Comment: The Government must act immediately to make it clear that - legal loophole or no legal loophole - the Bupa book of business will remain subject to the risk-equalisation scheme if and when acquired by the Quinn Group and that any necessary legislation or regulations will be introduced to ensure this outcome.

Let me explain the background.

The vast majority of people with health insurance in Ireland like the concept of community rating. They like the comfort of knowing that they can continue to have private health insurance in their later years, when they are likely to need it more. Equally, most realise that the system can only work if everybody contributes to the community risk.

For 10 years from 1996 to 2005, Bupa was granted the extraordinary privilege (in effect a regulatory subsidy) of providing its members with the promise of community rating without the need to contribute to the community risk. This privilege was granted to encourage competition in the health insurance market. (Vivas currently enjoys the same privilege but it will expire in October).

Bupa did not pass all of the benefits of this privilege to their members but retained most of the benefit by way of windfall profit or, as the recent High Court judgment more eloquently put it, a level of profit "substantially in excess of any other relative indicator in this business".

In this way it kept its growth level modest, targeted the specific low-risk sector of the market and continually threatened to leave the market if forced to contribute to the overall community risk.

After lengthy lobbying, countless review bodies and intensive examination by the Health Insurance Authority, the Minister for Health and Children agreed in December 2005 that risk equalisation was essential to support community rating and activated it with effect from January 1st, 2006.

Bupa immediately took the Government to court and argued that it had their own version of community rating that did not require any transfers to a community-based risk-equalisation fund. The judge listened to detailed arguments over 10 weeks and found against them on every count.

He concluded that "the [ risk equalisation] scheme as established will encourage the greatest possible competition in all areas other than risk profile. The scheme is therefore absolutely necessary given our system. Moreover, it is fair, reasonable and proportionate".

Now Bupa/Quinn Group claims it has found a loophole in the legislation which allows it a further three years from contributing to the community risk.

If this claim were to prove correct, the following stark consequences are inescapable:

1. Community rating will not survive - ie it is not possible that community rating could survive for three and a half years if 20-25 per cent of the market was not required to contribute to the community risk. The Minister for Health acknowledged this in December 2005 when she activated the risk-equalisation scheme.

2. The way would be wide open for a repeat of the massive hit-and-run operation that Bupa has so effectively carried out and which saw it extract huge windfall profits from the Irish healthcare market.

3. VHI Healthcare could not possibly deliver on the commitment to meet statutory solvency levels by 2012.

On the contrary, further losses would be incurred and there would be irreversible damage done to the financial reserves held on behalf of members in VHI Healthcare.

No doubt lawyers are capable of arguing for months with regard to the interpretation of the legislation. The market cannot await the outcome of legal argument. What matters is the public-policy objectives of Government.

If Government is committed to community rating then it must make it clear immediately (and Bupa/ Quinn also deserve clarity on the issue) that amending legislation or regulation will be introduced, if necessary, to ensure that the Bupa book of business will be required to contribute to the community risk, ie be subject to the requirements of the risk-equalisation system.

The alternative open to Government is equally stark: abandon the public-policy objective of community rating.

VHI Healthcare is a highly efficient, not-for-profit, membership-based business. This is not unique since the majority of health insurers around the world operate on a not-for-profit basis.

The Minister for Health and Children activated risk equalisation in 2006 just in time to rescue community rating (VHI Healthcare reported a loss of €30 million in the year to February 28th, 2006). Thus we were there to continue to offer health insurance cover when Bupa exited the market.

If our legislators believe that community rating can exist without any contribution to the community risk of 20-25 per cent of the market, then VHI Healthcare will not be around to pick up the pieces next time around.

Vincent Sheridan is chief executive of VHI Healthcare