THE EU Commission is expected to write to the Government within a month to seek its plans for the private health insurance market. The move follows a landmark ruling by the European Court of Justice that Ireland had failed to meet its obligations under various directives.
On foot of the judgment, the Government could now have to find significant sums – possibly running into hundreds of millions of euro – to invest in the financial reserves of the State-owned health insurer VHI to allow it to be regulated by the Central Bank.
Former minister for health Mary Harney suggested last year that the bill for this could be €338 million. However, it is understood the Department of Health believes the funding requirement for any such authorisation would be much lower.
The Central Bank will decide on the amount that has to be put into the reserves.
Dr Reilly said he was preparing “a comprehensive set of actions” and would be bringing proposals to Government shortly “on how best to address the issues arising from the judgment, as well as those affecting the private health insurance market as a whole”.
The Minister stressed that following the judgment, VHI would continue to trade as normal, although the Government had to make important decisions on how to address its regulatory position.
“I will examine the judgment of the court in detail and take legal advice as appropriate. I will also engage in discussions with my Government colleagues, the Attorney General, the Central Bank and the European Commission, in order to address the issues raised by the court judgment and to rectify the situation for the benefit of all.”
The case, which was brought against Ireland by the EU Commission, centred on exemptions enjoyed by the VHI from certain EU rules on non-life insurance.
In essence the case was over the fact the VHI is not subject to regulation or “authorisation” by the Central Bank in the same manner as competitors.
The commission had taken the view that the VHI today differed considerably in terms of membership and activities from 1973, when the exemptions were granted.
The court said when it was set up in 1957, the VHI was mandated to “make and carry out a scheme of voluntary health insurance for defraying . . . the cost to medical, surgical, hospital and other health services”.
However, it said under subsequent legislation introduced in 1996, the company was given the right to provide other health-related services, and this was extended further in 1998 to allow it to act “as agent for an insurer in respect of the provision of insurance cover pursuant to an international healthcare plan”.
It said in 2001, the VHI obtained the right to carry out, among other things, “activities of an advisory or consultative nature”.
The court said Ireland argued the additional activities carried out by the VHI were “of minor importance compared to the principal activity”.
“However, given that, at the very least, the power of the VHI to act as an agent on behalf of another insurer under an international healthcare plan or the right to carry out advisory activities go beyond the basic activities that it was authorised to carry out on the basis of the 1957 Act, it must be held that Ireland’s line of argument cannot be accepted, irrespective of the financial significance of those new activities with regard to the entire revenue of that body, as no provision is made for this criterion in the First Directive.”
VHI said that the decision of the European Court of Justice was “not unexpected”.
Siobhán Fay, managing director of Aviva Health, said: “This is a significant development for the health insurance market in Ireland. For too long, VHI has played by different rules.”
