VHI warns it may need funds of up to €200m

The Government will have to make a commitment on investing up to €200 million in the VHI within the next six weeks if it is to meet a deadline agreed with the European Commission of securing authorisation from the Central Bank by the end of the year, the State-owned health insurer has warned.

The Irish Times understands that VHI chairman Martin Sisk also told Minister for Health James Reilly late last month that further significant changes would be needed to the Government's stance on a controversial risk equalisation scheme in the health insurance market if VHI was to stand any chance of achieving Central Bank authorisation.

Court ruling
The European Court of Justice found in September 2011 that VHI's exemption from Central Bank authorisation and regulation was in breach of EU directives. Its private competitors in the Irish market must have substantial financial reserves.

The Government told the commission that VHI would not be authorised by the Central Bank until the end of 2013.

Mr Sisk is understood to have told Dr Reilly, in a letter, that VHI will have to make a full application to the Central Bank regarding authorisation by the start of June if the end-of-year deadline is to be met. Clarity from the Government on capital investment and on further reforms to the risk equalisation scheme would be needed by then.

No comment was available from the Central Bank yesterday.

The commission has reminded the Government that the court can impose fines on member states that do not comply with its judgments.

Dr Reilly told the Cabinet in 2011 that up to €220 million could be needed to bring the VHI’s financial reserves up to a level to secure Central Bank authorisation.

VHI is exploring the prospect of entering into re-insurance arrangements, which would reduce the State investment required. However, informed sources said this was still likely to leave the Government having to find at least €100 million to invest in VHI.

A second key element of the Central Bank authorisation process is that the company must show it has a sustainable business model. It is understood that VHI has warned the Government that “significant changes” would be needed to the risk equalisation scheme if this is to be achieved.