Tánaiste and Minister for Health Mary Harney has said that she does not favour turning the VHI into a mutual society, as mooted by some in the State-owned health insurer.

She was addressing a meeting of the Oireachtas Joint Committee on Health and Children, at which she revealed plans to oblige health insurers to provide cover to people aged over 65. New customers over that age will have to pay premiums for 104 weeks before making claims, except for claims made in the case of accidents or "if something is inflicted on them", she said.

Ms Harney indicated that she intended to change the VHI's corporate status to that of a commercial semi-State from statutory body. While statutory body status restricts the range of business activities that the VHI can undertake, Ms Harney stressed that any change would be subject to Government approval.

She understood the company favoured a change in status to that of a mutual society, owned by its members. "That would not be my preference," Ms Harney said, adding that she did not believe such a structure would be good for the market.

The VHI said later that commercial freedom could be achieved as a commercial semi-state but said the question of its corporate status was a matter for Government. "However, if the Government was to go down the route of privatisation then we do have a view as to the form that privatisation should take," said its spokeswoman.

In addition to indicating a preference for the commercial semi-State status, Ms Harney said she planned to withdraw a derogation from EU rules which imposes lesser capital requirements on the VHI than on other insurers.

While Ms Harney has already told health insurers in correspondence that she intends to trigger the risk equalisation scheme, she said at the committee that she has not made her decision yet and would not do so until next Monday's deadline.

The scheme will oblige the VHI's biggest rival, Bupa, to make multi-million-euro payments to the State company to compensate it for the higher age profile of its customers. Bupa has initiated a case in the High Court seeking to prevent the activation of the scheme.

Ms Harney said such a scheme would see younger people subsidise the healthcare of older people in a line with the principle of "generational solidarity".