What is risk equalisation?Risk equalisation is effectively a scheme under which private health insurance companies companies with large numbers of older subscribers, who tend to claim more frequently and are therefore considered a higher risk, would receive financial compensation from their rivals with predominantly younger membership profiles.

Under the scheme VHI would receive tens of millions from rival Bupa. The Government believes that risk equalisation is essential to underpin the concept of community rating where everyone pays the same regardless of age.

• How does the scheme work?The Minister for Health, Mary Harney, introduced the risk equalisation scheme from last January, based on a recommendation from the regulator, the Health Insurance Authority. The regulator assesses the level of risk differentials between companies in the market every six months. To date Bupa has not had to make payments, through the regulator, to VHI as a result of a stay put in place by the High Court. However liabilities are continuing to accrue.

• How does the judgment affect Bupa:Bupa maintains that the judgement endorses its position that it cannot operate under a risk equalisation regime without making a loss. It has previously argued that it would have to pay out around €161 million in risk equalisation payments over the next three years at a time when it is forecasting profits of €64 million. Bupa is not commenting on its future plans and whether it will pull out of the market or appeal yesterday's court ruling until it has studied the judgment. The company is also seeking an urgent meeting with Minister for Health.

• How will VHI be affected:VHI is delighted with yesterday's ruling. The company believes that it will receive between €7 million and €8 million in payments from Bupa for the first six months of the year. VHI will still seek a further rise in subscriptions next year.