MINISTER FOR Health Mary Harney has said there is no quick legal fix to the problems in the health insurance industry following a landmark decision by the Supreme Court to strike down a controversial risk equalisation scheme in the sector. MARTIN WALLand STEPHEN COLLINSreport
Ms Harney said yesterday the one thing she wanted to avoid was older people having to pay more for health insurance cover as a result of the ruling.
The Supreme Court, in a unanimous ruling in a case brought by Bupa Ireland, found that the introduction of a risk equalisation scheme by the Minister in December 2006 had been based on a wrong interpretation of law and should be set aside.
Risk equalisation is a compensation scheme under which companies such as the VHI, which has a larger number of older subscribers, would receive payments from rivals with a relatively younger membership profile. The Government had said the scheme was essential to underpin the concept of community rating, under which everyone pays the same for the same product, regardless of age.
The court ruled that community rating under current legislation was defined as applying across individual plans rather than across the whole population of insured people.
It is understood the Government fears this could lead to the emergence of a range of new health insurance plans targeted at younger rather than older people. This could involve new products covering benefits attractive to younger subscribers like maternity or laser eye treatment.
Sources said this could lead to younger people migrating from the traditional plans which, in their absence, could become more expensive for older people even though the official ban on price discrimination on age grounds would remain.
Age Action expressed concern about the possible implications of the ruling for older people.
"It could lead to a situation where the cost of private health insurance is prohibitive, at a time when public health services for older people are inadequate," said the organisation's spokesman, Eamon Timmins.
Ms Harney said the Government would have to give due consideration to the court's decision and that this could take some time.
"I am not certain at this point that there is a quick legal fix and I want to make that clear," she said. "If there were, I would be advocating a recall of the Dáil to deal with that."
She could not see a way of maintaining community rating without risk equalisation. "It would not be possible to have insurance affordable to older and sick people if younger people were not paying that little bit more."
Ms Harney pointed out that successive governments and all the major political parties had supported community rating and risk equalisation as the means to achieve it.
It is understood the Government will now examine other arguments put forward by Bupa Ireland in its challenge which were not addressed fully by the Supreme Court yesterday to see if there were any further areas of possible exposure. Sources said the Government was aware of the possibility of more legal challenges.
The decision yesterday also means that the VHI will not now receive about €40 million in risk equalisation liabilities which had arisen, but had not been paid over by its rivals, since the introduction of the scheme.
The VHI yesterday declined to comment on the impact of the ruling on prices for its 1.5 million subscribers. The company is conducting a price review and details of a further increase is expected within weeks.
Ms Harney said she wanted the process under which the VHI would be authorised by the financial regulator from next year to continue. This would involve the VHI significantly boosting its financial reserves to bring them into line with industry norms.