation scheme had been in force for the year from July 2005 and the phased payment arrangements had not been in place that Bupa's liability would have stood at €37.286 million.

It maintains that VHI would have received €37.109 million over the same period.

Last Thursday Bupa lost its challenge to the legality of the risk equalisation scheme and the State is expected to return to the High Court next week in a bid to have the stay on payments lifted.

Bupa will meet Ms Harney today about its future in the Irish market in the wake of the High Court judgment.

It is understood that Bupa will seek to reach a new accommodation with the Government on risk equalisation which could allow it to remain in the market.

There has been speculation that such a deal could centre on a review of the formula for calculating risk equalisation payments or in relation to the phasing of the financial transfers.

Bupa has previously stated that it would pull out of Ireland if it had to make risk equalisation payments.

The company has claimed that it would have to make payments of around €161 million over the next three years at a time when it is forecasting profits of €64 million.

Informed sources said that the Minister would listen to what Bupa had to say at the meeting tonight. No announcement is expected in the aftermath of the talks.

The HIA report states that Bupa will have to pay €7.72 million to VHI and €605,929 to the ESB Staff Medical Provident Fund in risk equalisation payments for the first six months of the year once the High Court stay is lifted.

The report says that the number of people subscribing to Bupa Ireland increased steadily over the last year, reaching a figure of 450,000 at the end of June.

It says that VHI has 1.525 million members while Vivas has 40,000 subscribers.