Health insurance legislation before the Dail is designed to put the single existing competitor to the VHI out of business, according to the former Progressive Democrats leader, Mr Dessie O'Malley.

Urging the Minister for Health, Mr Martin, to amend the Health Insurance Bill significantly, Mr O'Malley said the EU Commission and the European Court would reject the legislation if it was enacted as written.

"The European Union will not stand for a situation in which the sole shareholder of the existing monopoly company makes the rules by which all others can operate," said the Government backbencher.

"They won't stand for it when the rules as now proposed are designed to put the single existing competitor out of business, but also designed to ensure that there will never be more than one competitor to the huge state monopoly."

He paid tribute to the VHI and its role in Irish society, but said the rules were now being made elsewhere, "and thank God for that".