THE GOVERNMENT has told the European Commission that the State-owned health insurer VHI will not be authorised by the Central Bank until the end of 2013.
This would mean the Government postponing for nearly two years the investment of up to €220 million in the company’s reserves.
The requirement to put substantial financial reserves into the VHI arose from an adverse European Court of Justice ruling last September. It found that the VHI being exempt from Central Bank authorisation and regulation was in breach of EU directives. In contrast, its private competitors were required to have very substantial financial reserves.
Minister for Health James Reilly told the Cabinet in recent weeks that an investment of up to €220 million may be required to bring the VHI’s reserves up to a level which would allow it to secure authorisation.
The commission had written to the Government seeking its plans for addressing the ruling of the European Court of Justice by December 9th. It warned of possible fines if a response was not provided. The Department of Health has declined to give any indication publicly of its response.
However, it is understood the Government has signalled it will engage with the commission on the fallout from the ruling immediately and speed up the application process for the VHI to secure authorisation. While Dr Reilly suggested to Cabinet that €220 million may be required, the precise amount will not be determined until the application process is under way.
It is understood the Government indicated that, under its timetable, the Cabinet would make a final decision on investment in the reserves when the authorisation process with the Central Bank was nearing conclusion towards the end of 2013. It is believed the Government will also engage with the commission to determine whether any such capital injection would be regarded as a form of State aid.
The Cabinet is also understood to have considered plans over recent weeks to look at new legislation that would incorporate VHI as a limited liability company so it would have the same corporate status as its competitors.
The commission’s competition directorate is understood to have raised concerns over what it maintained was VHI having an effective State guarantee. Meanwhile, Dr Reilly and the country’s main health insurance companies have agreed to set up a health insurance consultative forum to tackle issues of mutual concern.
Dr Reilly met Declan Moran, acting chief executive of the VHI; Donal Clancy, managing director of Quinn Healthcare; and Siobhan Fay, managing director of Aviva Health. Dr Reilly indicated he would be happy to hear any proposals from the insurance companies which would result in lower costs for the health insurance sector.
The meeting took place after warnings by the industry of possible large-scale price rises on foot of planned Government reforms for charging for private patients treated in public hospitals.
Sources said the Minister had argued significant savings could be made to minimise the need for such increases.
