BUPA pulls out of Ireland

Medical insurance company BUPA announced on Thursday that it is pulling out of Ireland due to the insistence of the Government that it contributes to a risk equalisation fund which will subsidise rival VHI, which has an older membership profile. BUPA has stopped signing up new members and will not renew the policies of its 475,000 existing members, although they will have cover for the duration of their policies. The move will lead to the loss of 300 jobs, mostly in Fermoy, Co. Cork.
BUPA insists that it cannot trade profitably if the risk equalisation requirement remains. The Government points out that, when BUPA accepted the invitation to enter the Irish market ten years ago, it was fully aware that risk equalisation would be brought in at an appropriate time. When it was introduced, BUPA immediately challenged the decision in court and lost. It then entered negotiations with the Government but these negotiations broke down on Tuesday.
While BUPA argues that it could not sustain the losses arising from risk equalisation the Government consultants, Mercer, concluded that, although BUPA might incur losses in the short term, it would return to profitability. A VHI spokesman said he was disappointed at the BUPA decision and claimed that the company could have remained profitable. Taoiseach Bertie Ahern entered the fray, robustly dismissing BUPA's arguments and saying that the Government would not stand over a situation whereby one company enjoyed big profits by focusing on young healthy members while another was forced to increase premiums because it had a predominance of older members. It should be noted that, while BUPA had a younger membership, it did encourage older people to join at the same rates.
Some economists seemed to sympathise with BUPA MD Martin O'Rourke and blamed the Government for the debacle. Other observers said the rules were clear from day one, although they too bemoaned the departure of BUPA as it is accepted that it brought real competition to the sector. While this may not have resulted in lower prices, it probably limited the rate of increase and certainly introduced a greater range of options. There were also those who were more critical of BUPA, accusing it of only being interested in the high profits its younger members have delivered over the past ten years and of trying to blackmail the Government. Opposition politicians were in a quandary; they too believe in risk equalisation and in competition, so they simply blamed the Government for allowing the negotiations to fail. Members of BUPA seem to be backing the company and lay the blame squarely on Mary Harney.
It was reported on Friday that the Competition Authority will next month publish a report which calls for the break-up of VHI into two or more independent competing units. The only other independent medical insurance company in the country, the much smaller Vivas Health, has no intention of following in BUPA's footsteps. It will seek to reduce the amount due under risk equalisation and hopes to pick up as many BUPA clients as possible. A spokesman claims, however, that VHI, with its state protection, has an advantage over it. The Vivas website explains how easy it is to switch from one insurer to another, even for those receiving ongoing medical treatment.