PROPOSALS TO break up the VHI as part of Government plans to introduce a system of universal insurance for all citizens were strenuously opposed by the company’s chief executive Jimmy Tolan before he tendered his resignation last month, internal documents reveal.
Correspondence released to The Irish Timesunder the Freedom of Information Act shows Mr Tolan was in regular contact with the Department of Health in March and April setting out his objections to any suggestion the VHI be broken into three, a move which had been signalled by James Reilly after he was appointed Minister for Health in March.
Mr Tolan claimed the break-up of the State-owned insurer would only result in higher premiums for customers and in the State owning three health insurers, “none of which would be capable of being sold or achieving financial regulation”.
Furthermore he said the VHI’s understanding was that this issue was examined in 2006/2007 by the Attorney General’s office and the advice was that this was “a very complex issue and could not be legislated for”. It has been argued that the greater the number of insurers in the market the greater the level of competition and the lower the level of premiums, he said but “the reality is that these arguments are not supported by facts”.
He said in countries like the Netherlands, Australia, and the UK health insurance companies were merging to deliver efficiencies and the number of health insurers was falling.
“VHI Healthcare believes that three VHIs would have far less purchasing power than a single VHI and this would result in higher costs of procedures in the years ahead which would be then passed on to customers.” He estimated an additional €25 million at least in annual costs would have to be passed on to customers.
He tendered his resignation in early May after meeting Dr Reilly on the future of the health insurance industry here. While it was stated he planned to return to work in the private sector the documents released show, as suspected, his opinions on the future of the company were greatly at variance with those of Dr Reilly.
In one letter Mr Tolan told the secretary general of the Department of Health Michael Scanlan that the company was “not easily breakable into three parts without incurring significant additional internal costs and significant duplication of historic investment”.
Furthermore, he warned solvency requirements will present “a real challenge to the plans to introduce universal health insurance as it is likely that a minimum of €2.5 billion capital will be required”. Irish health insurers currently have capital levels of €780 million, he indicated.
Mr Tolan also warned universal cover could lead to overconsumption of healthcare resources unless there were very sophisticated checks and balances in place. It had resulted in health spending in the Netherlands increasing by 10 per cent a year. He warned the Health Service Executive does not have IT systems in place for the introduction of a money follows the patient system of funding.
A spokesman for Dr Reilly said last night the Minister was absolutely clear on the need for a competitive environment for health insurance to produce the best results. “It doesn’t work at present with such a dominant VHI,” he said. The Minister, he added, was awaiting the outcome of a review by Goodbodys.