Protecting older people was the rationale behind the Government's decision to privatise VHI, Taoiseach Brian Cowen said today.
The Government plans to invest up to €300 million in the VHI before placing the State-owned private health insurer on the market.
Speaking to reporters after the opening of the M7/M8 motorway extension at Portlaoise, Mr Cowen said the Government wanted to provide more security to older and sicker people and to ensure a form of "inter-generational solidarity" existed.
There was a need to avoid any further market segmentation which could lead to premia for older people "skyrocketing", he said. To achieve this, he insisted, an effective risk equalisation system would have to be put in place.
“We want to maintain the benefits and that are characteristic of private health insurance and therefore you have to make some decisions. One of those decisions is also to ensure that all of the companies are fully authorised. That means meeting the solvency ratios set down by the Financial Regulator.
At present those solvency ratios under present EU directives are at 40 per cent. We have indicated that we will provide the necessary state capital to have VHI authorised," he said.
The basic idea was to lay the foundations for a sustainable health insurance market, Mr Cowen said.
Minister for Health Mary Harney said yesterday the reforms would not increase premium costs for the Republic’s two million private health insurance subscribers.
She said that, as a result of the Government’s action, “older and sicker people would pay less than they would otherwise have paid because, if we didn’t make these decisions, there’s no doubt that the market would have segmented”.
“Obviously health costs are rising but we also believe the emphasis on primary care should help to reduce the cost of health insurance,” she said.
The VHI has also been told by the Government to open up its travel insurance operation to non-members and to put in place controls on its claims costs.
Under the Government’s plans, health insurance companies will have to cover GP services and measures such as health screening as part of minimum benefits offered to subscribers.
There will also be new penalties to encourage people to take out health insurance earlier rather than later in life. The Government has also signalled that it will consider measures to achieve a greater balance of older customers between the various companies in the market.
At present, VHI has 94 per cent of all subscribers over 80 in the market and nearly 90 per cent of those over 70.
The sale of the VHI is expected to take place in 2012 or 2013.
Fine Gael said the proposals would not address the high price of insurance premiums, while Labour said the taxpayer was going to be asked to pump as yet unquantifiable sums of money into VHI to fatten it up for privatisation.
