European Court of Justice to deliver judgment on alleged absence of regulation, writes MARTIN WALL
THE EUROPEAN Court of Justice in Luxembourg is scheduled to deliver a judgment in a fortnight which could have very significant implications for the private health insurance market in Ireland.
The judgment relates to infringement proceedings taken by the European Commission against Ireland over its alleged failure to implement an adequate regulatory regime to oversee the VHI, the largest company in the health insurance market.
The court heard the case last March, which effectively centres on exemptions currently enjoyed by the State-owned VHI from certain EU rules on non-life insurance. In essence, the case is over the fact that the VHI is not subject to regulation by the Central Bank.
The VHI’s status as an insurer not authorised by regulators is regarded as a market distortion because the company does not have to operate under the same rules as rival insurers.
The State is strongly defending the action.
According to official Department of Health documents, which were drawn up for former minister Mary Coughlan before the general election in February, part of the State’s defence “includes reference to the Government’s decision on the future strategy for the private health insurance market, including regulatory change and the capitalisation, authorisation and sale of the VHI”.
However, the new Government has changed the official position on the future of VHI. It said that the sale, which had been announced last year by the then minister for health Mary Harney, would not go ahead and that the company would remain in public ownership
Exemptions originally granted under the first and third non-life insurance directives mean that the VHI does not have to meet obligations, such as minimum solvency levels, which are required for every insurance company operating in the EU.
The commission has taken the view that the VHI today differs considerably in terms of membership and activities from 1973 when the exemptions were granted.
One of the main reasons for the delay in the VHI being authorised by the Central Bank is that this would require the company to bring its reserves up to 40 per cent of premium income.
Ms Harney said last May that to increase the VHI’s reserves from the current 20 per cent would involve an investment of €338 million. The former government said that it would invest up to €300 million in the VHI.
The Minister for Health James Reilly has proposed breaking up VHI into competing companies under proposals to introduce universal health insurance for all citizens. The insurer is opposed to the plan.
The Department of Health said last week that Mr Reilly had received a report commissioned from Goodbody’s Corporate Finance and law firm Matheson Ormsby Prentice into the health insurance market.