McCreevy urges Government to reform VHI

EUROPEAN Commissioner Charlie McCreevy has turned up the pressure on the Government to reform the VHI.

He has said a letter he received from the Government defending the VHI’s privileged position contains no new information.

As a result he is expected to send them a final warning, sometime after Easter, and refer the issue to the European Court of Justice possibly this autumn.

The VHI has said it is surprised that the Commission has leaked the information to the media before officially informing the government of its decision.

Under a special derogation given to the health insurance company when Ireland joined the union, the VHI does not have to set aside about 40% of its premiums as a special reserve fund.

Other insurance companies are required to do so by EU law to cover any unexpected demands on their funds and the VHI is to phase it in by 2012.

Vivas, the privately-owned health insurance company backed by AIB and multimillionaire Dermot Desmond, lodged complaints with Mr McCreevy’s Internal Market department of the European Commission early this year.

They claim that the VHI has changed dramatically from the body that was granted the exemption, including offering additional services such as travel insurance.

The Government in its response said the VHI’s derogation is to end in 2012 when they will have the necessary funds set aside to meet the requirement.

Mr McCreevy said: “I am studying the Irish response and if my lawyers are not convinced, we have to move to the next stage of the infringement procedure.”

The matter is being considered as quickly as possible and while the next round of infringement proceedings against member states is not due until June, Mr McCreevy is expected to come forward with the VHI case in late April or early May.

VHI’s chief executive Vincent Sheridan has warned that if it is forced to almost double its reserves to €370m overnight, it would have to increase premiums and sell off some parts of its operation.

He has also warned such action could force it to become a not-for-profit operation. As a semi-state body, it is not required to make a profit and can thus keep premiums down, he argued.

However, Vivas, with about 5% of the market, says the VHI is abusing its position with more than 80% market share and spending money it should be setting aside to promote itself and increase its membership.

If the issue goes to court the process could take up to two years, and by then the solvency limits for health insurers could be considerably reduced under new regulations going through the European Parliament.