VHI chief paid over €411,000 last year

THE OUTGOING chief executive of the VHI, Jimmy Tolan, received total payments of €411,420 last year, according to the company’s annual accounts.

The annual report and accounts, laid by the Department of Health before the Oireachtas yesterday, show he also received performance-related pay of €37,500 in respect of 2008 and 2009 for achieving strategic objectives.

It is understood that at Mr Tolan’s request, there was no performance-related payment for 2010 although most of the short- and long-term objectives were met for the year. The accounts show Mr Tolan was paid a salary of €412,003 in 2009.

Mr Tolan, who has announced his departure from the State-owned health insurer, was appointed chief executive of the company in May 2008. Under his contract, the maximum total remuneration level including pension and performance-related payments would have been €665,320.

As part of its reforms of pay for chief executives of commercial State companies, the Government set a salary rate for his successor at €191,014.

The VHI, the largest health insurance company in the State, was at the centre of huge controversy earlier this year when it increased subscription rates by up to 45 per cent.

In his review of the year, VHI chairman Bernard Collins defended the increases which, he said, were needed for the company to be sustainable and to meet its legal obligations to match income and expenditure.

Mr Collins warned in his review that the concept of community rating in health insurance – where everyone pays the same for identical products, regardless of age – was very much under threat.

“Sadly it is now very clear that community rating has been overwhelmed by market forces, primarily due to the failure of Government to set the age-related tax credits at a level which would properly equalise the health insurance market and, in turn, protect older members of society.”

Mr Collins highlighted the decision in December 2010 of the Department of Health to increase the cost of private accommodation in public hospitals by an average of 21 per cent and the failure of the industry regulator to raise tax credits to a level which VHI believed was needed.

“The consequence of these decisions by the Department of Health and the Health Insurance Authority is that VHI Healthcare was facing losses of €147 million in 2011 on its customers over the age of 60 and faced losses of over €100 million on Plan B and B Options prior to the price increases announced on January 6th, 2011.”

The accounts were lodged in the Oireachtas the day before a landmark ruling by the European Court of Justice which could have significant implications for the company and the private health insurance market in Ireland.

Today’s 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.

Last March the European Court of Justice heard the case, which in effect centres on exemptions 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 Department of Public Expenditure has clarified that new entrants to the public service from next year will still be entitled to a tax-free lump sum upon retirement, writes Harry McGee.

Earlier this week, it was suggested the lump sum would no longer be available to entrants to the public service under the new Single Pensions Bill to be published by the Government in the coming days.

The tax-free lump sum of 1½ times salary would still be available, a spokeswoman confirmed, but it would be based on the lower career average earnings figure, not a higher final salary average.