Minister for Health Mary Harney may consider seeking an emergency High Court hearing during the Christmas period to overturn an interim injunction granted to Bupa Ireland yesterday. Martin Wall reports
Bupa went straight to court yesterday after Ms Harney announced she would introduce a risk equalisation scheme to the health insurance market which would oblige Bupa to cross-subsidise high risk and older people with the State-backed VHI.
The Government believes risk equalisation is necessary to underpin the principle of community rating, where everyone pays the same regardless of age.
In a statement last night the Department of Health said it would seek the advice of the Attorney General on the interim injunction secured by Bupa yesterday afternoon.
The State may seek to go to court next week to have the interim injunction lifted.
Last night the Labour Party urged the Government to contest the injunction blocking the introduction of risk equalisation.
If the current injunction stands, the introduction of the scheme would be delayed until the outcome of a full High Court challenge which Bupa is launching to the constitutionality of the legal provisions allowing for risk equalisation. This case is scheduled to take place in February.
Risk equalisation is effectively a form of compensation scheme in the private health insurance sector under which companies with a larger number of older subscribers (who claim more frequently) would receive payments from rivals with relatively younger memberships.
With the introduction of risk equalisation, Bupa might have to pay up to €33 million a year to its main rival, VHI.
Bupa claimed yesterday that such a scheme could drive it out of business as it would have to hand over more than its annual profits in risk equalisation payments to VHI.
Bupa secured the injunction just hours after Ms Harney decided to accept a recommendation from the industry regulator, the Health Insurance Authority (HIA), which argued that the risk equalisation scheme should be introduced.
The authority had claimed that based on financial returns for the first six months, the level of difference in the risk profiles of companies in the sector was getting wider.
The department's health insurance unit said in its recommendation to the Tánaiste that Bupa had entered the market here in the full knowledge that risk equalisation was a key feature of the regulatory framework.
"It is open to Bupa to determine its products, price and other strategies having regard to the regulatory environment it faces.
"If it chooses to ignore one of the pillars of the market on entry it cannot expect the Irish Government to postpone introducing necessary supports which are required in the interests of the broader market," it stated.
The HIA said yesterday that the Government decision on risk equalisation was in the best overall interest of consumers.
VHI also welcomed the move and indicated that it could curb increases in subscriptions.
The company said that risk equalisation was essential to ensure the continuation of community rating.
VHI chief executive Vincent Sheridan said the move would stem the haemorrhage of funds from the healthcare system by way of windfall profits.
However the most recent entrant to the market, Vivas Health, said it was surprised and disappointed by the decision. It said that it was bizarre given that six months ago the Tánaiste did not believe that risk equalisation was necessary.
Meanwhile the Tánaiste, as expected, announced reforms to give the VHI greater freedom to set its own prices and products. She also said she had asked the HIA and the Competition Authority to advise her on competition in the market.