Health insurer Bupa yesterday has succeeded in preventing the VHI from being represented at its legal challenge to the law that allowed a State agency to recommend that it make risk equalisation payments to is main rival.

Bupa intends taking a constitutional challenge in the High Court to section 12 of the Health Insurance Act. It also claims that it breaches an EU directive.

The act allows the Minister for Health, Mary Harney, to introduce risk equalisation payments in the health insurance market.

This is a system whereby profits from young, profitable health insurance subscribers are used to offset losses from older customers, who are more likely to claim their insurance.

It is intended to underpin community rating, which guarantees that health insurance companies charge all of their customers the same for the same level of insurance, no matter what their level of risk.

Bupa has claimed that the introduction of risk equalisation could lead to it paying over €30 million annually to VHI, and has threatened to leave the Irish market if it is introduced.

VHI successfully sought to have itself included as a notice party to the action, which was originally against the State and the Health Insurance Authority (HIA).

Individuals or organisations can seek to be included as notice parties where they believe the proceedings will affect their material interests.

However, Bupa opposed this on the grounds that Tánaiste and Minister for Health, Mary Harney, last month said that she would not introduce risk equalisation for the time being.

This meant that Bupa was not at an immediate risk of having to pay the VHI.

Yesterday, Mr Justice Peart in the High Court ruled that VHI should not be a notice party to the case, which is expected to go ahead in the autumn.

The VHI may decide to appeal this, a spokeswoman said last night.