Quinn Healthcare has said it will take legal action over the Government's decision to close a loophole in the law that would have exempted it from making so-called risk equalisation payments to rival VHI for three years.
In a statement, Quinn Healthcare, which took over private health insurer Bupa after that company withdrew from the Irish market earlier this year, said it felt it had "no option" but to challenge the legality of the emergency legislation introduced in February.
Quinn Healthcare
That legislation, in effect closed a gap which would have allowed Quinn Healthcare escape making payments to State-owned VHI by claiming it was a new entrant to the health insurance market.
Risk equalisation payments are designed to level the playing field between insurers with younger clients and those who have older clients more likely to claim on their health insurance policies.
In statement, Quinn Healthcare said it had studied the Barrington report on the private healthcare market, published by Minister for Health Mary Harney earlier this week.
Amongst other measures, that report recommended that risk equalisation payments owed by private insurers such as Quinn Healthcare to VHI be reduced by 20 per cent.
VHI has already met the Minister to express its dissatisfaction with that aspect of the report.
"We have now had the opportunity to study the Barrington Report and the measures announced by the Minister for Health and Children and have met with department officials," Quinn Healthcare said.
"We welcome many of the conclusions reached in the Barrington Report and, in particular, the recognition that the main impediment to competition in the private health insurance market in Ireland is the dominant position and derogation from normal insurance solvency requirements enjoyed by VHI."
The company noted that the Barrington Report "recognises that until such time as the VHI's dominant position and derogation from solvency requirements are addressed the current [risk equalisation] scheme is not appropriate.
"We are very disappointed that the government has not taken on board this fundamental aspect of the Barrington report."
VHI statement
"Other than legislating for a subsection of one of the twelve recommendations in the Barrington report, and the two previous reports from the Competition Authority and HIA, and initiating another endless round of consultations, the government has not taken any firm action that address the impediments to fair competition whilst we are forced to continue to subsidise VHI inefficiencies.
"Under these circumstances we feel we have no option but to challenge the legality of the emergency legislation introduced by the government in February.
"We are committed to community rating and to providing competition in the health insurance market in Ireland as illustrated by our price freeze for 2007 and our plans to substantially increase market share in the coming years," the statement concluded.
In a statement responding to the Quinn announcement, VHI said the reference to Vhi Healthcare inefficiencies is "completely incorrect as Vhi Healthcare is demonstrably the most efficient insurer not only in Ireland but also in Europe".
It added: "The expressed commitment to community rating by Quinn Healthcare is in direct contradiction to their refusal to contribute to the community risk through the risk equalisation mechanism."
Meanwhile, the Society of Actuaries in Ireland welcomed recommendations in the Barrington report.
The body said it agreed that lifetime 'community rating' should be introduced.
This would mean individuals who take out insurance for the first time later in life should pay a higher premium than those who take out insurance at a younger age.
"This is desirable because it will encourage younger people to take out private health insurance, which in turn is essential to ensure the sustainability of community rating, particularly given an ageing population," the society said in a statement.