VHI intends appealing a High Court ruling that it should not be represented at a Bupa legal challenge to a scheme under which the State company could get €30 million from its main rival.
Bupa is due to take a High Court case arguing that a law allowing the Minister for Health and Children, Mary Harney, to introduce risk equalisation to the Irish health insurance market is unconstitutional and a breach of EU law.
Risk equalisation is a system whereby the earnings from young, profitable health insurance subscribers are used to offset losses from older customers, who are more likely to make claims on their insurer.
If it was introduced, Bupa, which has a large proportion of young subscribers, would have to hand over an estimated €30 million a year to the VHI which has a large number of older people on its books.
Last month Bupa succeeded in having the High Court rule that the VHI should not be represented in the case, which it is taking against the State and the Attorney General.
VHI announced yesterday that it intended to challenge the decision. The State company had been seeking inclusion as a notice party at the hearing, which is due to begin in the autumn. Individuals or organisations can seek to be included as notice parties in court cases where they believe that the proceedings could materially affect their interests.
VHI had succeeded in doing this. However, after Ms Harney postponed the introduction of risk equalisation for at least six months last June, Bupa challenged the ruling that its competitor was entitled to be included as a notice party on the basis that it no longer had a direct interest in the outcome of the case.
Risk equalisation is intended to support the community rating system, which guarantees health insurance companies charge customers the same amount for the same level of cover, irrespective of the risk involved.
Yesterday, VHI chief executive, Vincent Sheridan, argued that if Bupa succeeded, it would "destroy" community rating.
"While VHI Healthcare has every confidence that the State will successfully defend this case, we have decided to appeal the decision by the High Court that VHI Healthcare should not be allowed to be directly involved in the case."
The Health Insurance Authority's most recent study of the Irish market found that VHI's older customer base cost it an extra €16 million in the second half of 2004.
Mr Sheridan said that it was funding these costs from its €280 million reserves, and warned that if that state of affairs continued the company could be insolvent after two years.
Bupa is taking a separate challenge to the European Court of Justice claiming that risk equalisation is an illegal state aid.
Ms Harney said she wanted to delay the introduction of risk equalisation until the Government had made some progress with legislation that will convert VHI from a statutory body to a commercial organisation. She will have the option of introducing it at the end of the year.
