The Government is expected to consider the break-up of the State-owned health insurance company, the VHI, following the announcement yesterday that its main rival, Bupa Ireland, is to pull out of the Irish health insurance market.
Highly placed Government sources said last night that a Competition Authority report to be given to Minister for Health Mary Harney will recommend the company be divided up.
Bupa said it will now wind up its Irish operation, blaming the introduction by the Government of risk equalisation for its decision. It claimed risk equalisation - which has resulted in Bupa having to pay millions to the VHI to compensate it for its older client base - was costing €1 million every week, making its business unviable.
The company will no longer accept new members and some 475,000 existing subscribers will not have their policies renewed. However, all policies already renewed for the coming year will be honoured.
Up to 300 employees of the company - mainly based in Fermoy, Co Cork, but also in Dublin - look set to lose their jobs.
Martin O'Rourke, managing director of Bupa Ireland, said it was with huge regret the company had made its decision.
"Irish consumers are the real losers as the market will be restored to a virtual monopoly," he said.
"This is the first time Bupa has been forced out of a country and we are in 170 countries worldwide," he added.
Bupa holds about 22 per cent of the Irish health insurance market, having been here for 10 years.
Government sources said a break-up plan for the VHI could be very complex and could involve the VHI brand having to be eliminated so as not to give any one element of the divided company an advantage over another.
Negotiations between Bupa and the Government on a compromise on risk equalisation ended unsuccessfully on Tuesday night.
Ms Harney said she very much regretted Bupa's decision.
"I wish there was a way of avoiding it but, unfortunately, community rating and risk equalisation is fairly fundamental to our system of health insurance," she said.
Ms Harney added she would bring recommendations to Government on foot of the Competition Authority report.
The VHI said it was disappointed at Bupa's departure. It claimed there was no economic reason for the decision.
Vivas, the only other health insurer in the Irish market, said it would fight to take on as many of Bupa's customers as possible, but that the VHI had the benefit of a wide range of State protections and supports which would give it an unfair advantage.
Fine Gael leader Enda Kenny raised Bupa's decision with president of the European Commission José Manuel Barroso last night and asked for an examination of the Irish health insurance market.
Labour's spokeswoman on health, Liz McManus, said she was shocked and surprised at Bupa's announcement and hoped the company would reconsider its decision.