Private health insurer Bupa is not entitled to damages from the State following the insurer's successful challenge to the introduction in 2003 of a risk equalisation scheme into the health insurance market, the High Court ruled today.
Bupa had sought multi-million euro damages on grounds including it had disposed of its Irish business at a diminished value in March 2007. The State insisted Bupa had no entitlement to compensation.
Mr Justice John Cooke today determined a range of issues under Irish and European law as to whether the State has a liability to Bupa for damages. He concluded no liability arose.
The State is however facing a legal costs bill estimated at more than €5 million since the Supreme Court in 2008 awarded Bupa the legal costs of its successful challenge to the scheme. Further costs were incurred in the proceedings over damages.
In 2008, while dealing with issues arising from Bapa's successful appeal against the High Court's rejection of its challenge to the RES, the then Chief Justice Mr Justice John Murray said he wanted to make clear the Supreme Court's judgment allowing Bupa's appeal did not prohibit the Minister for Health proceeding with risk equalisation in any statutory form chosen.
The judgment merely stated the law as laid down by the Oireachtas and contained no inhibition on the introduction of any scheme, he stressed.
The Supreme Court granted Bupa's appeal after ruling the 2003 scheme was invalid because it was based on an incorrect interpretation of the phrase "community rating" in a provision of the Health Insurance Act 1994.
The 2003 RES was to have come into effect in 2005 but its introduction was deferred pending the outcome of Bupa's challenge. The scheme was intended to spread the claims costs of high risk persons amongst all insurers in proportion to their market share, effectively meaning insurance companies with lower risk customers would compensate the VHI for its older and less profitable customer base.
During the proceedings, the court heard VHI has 20 times more customers over the age of 80 than Bupa.
The State had argued "risk equalisation" was a fundamental prerequisite for the effective operation of community rating as it would guarantees all insurers and the members of their schemes would share proportionately the costs inherent in community rating.
The Supreme Court ruled the RES invalid because the Minister for Health adopted it on the basis of an incorrect interpretation of the meaning of the phrase "community rating across the market for health insurance" as set out in the 1994 Act.
The court said the correct interpretation of the term "community rating across the market for health insurance" in the Act means community rating "within a plan" or contract across the market - that each insured person within a given policy must be charged the same premium irrespective of their risk profile, including their age.
