The health insurer, BUPA, has launched a High Court challenge to try and stop the implementation of the Risk Equalisation Scheme.
The scheme would involve BUPA paying a subsidy to VHI to compensate the VHI for having a greater number of high risk, older and more expensive subscribers.
BUPA says the scheme will result in it withdrawing from the Irish private medical insurance market.
Today's action is a challenge to the legality of the scheme under Irish and European law.
The company is also pursuing a challenge to the decision of the Tánaiste and Minister for Health, Mary Harney, to commence the scheme.
Opening its case today, senior counsel Paul Sreenan said that risk equalisation is a fundamental interference in the market which is motivated to protect VHI.
Mr Sreenan said the Minister for Health and Children is also the minister with responsibility for the VHI, BUPA's main competitor.
And he said it is this Risk Equalisation Scheme which enables the minister to take the entirety of the profits of BUPA and more and give it to the dominant company, VHI - a company she owns on behalf of the State, to enhance its position and ability to compete.
BUPA claims that the triggering of risk equalisation will cost it €161 million over three years. In the same period it has projected profits of €64 million.
Mr Sreenan said there is no realistic prospect of BUPA staying in the Irish market if it faces liabilities of this size.
He claimed the scheme is anti-competitive and in breach of community law.
