Bupa has announced that it is acting on its often voiced threat to withdraw from the Irish market rather than submit to regulation aimed at ensuring a level playing field between health insurers.
Or has it? Yesterday's statement and subsequent comments contained enough ambiguity to arouse suspicions that Bupa may yet be trying to bluff the Government into amending the Risk Equalisation Scheme. Such an approach, if it was the case, would be foolhardy and reckless for a company which provides a service as vital as health insurance to 475,000 people.
It is prudent then for the Government and all others concerned to take the statement at face value and deal with the consequences, which in the short term are almost all negative. Bupa's exit will cause very serious upset for its members, some of whom by the nature of its business are sick. The departure of the number two player in the market - with a 22 per cent share - will mean less competition and some 300 people are also set to lose their jobs.
But, that said, the Government has followed the correct, and indeed the only course of action open to it by not conceding to Bupa. The health system - for all its faults - rests on several pillars, one of which is widespread private health insurance based on community rating. Underpinning this principle that everybody pays the same rate regardless of age is the system of risk equalisation which involves financial transfers between insurers with younger member profiles and those with older members.
Bupa knew this was the situation when it entered the Irish market 10 years ago and arguably should have structured its business appropriately. Instead it focused on younger, more profitable, members resulting in a situation where significant payments are now due following the triggering of risk equalisation. Bupa claims these payments render its business unviable. This is disputed by both its rival, the VHI, and their regulator, the Health Insurance Agency, lending credence to the theory that Bupa has merely decided to quit and bank its profits once the pickings are no longer as lucrative.
The issue now is what happens if Bupa withdraws. There are two imperatives. The first is to ensure that the problems caused for Bupa members are minimised and that they are not allowed to fall through the cracks. The wider issue is to foster continued competition in the market, and thus downward pressure on prices, albeit within the confines of a community rating system. Breaking up the VHI is one of a number of potential solutions.
The Minister has acted correctly in defending the principle of community rating, but that does not absolve her of responsibility for the consequences. She must demonstrate now that it is a system that is viable in the long term and worth the price of its defence, namely the disruption caused by Bupa's departure.