Bupa to seek deal with State

Bupa Ireland is expected to seek some form of new accommodation with the Government which would allow it to remain in the Irish private health insurance market following the High Court decision yesterday to reject its challenge to the legality of a risk equalisation scheme in the sector.

Bupa, which had previously indicated that it would leave the Irish market if the risk equalisation scheme was upheld, is to meet the Minister for Health Mary Harney on Tuesday.

The company said yesterday that it was looking for Government intervention. It said that only through this could the elimination of competition be avoided.

Bupa is expected to highlight, at its talks with the Department of Heath, aspects of the High Court judgment which found that under the risk equalisation regime Bupa would not be able to operate profitably in Ireland if it had to meet the financial obligations imposed on it by the scheme.

Bupa has contended that it would have to pay up to €161 million to its rival VHI over a three-year period when its forecast accumulated profits would be in the region of €64 million.

Bupa Ireland is a subsidiary of Bupa in the UK and it is understood that the financial regulator in London has in recent years expressed concern that risk equalisation payments could cause a drain on the entire group. This issue may also be raised at the talks on Tuesday.

Bupa has not yet received a written copy of the judgment and will wait to study the document before deciding on whether it should appeal the case to the Supreme Court.

There is currently a stay on Bupa having to make risk equalisation payments, although the contingent liability for these has been accruing since last January.

The State is expected to seek to have the stay lifted by the High Court in the next week or so.

Risk equalisation is effectively a form of compensation scheme in the sector under which companies with an older membership base would receive payments, through the regulator, from rivals with younger subscriber profiles.

In his ruling yesterday Mr Justice Liam McKechnie said the Government's risk equalisation scheme was not perfect. However, he found that there was an overwhelming preponderance of evidence that the stability of the market could be threatened in the absence of a risk equalisation scheme.

The High Court ruling was welcomed by the Minister for Health and VHI.

VHI chief executive Vincent Sheridan said the company expected to receive between €7 million and €8 million in risk equalisation payments for the first six months of the year.

He said the decision would mean that the level of subscription increases sought by the company in the future would be less than would otherwise have been the case in the absence of risk equalisation.