Health insurance company BUPA has told the High Court it faces liabilities of €161 million over three years and will be forced out of the Irish medical insurance market if Minister for Health Mary Harney goes ahead with introduction of the risk equalisation scheme.
Opening BUPA's challenge to the legality of the scheme, Mr Paul Sreenan SC said risk equalisation would involve BUPA paying a subsidy to its main rival VHI to compensate for the VHI having a greater number of high risk, older and more expensive subscribers.
This would expose BUPA to losses of €11 million this year and, over three years, would involve liabilities of €161 million compared to an expected revenue of €64 million.
"Looking at the figures one can see there is no realistic prospect of BUPA remaining in the Irish market nor would they do so. These liabilities would force BUPA out of the Irish market," he said.
He said the VHI gross premiums in the twelve months to the end of June 2005 were €890 million while their gross underwriting surplus for that period was €25 million.
If risk equalisation was introduced, BUPA would have to transfer €31 million bringing VHI's profits up to €56 million.
BUPA, with 417,000 members, earned premiums of €163 million and its gross underwriting surplus was €22 million.
If risk equalisation was introduced BUPA would have to transfer €33 million, causing a loss of €11 million, counsel outlined.
In an action expected to last six weeks, BUPA Ireland Ltd and BUPA Insurance Ltd are challenging the legality of the risk equalisation scheme under Irish and European law.
BUPA is claiming that the imposition of the risk equalisation charges is an interference with the right to private property under Article 43 of the Constitution and is a barrier to carrying on their business.
BUPA also claims the imposition of the scheme is contrary to Articles 43 and 49 of the EC Treaty because it limits the company's right of establishment and the freedom to provide services.
In opposing the case, the State claims the risk equalisation scheme is constitutional and in accordance with European law.
The Minister for Health Ms Harney announced on December 23rd last that the scheme would commence on January 1st.
Today, Mr Sreenan said that, under the 1994 Health Insurance Act, the Minister was given the power to introduce the risk equalisation scheme.