Dublin  - The Supreme Court in Dublin struck down a "risk equalization" scheme Wednesday by which the former Irish state health insurer, VHI, was compensated by private rivals for having more elderly customers, national broadcaster RTE reported.

The court said the scheme was based on "a wrong interpretation of the law," RTE reported.

The ruling upheld an appeal by British insurer Bupa against the scheme, which prompted the company to leave the Irish health insurance market in January 2007 after it was told to pay VHI 161 million euros (256 million dollars) in compensation over three years.

Bupa's operation and 750,000 customers were finally taken over in April 2007 by Quinn Insurance, which welcomed the court ruling Wednesday.

VHI chief executive Jimmy Tolan told RTE that the ruling would have serious consequences for the elderly and chronically ill.

The government's scheme was introduced in 2006 to compensate VHI, which is now a private company, for having a large proportion of older clients who tend to make more frequent claims and is similar to schemes in other EU countries. (dpa)