Tánaiste Mary Harney yesterday told health insurers she had given the go-ahead to a scheme that will force independent players to subsidise State-owned VHI.
She has written to the VHI and its competitors, Vivas and British-owned Bupa, saying that, from next month, she intends to introduce a risk equalisation system into the Republic's health insurance market. Ms Harney's decision follows the recommendations of a Health Insurance Authority (HIA) report that she commissioned, and which was delivered to her two weeks ago.
The move will mean that, from the end of this year, Bupa will have to make payments to the VHI to compensate the State operator for the fact that its customers are older, more at risk, and thus less profitable, than the British player's.
Vivas will have to begin making payments in two-and-a-half years. It entered the market last autumn and risk equalisation will not apply until a company is operating in the Republic's market for three years.
The Tánaiste, who is also Minister for Health and Children, was widely expected to follow the HIA's recommendations.
The authority believes that it is the best way of ensuring that health insurance charges continue to be community rated. This means that two people with the same level of cover pay the same premium to an insurer, no matter what the level of risk.
Ms Harney's letter states that the proposed start date will be July 1st. She argues that the move will be in consumers' best interests and preserve the stability of community rated market.
She has given 21 days to any company that who wants to object to make representations to her, and pledges to take these into account before finally deciding to introduce risk equalisation.
No payments will be made until six months after the start date, as the HIA will have to assess how much, if any, cash should change hands.
It will apply to all companies operating in the market. But as the VHI has the greatest share of customers aged over 49, the point at which the risk of ill-health increases, it will be the only beneficiary until its competitors' customers age considerably.
Bupa has already claimed that the scheme could cost it €34 million this year. It has launched a High Court challenge to the introduction of risk equalisation.
But the court said the minister could begin the process of introducing it, once no money changed hands until it makes a ruling.
Vivas issued a statement yesterday saying it was "shocked and disappointed" by the Minister's letter. "This decision is the single biggest deterrent for private investors in the health care market at a time when investment is needed most, and will put planned private hospitals in serious jeopardy," it said.
