Differences have emerged between the VHI and BUPA Ireland over plans to reintroduce risk equalisation into the Irish healthcare market in the Private Health Insurance and Health Insurance (Amendment) Bill, 2000.
Risk equalisation is a statistical system which requires companies to share costs of claims by way of a mathematical formula. It equalises the claims costs of less healthy members among all players in the market in proportion to their market share.
Risk equalisation is essential to underpin the principle of community rating, whereby everybody pays the same premium regardless of age, health or sex, Mr Oliver Tattan, acting chief executive of VHI Healthcare told the Joint Oireachtas Committee on Health and Children yesterday.
"Without risk equalisation, insurers have an incentive to target younger, healthier and cheaper risks and to discourage older and sicker individuals," he said. "A wide range of international and national independent experts, including the Harvey Commission which advised the Government in relation to risk equalisation, supports this view. It is also supported by international experience."
The failure to introduce risk equalisation was leading to instability in the market and increased premiums for VHI members and would eventually discourage insurers from providing cover to older and sicker people, Mr Tattan said.
However, the managing director of BUPA Ireland, Mr Martin O'Rourke, said risk equalisation would mean that BUPA Ireland would pay VHI about £20 million over the next three years and ignored the stability which existed in the Irish market due to competition. It would destroy competition and create uncertainty in the market.
BUPA Ireland was happy that the proposed Health Insurance Authority would have the freedom to recommend a risk equalisation scheme if such a scheme was independently considered necessary by the authority to maintain market stability.
Any threat to market stability should be assessed on objective criteria in terms of downsizing of the market, exit of older-aged policy-holders or the impending financial collapse of one or more insurers, he said.
Neither BUPA Ireland nor any other insurer could compete in the market if the authority did not consider these criteria but simply focused on some "unknown academic mathematical review of risk profiles".