Bupa to appeal High Court ruling

Bupa Ireland is to appeal the recent High Court ruling that a controversial risk equalisation scheme in the private health insurance sector is lawful.

However, the company told the High Court yesterday that the decision to launch a Supreme Court appeal did not affect its recent announcement that it is to withdraw from the Irish market.

The company last week said that it was being forced out of Ireland because the level of risk equalisation payments which it was being obliged to make would mean that its business was unviable.

Meanwhile, the Minister for Health Mary Harney has agreed to a continuation of a stay on payments under the risk equalisation scheme until January 19th to facilitate the appeal by Bupa to the Supreme Court.

The industry regulator, the Health Insurance Authority has estimated that Bupa will have to pay the country's largest health insurer, VHI, €7.72 million under the risk equalisation scheme for the first six months of its operation to last June.

No payments will be made while the High Court stay continues in existence. Informed sources said it was likely that Bupa would seek a continuation of the stay on payments until the full Supreme Court appeal was heard.

Such a move is likely to be resisted by VHI. In the High Court yesterday, Mr Justice Liam McKechnie said he would extend the stay on payments to January 19th on the understanding that the appeal by Bupa would be expedited. He also adjourned the issue of costs of the 35-day High Court hearing to January 16th.

In a statement yesterday, Bupa said that it had decided to appeal the High Court ruling having regard to its finding that the risk equalisation scheme was anti-competitive in its effects and because the company believed that the payments involved were disproportionate.

Industry observers believe that if Bupa won its appeal in the Supreme Court it could seek millions of euro in compensation from the State as a result of damage to its business.

Bupa has contended that it would be forced to pay out €161 million in risk equalisation payments, mainly to VHI, over the next three years at a time when its projected profits would be in the region of €60 million.

In dismissing the Bupa challenge last November, Mr Justice McKechnie said he accepted the State's evidence that, without such a risk equalisation scheme, there was a threat to the stability of the health insurance market. He added that Bupa had entered the market knowing its regulatory framework.

The risk equalisation scheme, announced by the Minister last year, would involve Bupa making payments effectively to compensate VHI for having a greater number of high risk, older and more expensive subscribers.

The Government believes that the risk equalisation scheme is essential to underpin the concept of community rating in the market where everyone pays the same amount regardless of age.

Meanwhile, the general secretary of the Irish Congress of Trade Unions (Ictu) David Begg said last night that he did not see how the Government could back away from the court ruling on risk equalisation.

He said that Ictu supported community rating and risk equalisation, but also did not want to see Bupa leave the market.

Mr Begg said that he believed that Bupa could continue to trade under the risk equalisation system if it was prepared to accept profits in line with those it earned in the UK.

He said that Ictu would be very much against proposals to break up the VHI to generate competition in the market. He questioned how such a break-up could be achieved. Ictu yesterday met with a delegation from Amicus, the trade union which represents around 800 VHI staff.

A Competition Authority report to be given to the Minister next month is expected to recommend that the company be split up.