The Taoiseach Bertie Ahern has rejected health insurer Bupa's argument that competitor VHI is the only such operator that can make a profit in the State.
Speaking in Brussels following an EU summit today, Mr Ahern argued that the so-called community rating system makes health insurance affordable for everyone in society.
Taoiseach Bertie Ahern
"Risk equalisation payments involve, as you know, transferring payments from companies which have a large proportion of young, healthy subscribers to companies which have a large proportion of older people and which are more prone to illness, and this ensures that younger and older subscribers pay the same amount for similar health insurance cover," he said.
"Under community rating subscribers pay the same amount for similar cover throughout their lives, and this means that people can continue to afford health insurance right into those decades of their lives when they're most likely to need it," Mr Ahern added.
The Taoiseach said the situation in Ireland was in "marked contrast" to countries such as Britain and the United States where risk-rated health insurance products "result in older people no longer being able to afford to maintain their insurance cover".
Mr Ahern said the State was being asked by British insurer Bupa that "people who are all well and healthy can pay cheap insurance", while old people "get screwed" and they make "greater profits".
"They are not going to do that," he said. The Taoiseach denied he was "acting tough" on the issue.
"If insurance is all about going out and getting 100 people who are likely to get sick for the next 10 years, so you'll make greater profits, sure that's great, that's marvellous. I'm meant to feel impressed with that argument?"
"And then you get 100 people who, like myself, are half crocked and then we have to pay far more for it. And you say that's fair? Market forces, competition? Who are they codding?"
A leading economist said today the risk-equalisation scheme, cited by Bupa yesterday as the reason it is pulling out of Ireland, was not about elderly subscribers but about making VHI a monopoly.
Trinity College economist Sean Barrett said risk equalisation was "about the Department of Health's monopolistic thinking, to make a VHI monopoly, and . . . at the public's expense they've won. They now have 95 per cent have the market. That's what they always wanted."
Mr Barrett said the image this sends abroad is that "if you compete with a State company, you'll be put out of business".
The average age of Bupa customers was 38, it was 44 for VHI, he said. "The Government fell for a mythology that somehow people in their 20s were in Bupa and people in their 80s were being discriminated against.
"Bupa never refused any old people. In fact, it charged old people much lower rates than VHI. If it had gone ahead, the old people who were members of Bupa would have been levied to pay for VHI. This was bogus, and I'm very sad the Minister fell for a completely bogus set of arguments," Mr Barrett said.
"The image this sends abroad is that if you compete with a State company, you'll be put out of business. This presents an appalling image of Ireland- that a company who could do business in 170 countries can't do business here. I hope somebody reconsiders it pretty quickly.
"The VHI hated having a competitor there and got it out of the market, and now the consumer is going to be really badly off with the monopoly," he said.
Mr Barrett said the report due next month on the sector from the Competition Authority and the Health Insurance Authority was too late.
Media reports today suggest the report will recommend breaking VHI into at least two competing companies; in light of Bupa's withdrawal the report will be amended. It has not yet been completed.
"Where was the Competition Authority in the past two years when a real competitor was being put out of business by the Government and by the State monopoly insurance company? Bit late for them to wake up now. I think the solution is a bogus one," Mr Barrett said.
Fine Gael's enterprise spokesman, Phil Hogan, said yesterday's decision by Bupa highlighted "the complete ineptitude and powerlessness of the structures and bodies set up by the Government to protect the interests of consumers.
"It is extraordinary that two organisations - the National Consumer Agency and the Competition Authority have responded so weakly," he said.
"The news that the Competition Authority is compiling a report on the health insurance market, that will then be handed to the Minister for Health, who will then share its contents with the Cabinet and then, maybe, something will happen will come as no comfort at all to almost half a million Bupa customers who must now look elsewhere for cover," he said.