Health insurer involved in a separate case seeking damages arising from Supreme Court ruling on risk equalisation, writes MARTIN WALL
THE STATE has paid out nearly €4 million in costs arising from the successful legal challenge by the health insurer Bupa Ireland to the Government’s risk equalisation scheme in 2008.
Newly released Department of Health documents show that former minister for health Mary Harney approved the payment of the legal costs last October. The documents state that the payment of the costs amounted to €3,975,806.20.
Bupa is involved in a separate case against the State in which it is seeking damages arising from the Supreme Court ruling on risk equalisation in July 2008.
The five-judge court found that the risk equalisation scheme introduced by the Government was invalid because it was based on an incorrect interpretation of the term “community rating” in a provision of the Health Insurance Act 1994.
Risk equalisation is a system whereby companies with larger numbers of older subscribers receive financial payments, via the industry regulator, from rivals with a younger membership profile.
The Government has argued that a risk equalisation scheme is essential to underpin the concept of community rating in the private health insurance market where everyone pays the same for identical products regardless of age.
The Supreme Court ruled that the then minister had exceeded her powers under the Act in adopting the scheme “on the basis of community rating across the market for all insured persons within the private medical insurance sector”.
This meant the scheme was based on supporting a form of community rating different to that referred to in the Act, the Chief Justice, Mr Justice John Murray, said.
He said the correct interpretation of the term “community rating across the market for health insurance” in the Act meant community rating “within a plan” or contract across the market, that each insured person within a policy must be charged the same premium, irrespective of their risk profile. This meant “the best overall interest of health insurance consumers” must be construed for the purposes of such a scheme.
The State had argued that risk equalisation was a fundamental prerequisite for the effective operation of community rating as it would guarantee all insurers proportionately share the costs.
In its judgment, the Supreme Court overturned an earlier rejection of the Bupa challenge by the High Court. In December 2008, the Supreme Court granted an application allowing Bupa costs of the case, both in the High Court and Supreme Court, against the State. Following the decision of the Supreme Court to strike down the risk equalisation scheme, the Government decided that a significant degree of support for the cost of health insurance claims by older people was required.
It introduced an interim scheme involving the introduction of age-related tax credits and a community rating levy on companies in the health insurance sector.
The Department of Health documents state that from 2012 new transitional arrangements will be put in place “which are planned to closely approximate the effect of a full risk equalisation scheme”.
Legislation providing for the introduction of a new risk equalisation scheme in the health insurance market is scheduled to come into effect in 2013.