The Government has announced that it will privatise health insurer VHI which was established in 1957.

The company will not be sold until it reaches the solvency ratios that apply to other health insurers. Prior to its sale, the State is to make a substantial capital investment in VHI to help it attain the solvency levels and the amount of money required has not been estimated. The Department of Health would not disclose the level of losses incurred at the VHI up to April this year. Officials from the Department said in a press briefing that they did not expect premiums to change or the 900 jobs at VHI to be affected - - which means nothing as no buyer is going to make a commitment on both issues.

The sale of VHI is to coincide with the full introduction of a new risk equalisation scheme and the scheme will start on a transitional basis in 2012 before taking full effect in 2013. The scheme would require some insurance companies to pay compensation to others with larger number of older customers. VHI has currently a larger proportion of older customers.

Minister Mary Harney said: "The Taoiseach has underlined the importance of solidarity in the health insurance market and that older and sicker customers should be supported by younger and healthier customers.

“This is the key to all the changes the Government has approved.

“We have carried out a fundamental analysis of the health insurance market. We started out by reaffirming that this Government, like its predecessors, wants to see an effective community-rated market, and we have then identified all the actions needed ensure this.

“Everything we are doing is to secure a stable, community-rated market that contains effective solidarity between the younger and older people and healthier and sicker people. We are protecting older and sicker people from being loaded with premium increases or more expensive policies solely because of their age and medical history.

“There are very complex challenges involved in our health insurance market. It is important to deal with all the complexity on the basis of a clear objective and a determination to achieve it.

Vhi Healthcare today responded to the measures announced by the Government designed to address the major structural challenges in the Irish private health insurance market. In particular Vhi Healthcare welcomed the Government’s re-affirmation of its commitment to uphold Community Rating and to protect older health insurance customers.

According to Jimmy Tolan, Chief Executive, Vhi Healthcare: “We are pleased that the Government has in principle re-affirmed its commitment to protecting older health insurance customers through a robust set of support mechanisms and this is in society’s interests . Vhi Healthcare is currently losing €170 million annually in meeting the healthcare needs of its older customers. Consequently, the current support mechanisms for older customers will need to be significantly strengthened in 2011 and beyond or community rating will be overwhelmed by market forces and ‘cherry picking’ and older people will not be protected in the right and proper way and would end up paying significantly more for their health insurance .”

Potential sale of Vhi Healthcare

Commenting on the proposal to explore a sale of Vhi Healthcare Tolan said: “We support the Government’s view that an independent Vhi is right for the health insurance sector. It is our view that this is in the best interests of our customers and all our employees as this will enable Vhi Healthcare to realise its ambitions to further grow its business and healthcare services from both a geographic and product perspective. It will also enable us to develop additional services for our customers in the key areas of chronic conditions management, prevention and care in the community. The Board of Vhi Healthcare intends to work closely with the Government to ensure the best outcome for all stakeholders.”

He continued: “Ultimately the exact timing of any sale process will be determined by the timing of legislation and by the efficacy and clarity of the measures proposed to support older customers. The view of these complex mechanisms by potential investors will determine the matter and we envisage that this may take some time.”
The Board of Vhi Healthcare is committed to working with the Government to find a partner that is aligned with Vhi Healthcare’s vision, particularly in relation to how the healthcare needs of our customers will be met in the years ahead.”

Financial Regulation

VHI said achieving Financial Regulation is a strategic imperative and as part of the Financial Regulation process Vhi Healthcare will also have to satisfy the Financial Regulator that it is sustainable and well capitalised. It will also have to satisfy the European Commission that it is sustainable and also meet its legal obligations which requires that its income at least matches its expenditure.

Irish Health Insurance Comparisons