THE GOVERNMENT is considering a proposal that the State purchase the country’s second biggest health insurer Quinn Healthcare as part of an ambitious plan to merge it with the VHI and reform the health insurance market.
According to reliable sources, Minister for Health James Reilly has suggested the State purchase Quinn Healthcare in a memo sent to Cabinet colleagues.
It was sent along with proposals to capitalise the VHI.
The need to put substantial financial reserves into the VHI arises from an adverse European Court of Justice ruling last September. It found that the State-owned insurer being exempt from Central Bank authorisation and regulation was in breach of obligations under EU directives. In contrast, its private competitors were required to have very substantial financial reserves.
The State gave an undertaking to the European Commission that it would outline by December how it would comply with the ruling. It is understood that the VHI will require an injection of some €220 million to bring its solvency levels to the level required by the Central Bank. It is understood that the Government would face a fine of €3 million in 2012 for noncompliance with the ruling.
According to the sources, Dr Reilly has requested permission to investigate the State purchase of Quinn Healthcare, which is currently in administration following its takeover by Anglo Irish Bank from the Quinn group.
The proposal has met with a mixed response from other Ministers.
The Department of Public Expenditure in particular has been wary of the costs involved and is believed to have asked for more detailed information.
Dr Reilly’s suggestion would see the State purchase Quinn, which has a 20 per cent share of the health insurance market, and merge it with the VHI which has a 58 per cent market share and is the dominant player.
Once that had occurred, there would be a transfer of subscribers between both companies.
The age profile of VHI customers is much higher than that of Quinn. A cross-transfer of younger subscribers from Quinn to VHI and older subscribers from VHI to Quinn would lead to an equalisation of age profile and allow both companies to compete against each other “on a level playing field”.
However, the overall costs involved are very high.
In addition to the €220 million required by VHI, Quinn is estimated to require some €130 million to bring its reserves to the required levels. In addition, the price of purchasing Quinn could bring the overall cost to the State to well over €400 million.
The Departments of Health and Public Expenditure both declined to comment on the issue last night on the basis that the matter is still under consideration by Cabinet.