VHI has taken the first step towards private ownership. The management of the state's largest medical insurer is initiating discussions with the Department of Health that it hopes will lead to it breaking free of state control and into the presumably welcome embrace of the private sector
The company's chief executive, Mr Vincent Sheridan, has been careful to get his ducks in a row before broaching the subject with his political masters, but he still has a number of obstacles to navigate
Foremost is the introduction of legislation that will see the cost of insuring older citizens spread across all the players in the market. Given its market dominance and mandate, the VHI insures a far greater proportion of older people than its rival, BUPA.
Before anyone would seriously consider investing in the VHI it would want to ensure that BUPA, and any other rival, will shoulder some of the cost of insuring the less profitable demographic groups. Legislation to give effect to risk equalisation, as it is called, has been passed by the Oireachtas, but it has yet to come into effect. The company will also have to ensure that its employees buy into the concept, but the share ownership schemes put in place at other state companies provide the road map in this regard.
Ultimately the decision to privatise the VHI will be a political one and the arguments are finely balanced. Perhaps the strongest argument in favour of privatisation is that it makes little sense for the state to be both a seller and buyer of health care. Under the current set-up the state is the biggest provider of healthcare and via its ownership of VHI, the single biggest purchaser. In addition it is also the the regulator of the market via the Health Insurance Authority.
The €300 million that the sale of VHI is expected to raise would also be very welcome as all the signs are that next year's Budget will make the current one look positively generous.
The arguments against privatisation are significant. The fate of the company is in effect only a side show to the much larger drama that is the state of the health service. Privatisation of the VHI will do little to improve the quality of health care and as the company acknowledges, it will not reduce the price of health insurance.
The Government's experience of privatisation has been mixed. The ceding of control over Eircom to the private sector has not been an unqualified success. The Government, via the telecoms regulator, is fighting a running battle in the courts with the company as it endeavours to implement policies in areas such as broadband.
It will take many years to fix the problems in the health service and losing control over the VHI at this crucial juncture may not be worth the €300 million that will flow to the government coffers.
Mr Sheridan and his colleagues have a hard sell on their hands.