IT WAS inevitable that the European Court of Justice should order the VHI to carry the same financial reserves as its competitors in the health insurance market. It has directed a cash-strapped Government to invest at least €300 million in the semi-State company to continue trading. It should never have come to this. Six years ago, the European Commission issued a formal warning to government.
Then minister for health Mary Harney declined to deal with the matter and compounded matters by her attitude to risk equalisation.
Government handling of the health insurance market has been marked by incompetence. It introduced legislation to end the VHI’s monopoly in 1994, assuring the public that community rating and risk equalisation would provide protection for older consumers and compensate the VHI if any “cherry picking” by competitors took place. By 1997, it had introduced regulations to give effect to these commitments. But, following a challenge by BUPA, the Supreme Court ruled in 2008 that the regulations were incompatible with the legislation. That decision cost the VHI hundreds of millions of euro in expected compensation. The money would have plugged the hole in its reserves.
The Supreme Court ruling appeared to cause paralysis in government. In 2009, Ms Harney declared the sale of the VHI was unlikely to go ahead without risk equalisation. Last year, she announced legislation was being prepared to establish a full risk equalisation scheme by 2013. During those years, the VHI was haemorrhaging money and losing clients. Lacking risk equalisation payments to compensate for its ageing client base, the VHI announced increases of up to 45 per cent last January on those specific policies. Despite government assurances, a US -style insurance model had emerged.
These developments are likely to compound the difficulties facing Government as it prepares to abandon the existing, dual system of healthcare in favour of a universal, single-tier arrangement. Finding €300-€400 million to underpin the VHI while retaining it in State ownership will be problematic. After that, universal healthcare is to be introduced in phases, with the compulsory insurance element due by 2016. The State-guaranteed insurance system will not, apparently, be subject to European or national competition law. But it will involve community rating and risk equalisation. A “comprehensive set of actions”, promised by Minister for Health James Reilly to protect consumers and provide an evenly structured market, is urgently required.