The Supreme Court has ruled that the Government's risk equalisation scheme for health insurance is based on a wrong interpretation of the law and should be set aside.
The court upheld BUPA's appeal against a High Court decision rejecting its challenge to the scheme.
Quinn Insurance welcomed the judgment.
A spokesperson said: 'We have always had fundamental concerns with how the process is assessed. We now need to look at the judgment in detail to see what the full implications are for the health insurance industry.'
Jimmy Tolan, Chief Executive of the VHI, said the decision might have serious consequences for older and chronically ill members of society.
'It is our goal to try and ensure that private health insurance can continue to be purchased on acceptable terms by our more medically vulnerable customers,' he said.
Minister for Health Mary Harney said it was not clear if there is a legal solution to the issues that have arisen following today's judgment.
Ms Harney said it was essential to maintain solidarity between young and old people and she advised subscribers not to panic. The minister said she was seeking legal advice and this would take time.
Under the risk equalisation scheme, the VHI was to have received payments of more than €40m from BUPA.
Those payments had been postponed pending the outcome of this appeal.
Risk equalisation was intended to compensate the longer-established insurer for the enhanced risk inherent in its customer base of older members.
Risk equalisation between insurance funds is common practice in several European competitive insurance markets.
In December 2006, BUPA announced it would leave the Irish market following a warning that the company would have to pay €161m over the next three years to support VHI.
BUPA Ireland operated from its corporate headquarters in Dublin and its call centre in Fermoy, Co Cork.
In January 2007, BUPA announced a takeover agreement with Quinn Group, resulting in BUPA Ireland transferring around 750,000 members and saving over 300 jobs.
The takeover was concluded on 17 April 2007 when the company was fully relaunched as Quinn Healthcare.
