The Government could be facing legal action from Europe over health insurer, VHI's ancillary businesses.
The Internal Market Commissioner Charlie McCreevy is reportedly preparing to write to the Government saying VHI is abusing its unique position in the Irish market by operating a travel insurance business, online retail service and a private clinic.
Mr McCreevy's action follows a complaint lodged with the Commission by VHI rival, Vivas, late last year.
VHI, formerly a State-owned monopoly, is regulated by the Department of Health and is not subject to the regulatory requirements imposed on operators in the health insurance market by the Financial Regulator.
Vivas chief executive Oliver Tattan believes VHI could be breaching the terms of a special exemption from the Commission by linking its policies to other products giving it an unfair advantage because the regulator precludes other health insurers from doing likewise.
Mr Tattan has also complained that VHI, which has unlimited financial guarantees from the Government, has been running down its cash reserves while his company must meet strict solvency rules insisted upon by the regulator to cover for emergencies.
"The approach of the Irish Government to the regulation of the private health insurance market is both protectionist and discriminatory. As a limited company, Vivas Health is subject to all applicable rules of Irish company law and Irish insolvency law.
"VHI does not comply with any of the solvency requirements normally applied to insurance undertakings, even though it has expanded its commercial activities into markets not directly related to the provision of private health insurance," Mr Tattan said today.
Mr McCreevy has already written to Minister of Health Mary Harney expressing concern about regulation of the health insurance market.
He is also studying the High Court ruling in November giving the go-ahead for risk equalisation to be implemented.
The largest independent health insurer in the State, Bupa, has appealed to the Supreme Court and said last month it was pulling out of the market because of the ruling.
Bupa says it must pay around €1 million a week under the scheme which compensates VHI because it has an older customer base which is more expensive to service.
RTE reports that the letter Mr McCreevy is due to send next week is separate from his concerns about risk equalisation and constitutes the start of a formal process that could lead to Ireland being referred to the European Court of Justice.
The Government will have 60 days to respond.