herald

Saturday 18 August 2018

VHI fees may soar again to pay €300m bill

VHI bills could rise again to bridge an estimated €300m gap the insurance company needs to cover minimum reserves.

The healthcare insurer is currently exempted from being regulated by the Central Bank.

But the European Court of Justice has now ruled that Ireland was in breach of its EU obligations.

EU laws state that financial insurance companies have to put aside €4 out of every €10 in premiums so that they have enough reserves to cover the cost of a major increase in claims.

However, the VHI was not obliged to meet this target.

The case, which was brought against Ireland by the EU Commission, centred on exemptions enjoyed by the VHI from certain EU rules on non-life insurance.

The commission said that the VHI today differed considerably in terms of membership and activities from 1973, when the exemptions were granted.

This ruling from the ECJ means that the Government could now have to find significant sums to invest in the financial reserves of the State-owned health insurer VHI so that it can be regulated by the Central Bank.

The Central Bank will decide on the amount that has to be put into the reserves.

The knock-on effect will mean that premiums will rise even further as the funding requirements come from taxpayers or premium rates will be pushed up and on to customers.

Competing

But there is a suggestion that the insurer could be part privatised.

Minister for Health Dr James Reilly said he would bring proposals to Government shortly "on how best to address the issues arising from the judgment, as well as those affecting the private health insurance market as a whole".

Dr Reilly has already unveiled plans in the programme for government to break up the VHI into three competing companies. There are also plans to use the VHI as part of the plans to introduce a universal healthcare system.

clairemurphy@herald.ie

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