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Irish threat to Bupa plans

Nic Cicutti
Tuesday 31 December 1996 00:02 GMT
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Plans by Bupa, the healthcare provider, to grab a slice of the pounds 300m health insurance market in the Republic of Ireland could be dealt a critical blow by the Irish government, which claims its schemes fall foul of the law.

The refusal of the Republic's Department of Health, which regulates the market, to authorise Bupa's launch on New Year's Day would deal a severe blow to the insurer's bid to expand at a time of difficult trading conditions in the UK.

Bupa currently has a 45 per cent share of the private health insurance market in the UK, worth about pounds 1bn in premium income each year. Its market share has declined steadily from a high point of about 70 per cent over 15 years ago.

The row in Ireland concerns the UK insurer's plans to mount an assault on the near-monopoly enjoyed until recently by the Voluntary Health Insurance Board (VHI), which is part-owned by the Irish state.

VHI policies cover 1.4 million people, almost 40 per cent of the total population, compared with just 11 per cent of UK residents with similar cover.

The policies are structured so that one can buy varying levels of cover, with the vast majority of people choosing an option which allows them some sort of care in a private hospital, or private care in the state system.

A recent Health Insurance Act allows competition to VHI, as long as all age groups pay the same premiums for their cover. The aim is not to allow "cherry-picking" of healthy policyholders, leaving the rest to pay more.

Bupa's plan competes with VHI by offering a very basic minimum insurance cover. Its more popular options pay cash to people needing hospital treatment rather than paying for it on their behalf. Bupa believes this allows it to avoid the Health Insurance Act. These options are age-related.

But a Department of Health statement said: "The effect of such a package may be to contravene the definition of a health insurance contract, as set out in the Act."

Tony McSweeney, sales and marketing director at VHI, said: "We welcome competition. But we have obtained legal opinion that Bupa's plans are not lawful as they stand."

He added that VHI reserved the right to take legal action in a bid to block Bupa if the Government gives the schemes its go-ahead.

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