Tánaiste Mary Harney, plans to transform health insurer VHI from a statutory body to a State-owned commercial company.
The Minister for Health and Children revealed yesterday that she intends publishing in September the heads of the Bill that will lead to the change, but added that passing the legislation could take a number of years.
The move will mean that the insurer will be obliged to maintain reserves equal to half its premium income, an obligation faced by its competitors, who object to the fact the VHI does not face the same requirement.
Ms Harney said she wants to change the VHI's status to ensure that there is a "level playing field" for all players in the Republic's health insurance market. "All players have to have the same requirements in relation to reserves," she said.
The Tánaiste added that the latest entrant to the market, Vivas, had made a strong case for the change in a submission on the Government plan to introduce risk equalisation payments to the market place.
Vivas has already made a complaint to the European Commission about the fact that the Irish Financial Services Regulatory Authority (Ifsra) requires it to hold reserves while the VHI, its biggest competitor, is not obliged to do the same thing.
Ms Harney yesterday said that it would be premature to introduce risk equalisation in advance of a Government decision on the VHI's future status.
However, she said that she would not necessarily wait until the VHI's status had changed until she gave the go ahead to risk equalisation. "What I am saying is that it must be on course to becoming a commercial body," Ms Harney stated.
Risk equalisation will mean that the VHI's biggest competitor, British-owned Bupa, and ultimately Vivas and any other new entrants, will have to compensate the State player for the fact that its customers are older, more at risk and thus less profitable than those of the more recent arrivals.
The Health Insurance Authority (HIA) had recommended that she introduce risk equalisation, as she and the Government want to ensure that charges for health cover are community rated.
This means that two people with the same level of cover pay the same premium to an insurer, no matter what the level of risk.
The last HIA review of the market found that the VHI's exposure to older age groups cost it an extra €16 million in the second half of last year.
However, Bupa last month warned that risk equalisation would result in it handing over €34 million to VHI this year alone. The company threatened to leave the Irish market if the Tánaiste introduced the scheme.
