The Irish Government’s risk equalisation scheme for private health insurance is based on an incorrect interpretation of the law and should be set aside, the Supreme Court has ruled.
Risk equalisation is a scheme that provides for insurance companies with fewer elderly subscribers to compensate other companies who have higher numbers of elderly, and therefore more costly, subscribers.
Under the scheme, private health insurer Bupa would have had to pay the VHI €161 million over a three-year period. Bupa had always insisted that such a scheme would threaten its future viability in Ireland. After losing a case in the High Court against the scheme in 2006, it announced in December of that year that it was withdrawing from the Irish market as a result. The company was subsequently taken over by Quinn Insurance.
Bupa appealed the 2006 High Court decision to the Supreme Court. All five appeal judges who heard the appeal ruled in favour of BUPA. They said that the scheme adopted in 2003 was based on an incorrect interpretation of the law and should be set aside.
The decision means that VHI will not receive any money from Bupa to compensate it for having a larger proportion of older members.
The Quinn Group has argued in separate proceedings that it is not obliged to make payments under the RES for a three-year period. It claims it would incur costs of some €30 million if obliged to make payments under the scheme. Those proceedings had been deferred pending the Supreme Court decision. Quinn will now automatically win its case and the third Irish insurer, Hibernian, is now safe from future payouts.
Predictably, VHI has whined about the financial handouts it will not now get, but current management at the state owned insurer which once had a country monopoly, know that they are under pressure to complete their privatisation and self-funding to prevent the EU taking legal action against them.
The judgement is good news for insurers wanting to compete in Ireland.
Although legal views vary about whether or not it is now legal for international insurers to offer international health to Irish expats, or UK expats in Ireland, insurers are now safe from waiting months or years and then finding VHI demanding a substantial financial handout.
Bupa's winning arguments were that community rating in the Act always means community rating “within a plan” - in other words, that each insured person within a given policy must be charged the same premium irrespective of their risk profile."