High Court to deliver judgment in the next week on whether VHI will receive payments from Bupa due to its older membership base, writes Martin Wall
The High Court is expected to deliver a judgment in the next week or so which could have the most significant impact on the private health insurance industry since the market was liberalised more than a decade ago.
The court will rule on a challenge brought by Bupa Ireland, the State's second-largest health insurer, to the introduction of a risk equalisation scheme for the sector.
It is challenging the legality of the scheme under both Irish and European law. This is being contested by the State.
Bupa claims that the scheme could cost it up to €161 million over the next three years - at a time when it is forecasting accumulated profits of about €64 million.
It maintains that the measure would effectively force it out of the Irish market.
On the other hand, however, the State's largest health insurer, VHI Healthcare, has argued that the absence of risk equalisation in the future could lead to a situation where its business is no longer viable.
VHI has more than 1.5 million members and any threat to its long-term security could have major implications for the health system in the Republic.
Risk equalisation is effectively a compensation scheme in the market under which companies with generally older subscribers, such as VHI, would receive payments from rivals with younger membership bases.
Under such a scheme, VHI would stand to gain tens of millions of euro annually, mainly from rival Bupa Ireland.
The Government believes risk equalisation is an essential component of a community-rated market, where everyone pays the same amount for similar products regardless of age.
The VHI, which was a notice party in the High Court case, has maintained that any company entering the Irish market should have been fully aware that the Government planned to introduce a risk equalisation arrangement and there had been provision for such a scheme in legislation dating back to 1994.
On foot of recommendations from the Health Insurance Authority, the Government activated a risk equalisation scheme from the beginning of January.
However, as a result of an order made last year by the High Court, Bupa Ireland does not have to make any payments to VHI until the final outcome of the legal challenge to risk equalisation.
VHI chief executive Vincent Sheridan has said that in the "appalling vista" of the legality of risk equalisation not being upheld by the courts, then the concept of community rating would not stand up either.
He said such a scenario would not only be a problem for VHI but for the system as a whole. People over 70 could be asked to pay 10 times as much as at present in a risk-related market, he said.
It is expected that the outcome of the High Court case will be appealed to the Supreme Court.