Redrafting risk equalisation measure a tricky assignment (The Irish Times)

04 November 2011


The Minister will have to carefully redraft legislation preserving risk equalisation


Only one issue was decided by the Supreme Court when it upheld the appeal of Bupa against a High Court ruling that the risk equalisation scheme introduced by the Minister for Health was invalid. Other issues raised by Bupa, including the constitutionality of the provision and whether it was in accordance with the relevant EU Directive and EU law generally, were not examined by the court, following its decision on the first question.

The issue was therefore a very simple one - does the term "community rating" refer to people who apply to join a health insurance scheme, and ensure that they are charged the same irrespective of age, gender, sexual orientation or health status; or does it refer to everyone within the total population of the privately insured?

Bupa argued for the former, stating that it was prepared to offer the same rates to everyone who applied to join any particular scheme. The State, along with the VHI, argued that it meant the whole privately insured population.

Everything hinged on section 2 of the Health Insurance Act 1994, which ended the VHI monopoly. This sets out the definitions of the various items referred to later in the Act, and stated that "community rating shall be construed in accordance with s. 7 (1) (c)" of the same Act.

This section states that "the premium payable under any health insurance contract effected by a particular registered undertaking shall be the same as that payable under every other such contract". The court found that this referred to schemes offered by specific health insurance companies.

The risk equalisation scheme is provided for in Section 12 of the Act, and was drawn up on the basis that community rating means community rating across all insured. However, the Supreme Court found that this did not accord with the proper interpretation of the Act and the consistent application of the definitions laid down in Section 2.

The State's interpretation of community rating involved a serious interference with the property rights of new entrants to the insurance market, the court said. Such interference might well be justified, but this was for the Oireachtas to decide and to state clearly in legislation.

If risk equalisation is to be preserved Minister for Health Mary Harney must go back to the drawing board, and the court has indicated that new legislation must pass constitutional muster.

It might be wise for the Minister to ask the President to refer any new legislation to the Supreme Court in order to test its constitutionality. If it passes this test, the door will be closed against any further constitutional challenge. It will not, however, be immune from examination in the European Court of Justice, so the drafters will have to keep one eye on this as they commence their complicated task of rewriting this legislation.