Internal Market Commissioner Charlie McCreevy is threatening to take legal action against the Government over its failure to restructure the State health insurer VHI and the introduction of risk equalisation.
He has also warned that the European Commission could begin a separate State aid investigation into the unlimited guarantees that the VHI enjoys from the State.
In a letter sent yesterday to his former government colleague, Minister for Health Mary Harney, Mr McCreevy says his main concern is that VHI is not subject to the same regulatory conditions as its competitors in the Republic. He also asks to see the full High Court judgment in the recent risk equalisation case to enable him to make a decision on whether he should propose to the commission the start of legal action.
"I am aware that the current unsatisfactory situation of the VHI has been built up over many years now prior to you assuming responsibility for health. However, this is now becoming acute and for which remedial action by the Irish authorities is necessary," Mr McCreevy says in the letter, which asks for a formal response within 15 days.
Risk equalisation involves the transfer of payments from health insurance firms with relatively younger subscriber profiles to ones with relatively older memberships. Bupa, the main competitor to VHI in Ireland, has claimed that it will face risk equalisation payments worth €161 million over three years under the scheme. Bupa lost its challenge to the introduction of the risk equalisation scheme in the health insurance market in the High Court last month but has lobbied Europe on the issue. It has threatened to pull out of Ireland over the issue.
In an earlier letter to Ms Harney in June on the VHI, Mr McCreevy warned that risk equalisation may break EU law by sweeping away competitors from the Irish market.
In yesterday's letter to Ms Harney he questions whether the VHI should continue to enjoy exemptions from EU regulations that impose a tough supervisory regime on its main competitors. He also raises the thorny question of whether VHI's position as a State company gives it financial guarantees that could be constituted as State aid.
"I will be raising with my colleague Neelie Kroes, commissioner for competition, my concerns about the unlimited guarantees that VHI de facto benefits from and seeing how her investigations under the State aid rules are proceeding," he says.
Mr McCreevy has responsibility to ensure that EU governments introduce a competitive and fair insurance market. He has the power to launch legal cases against states that breach EU regulations governing the European health insurance market. He also calls into question the different rules that govern the VHI from its rivals.
Mr McCreevy lists the different licensing, prudential supervision and solvency regimes that VHI enjoys as areas of major concern for his office. In particular, the solvency requirements on market operators in Ireland, which are higher than in Britain, add to the difficulties faced by new market entrants viz-a-viz the VHI, said Mr McCreevy.
