Press Release

Minister for Health Welcomes Decision of the Court of First Instance of the European Community

The European Court of First Instance issued its judgement confirming the Commission’s original decision approving Ireland’s risk equalisation system for the private medical insurance sector at 8.15am Irish time, this morning, Tuesday 12th February, dismissing the challenge to this decision by private health insurer BUPA.

The judgement was the result of a challenge by BUPA Ireland to the decision of the EU Commission in 2003 not to raise objections to the introduction of a risk equalisation scheme in the Irish health insurance market, the scheme having been first notified to it by the Department of Health and Children and having been examined by the Commission. BUPA lodged an Application for Annulment against the Commission’s decision with the Court of First Instance of the EU and this was heard in March 2006.

Commenting on today’s decision, the Minister for Health and Children , Mary Harney, said “the Government, my Department and I have always seen Risk Equalisation as important and necessary in the provision of an equitable and competitive health insurance market in Ireland. We are pleased to have this upheld today by the judgement of the European Court of First Instance. Risk Equalisation enables the provision of a level playing field for all consumers and insurers and allows for the protection of the consumer by facilitating Community Rating and Open Enrolment. I am committed to protecting equality and encouraging competition in the health insurance market in this way”.


•Risk Equalisation provides the means by which competition in the market works to the benefit of all health insurance subscribers. It operates in the Irish market in the context of the Government commitment to Community Rating, Open Enrolment and Lifetime Cover.

•Open Enrolment entitles persons of all ages, irrespective of health status to avail of health insurance.

•Community Rating ensures that younger and older subscribers pay the same amount for similar health insurance cover and that subscribers pay the same amount for similar cover throughout their lives. This means that people can continue to afford health insurance right into those decades of their lives when they are most likely to need it.

•Risk equalisation payments involve transferring funds from insurance companies which have a disproportionate share of young, healthy subscribers to companies which have a disproportionate share of older people who are more prone to illness.

•In the Irish market, it is evident from returns made to the Health Insurance Authority that a disproportionate share of risk in Health Insurance is borne by the Vhi with a higher proportion of its membership in the over 50 category. The scheme requires that the newer health insurance providers in the market compensate Vhi, although the Risk Equalisation Scheme does not fully compensate Vhi.

•This allows for an equitable market, enabling companies to compete on a equal basis, but also protecting customers through removing the incentive to engage in preferred risk selection.

Risk Equalisation Scheme

•The scheme provided for initial phasing of payments over the first 12 months, BUPA only have to make 50% of the payments due in the first year of the scheme.

•Without phasing, the payment due for the period January to June 2006 would have been €16.6 million and significantly higher should the HIA have determined that health status be incorporated into the formula. BUPA would have had to pay only €8.3 million.

•A stay has been in place on the scheme since commencement, due to a series of legal challenges mounted by BUPA. To date, no monies have been paid over.

•The Health Insurance Act 2001 provides that the Independent agency, the Health Insurance Authority will operate the Risk Equalisation Scheme.

Background Note on CFI Judgement due Tuesday 12 February

•Case taken by BUPA against the Commission decision in 2003 that Ireland’s Risk Equalisation Scheme was not a State Aid.

•Ireland intervened in this case in support of the Commission’s positive State Aid decision of May 2003, given the importance of maintaining community rated health insurance for all health insurance consumers and the role health insurance plays in the Irish health system.

•There is broad international acceptance that risk equalisation is essential to underpin community rating. This is recognised by the Non-Life Insurance Directives. It has also been accepted by all countries where community rating applies, the OECD, The Society of Actuaries in Ireland and other professional bodies without any commercial interest in the issue.

•The Programme for Government affirms the commitment to community rated health insurance supported by risk equalisation.

•Over 50% of the Irish population have private health insurance and rely on it to avail of acute hospital services.

•Private health insurance therefore forms an important part of the delivery system for acute hospital services to the entire population.

•The Government recognises the contribution of the private healthcare sector through tax relief on health insurance premiums and by tax breaks to encourage the development of private hospitals.