THE GOVERNMENT will take legal action to close down BUPA's operations in the Republic if its medical insurance products do not "the principle and practice of community rating".
A spokesman confirmed yesterday that the Government was not prepared to sanction a medical insurance system which imposed higher premiums on older people - a reversal of the motor insurance situation - and encouraged competing companies to profit from low risk categories.
The failure of recent negotiations between the Department of Health and BUPA to resolve outstanding difficulties over linked insurance and cash plans has prompted the Minister for Health, Mr Noonan, to pledge that, if further talks failed to resolve the matter, he would take "appropriate steps" to uphold the Health Insurance Act of 1994 and deregister BUPA.
The British based company, which began formal operations here yesterday, has insisted that its products comply fully with Irish and EU law. The health insurance scheme complied fully with the spirit and the letter of community rating, it said, and its cash benefits "could be used by a member in any way they choose".
In a statement, BUPA sought to reassure its clients that they would be fully covered under its health insurance and cash plans from January 1st.
Fresh talks are expected to take place between the parties next week. However, with both sides quoting legal advice in support of their positions, the matter could end up in the courts.
Under the Health Insurance Act of 1994 the Minister is required to give BUPA 21 days' notice of any intention to seek its de registration as a medical insurance company before the High Court. He will have to state the grounds for this proposed action and is also required to take into account any representations made by the company.
Last week BUPA sources hinted that the company was prepared to fight the Government on the issue in both the High Court and the European Court of Justice. But a long drawnout legal dispute of that nature would inevitably effect, public confidence in the company's insurance products.
The VHI has strenuously objected to the approach adopted by BUPA and has obtained legal advice to the effect that the proposals are in contravention of the 1994 Act. At the same time, Mr Noonan - as official regulator - received separate legal advice from the Attorney General, Mr Dermot Gleeson, to the same effect.
Having provided for competition in the area of medical insurance under the 1994 Act, the Government now finds itself in the embarrassing position of objecting to the operating methods of the first foreign company to challenge the VHI.
After last Tuesday's failed negotiations Mr Noonan emphasised that he was committed "to facilitating a competitive health insurance market" in the Republic, but he said that this would have to be developed "within the framework of community rating".
As regulator of the insurance industry, be had "a problem" with the BUPA package, because it appeared that the company was "seeking to sell as an integrated package an indemnity product which is community rated and a cash plan which is age rated".
If this difficulty was not resolved soon, he said, he would. "take appropriate steps, in accordance with the relevant legislation, to ensure that the principle and practice of community rating, is fully preserved".
The Minister enjoys the complete support of the Coalition parties for his tough stance on a community rating system, according to Government sources.
The Fianna Fail spokeswoman on health, Mrs Maire Geoghegan Quinn, has also expressed concern about the legacy of the BUPA products, saying that they could not compare with the VHI health plans, which were "community rated all the way through".
A VHI director, Mr John O'Connor, has warned that acceptance of the BUPA scheme could cripple the VHI and unload "a huge population of people over 50 years of age on to the state health system".