I announced on 23 December, 2005 that the risk equalisation payment provisions of the scheme would be commenced with effect from 1 January 2006. Taking account of the phasing factor of 50% applicable to risk equalisation payments for the first 12 months, the amount BUPA Ireland would have to contribute in risk equalisation payments would be half of the amount quoted by the Deputy for the 12 months ending June 2006.
The purpose of a risk equalisation scheme is to neutralise differences in insurers claims costs that arise due to variations in the age and gender distributions of their members. In a community rated market without risk equalisation, insurers with more favourable risk profiles have a regulatory advantage. The current Risk Equalisation Scheme reduces the advantage of insurers with lower risk profiles.