Plans to regulate VHI face new delay

PLANS TO bring the State’s largest health insurer, the VHI, under the regulation of the Financial Regulator – a move likely to require an investment of at least €100 million – have been delayed again.

Minister for Health Mary Harney has signed an order setting a new date of March 31st next year for the VHI to accrue the capital reserves required for authorisation by the Financial Regulator.

The Government, which faces court action by the European Commission for failing to implement an adequate regulatory regime to oversee the State-owned VHI, had initially set a date of last September 1st for the State-owned company to be authorised by the regulator – a deadline that was later extended to December 31st.

However, the Department of Health has confirmed that this December deadline will not now be met.

Earlier this month, the chairman of the Health Insurance Authority, Jim Joyce, told the Oireachtas Joint Committee on Health and Children that the fact VHI Healthcare was not authorised by the Financial Regulator as an authorised insurer was a market distortion that must be addressed.

The Minister has previously stated that she intended to bring proposals to cabinet shortly in relation to its future regulation but it is unclear as to whether this has yet happened.

There has been strong speculation that among the options under consideration for generating the level of funding required to allow for VHI to be authorised would be to put in place a full or part privatisation of the company.

The VHI currently benefits from an exemption from the general insurance supervisory regime established by two EU non-life insurance directives, even though the firm has expanded beyond the health insurance market.

This means it does not have to meet some obligations required of its rivals in the Irish market, such as setting aside reserves for a minimum guarantee fund and meeting solvency levels.

Ms Harney said earlier this year that the Government was addressing the issue of having a level playing pitch for all health insurers and ending the VHI’s special derogation under directives on insurance from prudential regulation by the regulator.

She said the Government had decided the VHI should be in a position to attain authorisation from the regulator and satisfy its prudential requirements as soon as possible.

It had been estimated that VHI required a capital injection of more than €100 million to bring its financial reserves up to the level to allow it to secure authorisation.

In essence, the VHI needs to bring its reserves up to 40 per cent of premium income.

The company had intended to use millions of euro it hoped to receive under a controversial risk-equalisation scheme to boost its reserves.

However, this plan evaporated after the Supreme Court struck down the scheme in 2008.

Ms Harney told an Oireachtas committee earlier in the summer that if the Government was “to force the VHI to be regulated in the morning and it was not regulated, it would go under, with 1.5 million customers, and no one wants to see that happen”.

VHI’s main rivals in the health insurance market here are Quinn Healthcare, owned by wealthy Fermanagh businessman Seán Quinn, and Hibernian Aviva.