PRESS CONFERENCE:THE DECISION to privatise the VHI was taken at a special Cabinet meeting this week where a proposal from Minister for Health and Children Mary Harney was approved after a discussion that lasted approximately 1½ hours.
The matter had already been discussed on several occasions but no decision was taken until the Government met on Wednesday evening.
The holding of the additional Cabinet meeting was not disclosed until after a news conference that took place at an hour’s notice yesterday.
In his opening remarks to the news conference at Government Buildings, the Taoiseach said the principle of solidarity should apply in private health insurance, as well as in public health services.
Mr Cowen told a news conference that a new risk equalisation system was being put in place that would involve cash transfers between health insurance companies in relation to the cost of insurance for older and sicker people.
“We are ensuring that there is a level playing field among health insurance companies, that all are fully regulated and comply with regulatory reserves and solvency levels. This means that the VHI, in particular, is to be fully regulated.
“We are prepared to invest significant sums of State capital into VHI to help it achieve authorisation.” The Government was divesting the State of ownership of the VHI.
“Since we will be requiring risk equalisation cash payments between companies, it is vital that the State acts in a totally even-handed and impartial way,” Mr Cowen said.
“We will provide for a developing role for health insurance by taking steps towards the introduction of primary care cover into minimum benefits and other measures to increase competition and choice for customers.”
Ms Harney said community rating meant that “younger, healthier people subsidise older and sicker people”.
“We believe we can only protect community rating if we bring in, firstly, new legislation which we hope will be operational from January 1st, 2013, and obviously that legislation has to be approved by the European Union.”
Asked about the implications for VHI premiums, she said: “As a result of the plans we are announcing today, older and sicker people will pay less than they would otherwise have paid because, if we didn’t make these decisions, there’s no doubt that the market would have segmented”.
Ms Harney added: “Obviously health costs are rising but we also believe the emphasis on primary care should help to reduce the cost of health insurance.”
Asked about the job-security of VHI staff, Ms Harney said: “We do not believe that this decision will have any negative effect on employment.”
Public funds would be put into the VHI as it did not have to meet the reserve ratios of its competitors. Those that are regulated have to have 40 per cent of their premium income by way of reserves: the VHI has roughly 20 per cent and in their 2008 report that was €338 million.
“So if they are required, like their competitors, to have a 40 per cent ratio, clearly they would require in the region of another €338 million.
“We believe that will come from Government sources but also from reinsurance and the reason we haven’t a figure today is we are going to recruit financial experts to do a due diligence and to advise the Government on what capital will be required.”
“The fact that the Government is the owner of the VHI and requires its competitors to transfer resources to the Government’s company means that we don’t have an even playing field,” added Ms Harney.
In addition the VHI had been instructed to open up its travel insurance scheme to non-members; younger people would be encouraged to take out health cover by imposing a penalty on those who joined above a certain age; and minimum benefits would be amended so products would be based on primary and non-hospital care as much as possible.
The Government expected to recover its investment – “all of that and more” – from the sale of the VHI which would be “a very attractive possibility for interested parties”.