Health insurer Bupa Ireland (now owned by the Quinn Group) faces having to pay about €11 million to rival VHI in controversial risk-equalisation payments for the six months to last December, according to an internal report drawn up by the industry regulator for the Government. Martin Wall, Industry Correspondent, reports.
The figures produced by the Health Insurance Authority (HIA) represent a significant increase in risk-equalisation payments over the previous six months.
Following its analysis of the market for the six months to June 2006 the HIA said that Bupa would have to pay about €7.2 million in risk-equalisation payments to the VHI.
According to the HIA report for the six months to December, which has been submitted to the Minister for Health, Mary Harney, Bupa would have to pay almost €11 million to the VHI in risk-equalisation payments.
It would also have to pay a further €818,000 to the internal health insurance scheme operated for staff of the ESB.
These figures only represent 50 per cent of the total amount which Bupa would have had to pay if the risk-equalisation scheme, triggered by Ms Harney in January 2006, had been fully in operation. Under rules which applied at the time, companies only had to pay half of their total risk-equalisation liability in the first year in which they came within the scope of the scheme.
If the scheme had been fully operational for the period, Bupa would have had to pay €23.633 million for the six months to last December and a further €15 million for the six months to last June.
Risk-equalisation is essentially a compensation scheme under which companies such as the VHI, which has a larger number of older subscribers (who tend to claim more frequently), would receive payments from rivals with a relatively younger membership profile.
Reforms introduced by the Government in April will see risk-equalisation liabilities in the current year reduced by 20 per cent.
Bupa has not yet had to make any risk-equaliastion payments under the scheme as a result of a legal stay put in place by the High Court in May 2005. The Supreme Court is expected to rule on the stay at a hearing later in the year.
The HIA report found that Bupa Ireland's market share had increased, although at a slower rate than previously. "By the end of December 2006 its membership with respect of plans subject to risk-equalisation had increased to almost 465,000. Twelve months previously its membership had been a little over 440,000 . . . In the same 12 months the membership with respect to plans subject to risk-equalisation of the relatively new entrant Vivas Health grew significantly to almost 63,000, from 20,000," the report states.