State in bid to overturn risk equalisation injunction

 

Lawyers for the State have applied to the High Court seeking to overturn an injunction secured by health insurer Bupa last week preventing the implementation of risk equalisation.

Tanaiste and Minister for Health Mary Harney announced last week she intended to introduce a risk equalisation scheme to the health insurance market which would oblige Bupa to cross-subsidise high risk and older people with the State-backed VHI.

The scheme could see Bupa and Vivas forced to pay out up to €33 million a year to the VHI.

Risk equalisation is effectively a form of compensation scheme in the private health insurance sector under which companies with a larger number of older subscribers (who claim more frequently) would receive payments from rivals with relatively younger memberships.Ms Harney said the measure would even up the marketplace. "I have previously made it clear that risk equalisation is a necessary and appropriate mechanism in a community rated market," she said.

However, Bupa rejected her claims. "This would involve Bupa Ireland having to provide for an annual subsidy, estimated to be more than twice its annual profits, to the ESB and the VHI," Bupa said in a statement. "We have always said that risk equalisation makes competition and the Bupa Ireland business unviable. This remains the case."

The company secured a High Court injunction blocking any attempts to implement the scheme before February 7th.

Today's hearing at a special sitting of the High Court has been ongoing all day. Judgement is expected to be reserved.

Bupa's legal team said the company had made an "unequivocal" decision to withdraw from the Irish market if risk equalisation is introduction.

The VHI welcomed the move and indicated that it could curb increases in subscriptions. The company said that risk equalisation was essential to ensure the continuation of community rating.