In reality, no money has changed hands yet

Legal arguments on risk equalisation will continue, writes Martin Wall, Industry Correspondent

Arguments over the operation of a risk-equalisation scheme in the Irish private health insurance market have been raging now for more than a decade.

In that time there have been countless debates over whether such a system was needed, how it should work, as well as several Government reform proposals for the area.

However, the reality is that to date, not one cent has yet been paid over in risk-equalisation payments by anyone.

It seems certain now that despite the ruling of the EU Court of First Instance yesterday, rows over risk equalisation will continue for the immediate term at least.

For all the main players in the health insurance market, risk- equalisation is a high-stakes game, with literally tens of millions of euros on the table.

For the country's two million health insurance subscribers, the ultimate outcome to these arguments could shape the future structure of the market and determine whether the traditional system of community rating - where everyone pays the same regardless of age - will be maintained.

The Government argues that a risk-equalisation scheme is essential for the maintenance of community rating.

Both the Government and the VHI have contended that without risk equalisation, the market would have to change fundamentally with premiums set on the basis of risk.

In essence, that would mean that those who are older would pay considerably more than younger people who tend to claim less frequently.

However, Bupa had argued that the Government's risk- equalisation scheme would see it paying tens of millions of euros to its main rival, the State-owned VHI and, in the process, make its business unviable.

Bupa sold its Irish business last year to the Quinn Group but remains liable for risk-equalisation payments due to that point.

Minister for Health Mary Harney triggered the risk- equalisation scheme in early 2006; since then the metre measuring the amount to be paid out in risk-equalisation payments has effectively been running.

Last year Ms Harney introduced a 20 per cent discount on risk-equalisation payments on foot of a number of external reports.

However despite these changes, a flurry of legal cases - which were also effectively triggered by the Minister's decision to introduce the scheme in 2006 - continued.

As part of one of these cases, a stay was put in place by the courts, which has meant that no money has yet actually been handed over under the scheme.

Yesterday's ruling in the Court of First Instance resolved just one of these various cases which are currently under way.

Bupa said yesterday that it was studying the ruling and it is possible that it could appeal on a point of law to the Court of Justice.

Separately, the Supreme Court here is scheduled to rule shortly on an appeal of a High Court decision in which Bupa challenged the legality of the risk-equalisation scheme introduced by the Government.

If the Supreme Court upholds the original ruling, it is expected that the VHI will immediately seek a lifting of the stay, allowing it to receive about €40 million in payments which it is owed.

Bupa has initiated a second High Court case in which it is effectively challenging a decision of the Health Insurance Authority to recommend the risk-equalisation scheme and the subsequent decision by Ms Harney to put the scheme in place.

The Quinn Group, which bought Bupa's health insurance business in Ireland last year, also has two legal cases pending.

It is challenging the constitutionality of emergency legislation introduced by the Government to close what it saw as a loophole under which the company would have secured a three-year honeymoon from making risk-equalisation payments, even though it was not a start-up operation.

The Quinn Group company is also planning a challenge to the legality of the risk-equalisation scheme itself.

Either way, it seems that the legal arguments on risk- equalisation will continue for some time yet.