The Minister for Health should look into splitting the State-owned health insurer VHI into two or more smaller companies to increase competition in the market, a report by the Health Insurance Authority (HIA) has recommended.
The HIA also proposes significant changes to the controversial risk equalisation scheme.
In its report on competition in the market, it calls on Minister for Health Mary Harney to commission an independent study into the feasibility of splitting up VHI, examining the costs and benefits of such a move.
The HIA said a split would increase competition and consumer choice in the health insurance market, which, it said, would remain limited if no new companies entered the market.
However, the authority said it was "quite unclear" whether the possible benefit of better value health insurance policies for consumers would outweigh the costs and risks involved in splitting the company.
It said the views of VHI's 1.55 million members should be considered.
A report by the Competition Authority, published on Tuesday, also debated the idea of breaking up VHI into a number of companies, suggesting the possibility of a one-off splitting out of a "grey" insurer for consumers of more than a certain age.
The HIA's proposed changes to the risk equalisation scheme would mean new entrants to the private health insurance market would have a longer phase-in period before they have to pay the full rate of risk equalisation payments.
Under the scheme, new market entrants with a greater proportion of younger customers than VHI must make annual payments to the insurer to compensate it for its members' higher-risk profile.
However the scheme has been described as a deterrent to new market entrants and prompted Bupa's withdrawal from the market in December.
Under the existing scheme a new health insurance company does not have to make risk equalisation payments for three years. In the fourth year it must pay 50 per cent of the full amount, with full payments from the fifth year.
However, the HIA recommends that the phase-in period should be extended so that new entrants only pay 25 per cent of the full amount in the fourth year, rising to 50 per cent in year five, 75 per cent in year six and only reaching the full amount of the risk equalisation payment in the seventh year.
Vivas Health, which is nearing the end of its risk equalisation exemption period, welcomed the HIA's report, but Vivas's chief executive Oliver Tattan questioned why its proposals for the phase-in of risk equalisation payments were not raised before.
"While there is clearly a need for changes to the risk equalisation scheme as it is currently proposed, I find it confusing that a regulatory body which last year advised the Minister to trigger risk equalisation, is now calling for changes to the scheme," said Mr Tattan.
