Independent health insurers are likely to have between nine months and a year before they have to begin making risk-equalisation payments to their State-owned competitor.
HIA, the Health Insurance Authority, yesterday issued a statement confirming that it had recommended to Minister for Health Mary Harney that she introduce a scheme to force independent players to make payments to State-owned health insurer VHI.
The system, known as risk-equalisation, is designed to compensate the VHI for the fact that its customers are older and more at risk of ill-health, therefore less profitable, than those of its competitors, Vivas and British-owned Bupa.
The HIA is recommending that it be introduced because the Government wants health insurance charges to be based on a community rating. This means that two clients with the same level of cover from the same company pay the same premium, no matter what the level of risk.
Bupa has already warned that it will leave the market if the Minister introduces risk-equalisation. It claims that it will lead to it giving €34 million to the State operator, even though its projected profits for this year are €17 million.
Ms Harney has to decide by the end of June if she will introduce risk-equalisation and will have to announce her decision at that point. However, she is not obliged to introduce it immediately.
Sources yesterday suggested that if she decides to go ahead, she will introduce risk-equalisation sooner rather than later. However, Bupa will still have a wait of six months before the HIA establishes how much it will have to pay, and a further three months to pay up.
It is thought that Ms Harney is unlikely to delay if she decides to introduce risk-equalisation and the process should get under way during the summer. This means that Bupa will have to make its first payment during the second quarter of next year.
Vivas would not become part of the process, if it is introduced, until autumn 2007, as new entrants have a three-year moratorium before they have to begin making the payments. The company began trading last autumn.
Vivas warned yesterday that the HIA recommendation was regrettable and short-sighted. "If the Tánaiste was to take this recommendation on board, this would be the single biggest deterrent for private investors in the healthcare market at a time when investment is needed most," it said.
