Harney defiant following BUPA exit

Minister for Health Mary Harney today defended a controversial Government scheme designed to bring fairness to health insurance after BUPA announced it was quitting Ireland in protest.

Blaming the risk-equalisation scheme for its withdrawal, BUPA said the system effectively forced it to compensate rival insurer VHI on the grounds that its clients were younger and less at risk.

The company, which has 475,000 people on its books in Ireland, claimed it was facing bills of €1m a week.

Martin O'Rourke, BUPA Ireland managing director, said over three years risk equalisation would cost €161m, while profits would be only €64m.

Three hundred BUPA workers in Dublin and Fermoy will lose their jobs.

Ms Harney defended the plan, insisting it was set up to ensure sicker and older people had affordable cover.

She said evidence from Mercer Consultants, actuaries hired by the Government to assess the scheme, showed BUPA would have losses in the short term but make profits again in the long term.

"It is with great regret I learned of their decision to withdraw from the Irish market," the minister said.

Ms Harney said her job was to ensure competition and she was awaiting a report in January that would inform Government policy on the health-insurance market.

She accepted there were deficiencies in the market but said they would be addressed in the new year.

BUPA has been battling risk equalisation since it was first mooted more than a decade ago. In December last year Ms Harney announced payments would commence on January 1, 2006, and a High Court battle began, which BUPA eventually lost.

Last month, a judge ruled risk equalisation should go ahead, that there was no threat to the stability of the market and that BUPA had entered the market in 1994 knowing it faced such a scheme.

Mr O'Rourke said: "Irish consumers are the real losers as the market will be restored to a virtual monopoly.

"While we brought competition to the market and fought hard to keep it alive, the current risk-equalisation scheme makes it impossible for us to have a viable health-insurance business. We leave the market with deep regret."

Vivas Health, the third and smallest insurer in Ireland, claimed sweeteners set up for VHI had forced BUPA out of the market.

Oliver Tattan, the company's chief executive, warned that the risk-equalisation scheme could end up backfiring and killing competition, rather than encouraging it.

He said VHI, which held an effective monopoly in the market before BUPA arrived, was waiting to pounce on former clients.

"The minister's ill-advised decision to trigger the risk-equalisation subsidy scheme has resulted in one of the three competitors in the market being forced to leave due to the fact that the market structure no longer allows fair competition," Mr Tattan said.

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