The State's largest health insurer, the VHI, will remain in State ownership next year, Minister for Health Mary Harney has said.
However, the Minister said that the Cabinet still had to decide on how to fund the estimated €100 million-plus which will have to be injected into the company's financial reserves by the end of 2008.
Under Government plans, VHI will lose its existing derogation from solvency requirements and become a conventional insurer authorised by the Financial Regulator, IFSRA, by the end of 2008.
It is generally accepted that this will require a substantial injection of capital, estimated between €100 and €200 million, to bring its reserves into line with industry norms.
Several months ago the Cabinet appointed legal and corporate finance advisers to report on how this could be achieved, leading to speculation that the funding could be generated by means of a part or full privatisation of the company.
However, Ms Harney told The Irish Timesthat her view was that the VHI "would be authorised in the context of it remaining in State ownership during 2008".
She said that many different models had been put forward, but that under the current proposals, the company would be authorised under State ownership.
"The ownership issue will not be addressed in 2008. I do not envisage a situation arising where the Government will be selling the VHI in 2008. A lot of people are raising questions about how it can be authorised if it is not sold. I do not think that the two are necessarily incompatible. VHI is capable of being authorised under a structure that is not privatisation," she said.
The Minister added that the issue of the company's access to capital for its reserves had to be decided by the Government and that she did not want to prejudge the issue in advance of a Cabinet decision.
She said that while the external advisers had reported, the Department of Health and the Department of Finance were still working on the issue with a view to bringing a memorandum to Cabinet in the spring.
The Government has been urged by the trade union Unite, which represents staff at the VHI, to invest State funds in the company's reserves.
However, Ms Harney said that aside from this issue of whether this would represent State aid and be allowed by the EU, the question remained "if the State had capital and could invest it, whether it was a wise choice for investment, rather than a new hospital, for example".
On foot of a derogation from the first non-life directive, which governs solvency requirements and which was introduced in the 1970s, VHI currently only maintains financial reserves equal to about 23 per cent of its premium income.
However, under rules set down by the financial regulatory authorities in Ireland, the company will in future have to maintain reserves of about 40 per cent of premium income.
Similar rules apply to rival health insurers such as Vivas.
Ms Harney said she had sympathy for those who argued that this requirement was too high. However, she said that the Financial Regulator was the independent regulator in the area.
