Ratings: Health insurance in Ireland works on a principle known as "community rating". This means insurers must set and charge consumers the same premium for a particular plan, regardless of their age, gender and current or likely future state of their health.
If a principle of "risk rating" were to be applied to health insurance, it would mean that older people would have to pay significantly more for cover than younger people, because they are more likely to make a claim.
It would also mean people with adverse health conditions would have to pay an extra loading on their premiums. In short, health insurance would become unaffordable for the people who need it most.
As the only health insurer in the market before BUPA's arrival in 1997, VHI has a higher proportion of older customers and thus higher claim costs. Supporters of a policy called "risk equalisation" say if the community is split between health insurers so one insurer has older-than-average policyholders, the principle of intergenerational solidarity breaks down.
The Health Insurance Authority (HIA) is due to publish a report on whether or not risk equalisation should be introduced before the end of April 2004. If the risk difference between the insurers is above a certain level, the Minister for Health and Children must act on the HIA's report before the end of June.
Mr Vincent Sheridan, VHI's chief executive, said last week that risk equalisation was "so important for the future of community rating in Ireland".
Mr Martin O'Rourke, managing director of BUPA Ireland, said he did not want to second- guess the decision of the HIA.
Meanwhile, BUPA is appealing the European Court's decision not to intervene in the Government's threatened introduction of risk equalisation. BUPA describes risk equalisation as "absurd" and anti-competitive, saying its customers should not have to subsidise another insurer four times its size.
