THE GOVERNMENT may be referred to the European Court of Justice in the New Year over its failure to eliminate the exemption of VHI Healthcare from EU legislation that requires the insurer to keep specific funds in reserve.
The European Commission has sent Ireland a “complementary reasoned opinion”, which follows a previous reasoned opinion, as a final request to end VHI’s exclusion from EU legislation dating back to 1973. The Irish Government has been given until the end of January to comply with the order – a deadline it looks likely to miss, according to the Department of Health.
When work on Directive 73/239/EEC was initiated in the 1960s, it was considered necessary to exclude certain public or semi-public monopoly institutions, providing health or fire insurance in particular, from the scope of its application. Accordingly, VHI was exempted from the legislation.
In light of the Irish Government’s observations on its initial reasoned opinion, and given that new legislation on Vhi which entered into force last summer has in effect still not removed the exemption, the commission has concluded that Ireland is still in breach of its obligations under EU law with regard to the supervision of VHI’s operations.
“The commission takes the position that the VHI of today differs considerably in terms of membership and activities from the VHI of 1973 when the exemption was granted. It is clear from the number of amendments to the relevant legislation introduced in 1996, 1998 and 2001 that the capacity of the VHI has changed significantly,” the commission said.
It is insisting that VHI – which has announced an average increase of 23 per cent in its premiums with effect from January – be made subject to the provisions of EU non-life insurance legislation and hence be subject to the same regulatory framework as other operators on the market.
It has been a bone of contention among VHI’s competitors that while they have to put aside 40 per cent of their premium income into a reserve fund, VHI does not. This will change as soon as VHI is authorised. Gaining such an insurance licence would also give VHI greater freedom to launch new insurance products, such as investment or pension policies.
Responding to the formal notice from the commission, VHI said the Voluntary Health Insurance (Amendment) Act, 2008 was introduced earlier this year to address the issue. “Under the Act, VHI Healthcare is required to acquire a fund before the year-end. We are working to do this,” a spokeswoman stated.
However, the Department of Health has suggested that it will be well into 2009 before VHI can gain its licence from the Financial Regulator. The health insurer submitted an application for authorisation in June.
But given the Supreme Court judgment on risk equalisation in July and the Government’s decision to introduce a new health insurance levy and tax relief for older people, it is understood revised projections are now required by the regulator to consider VHI’s application.
“The department understands that VHI will be submitting these in the near future,” said a Department of Health spokesman. “As the regulator usually takes up to six months to consider a completed application, it is not expected that authorisation will be achieved by January.” He said the Minister for Health remained committed to VHI attaining authorisation at the “earliest possible date”.
If not resolved by the end of January, the commission will consider bringing an action against Ireland in the European Court of Justice. The court could impose accumulating fines until its ruling is followed.