Latest health problem could end up out of Harney's hands

Analysis: Given the rate at which the health service is throwing up problems, one headache you'd have thought the Minister, Mary Harney, could do without is risk equalisation.

Risk equalisation is a system used in the health insurance market to ensure that, contrary to normal industry practice, everybody pays the same for cover, no matter what their level of risk, an approach known as community rating.

Broadly speaking, it means that profits earned from insuring young, healthy people who rarely get ill, and thus rarely claim against their policies, are used to subsidise older people who are more likely to have problems and are thus more likely to claim.

Under the risk equalisation system that is officially in place in the Republic, this subsidising will involve British insurer Bupa, the second biggest player in the market, handing over around €33 million-a-year to its bigger rival, the State-controlled VHI.

This is because the VHI, which has been in business for 49 years and which has 80 per cent of the market, has a larger number of older people on its books than Bupa, which arrived on these shores 10 years ago.

Understandably, Bupa is miffed about this. So miffed, in fact, that it has taken cases to the High Court and the European Court of Justice to stop risk equalisation.

Notwithstanding this, Harney announced the day before Christmas Eve that risk equalisation would apply in the Irish health insurance market from January 1st.

However, no money will change hands until the courts have deliberated on the issue.

At the same time, Harney started the process of putting the VHI on a commercial footing, something that she said was necessary if risk equalisation was to be introduced. By 2012, it has to raise the level of its reserves to match private sector insurers. Legislation is due in the autumn and the VHI has already begun preparing for commercialisation.

Problem solved from the Tánaiste's point of view. Well, possibly not. Her old colleague, EU internal trade commissioner Charlie McCreevy has written to her saying that risk equalisation may well breach EU law, because it could remove VHI's competitors from the market.

He also wants to know why it is going to take six years for the VHI to become fully commercialised.

The company itself said yesterday that it needed this length of time to build up its reserves. The Department of Health and Children's spokesman said 2012 was only a "nominal" deadline, and that the VHI could well have completed the process before then.

Where does all this leave risk equalisation? Pretty much in the same place it was a year ago, when the Tánaiste first had the opportunity to introduce it, but refused saying that the VHI's status had first to be clarified.

Even though she has since "introduced" the provision, it can have no practical effect until the courts have made a decision on the cases before them, a process that could take a very long time, particularly given the fact that any verdicts can be appealed.

McCreevy's letter, one of a series of communications between his office and that of the Minister for Health, indicates that, in any case, she might not have the last word in this at all - it could ultimately be up to Brussels.

In one way, this really takes what once threatened to be a controversial issue completely out of Harney's hands. It's not really a headache for her at all.

She's done all she can by introducing risk equalisation. If the courts or Brussels stop it, so be it, there's nothing she can do.

If they do let it go ahead, it's unlikely to be this side of next year's election, after which it could well be someone else's problem.