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Written Answers - Health Insurance Industry

Tuesday, 7 February 2012

Dáil Éireann Debate
Vol. 754 No. 3

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 456.  Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  the reason the authorisation of the VHI has been delayed until end 2013; the European Commission’s response to this delay; if he will outline the way he intends to achieve the authorisation of the VHI in particular in regard to achieving the required levels of reserves; and if he will make a statement on the matter. [6630/12]

 457. Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  when he expects the authorisation of the VHI to occur; if he will outline the steps the VHI is required to take to achieve authorisation; the effects in practical terms for the VHI and their impact on its customers; and if he will make a statement on the matter. [6631/12]

 458. Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  the corporate governance measures that must be undertaken by the VHI in order to become authorised by the Central Bank of Ireland; the reason such measures are not currently applied by the VHI; if he has concerns regarding the functioning of the VHI heretofore in the absence of such governance measures; and if he will make a statement on the matter. [6632/12]

[522]

 459.  Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  the level of capital required for the VHI to be authorised by the Central Bank of Ireland; if he does not yet have a final figure for the level of capital required; the indicative levels he has been given and by whom; and if he will make a statement on the matter. [6633/12]

 461.  Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  if Ireland is facing any punitive sanctions from the European Commission in view of the failure to regulate the VHI in response of the European Court of Justice’s decision of September 2011 that the VHI should be treated in a similar manner to private health insurers operating in the market here; and if he will make a statement on the matter. [6635/12]

Minister for Health (Deputy James Reilly): Information on James Reilly Zoom on James Reilly I propose to answer Questions Nos. 456 to 459, inclusive, and 461 together.

The Government has decided, on foot of my recommendations, that the VHI should make an application for authorisation by the Central Bank, subject to further Government decisions to be made relating to capitalisation, once the level of its capital shortfall is clarified. The VHI has been working for some time in preparation for this.

As the Deputy will be aware, the European Commission took a case against the State regarding the VHI’s derogation from the EU Non-Life Directives which had exempted it from the requirement to be authorised by the Central Bank. The Court of Justice of the European Union ruled against the State on 29 September last.

The Voluntary Health Insurance (Amendment) Act 2008 provided for the VHI to acquire sufficient funding in terms of its capital reserves to enable it to make an application to the Financial Regulator for authorisation. The date by which the VHI must accrue the necessary reserves is set at 31 December 2013. It would not be appropriate for me to speculate on the level of capital which may be required as it will be subject to market fluctuations and will ultimately be determined by the Central Bank. Should the State decide to provide the funding requirements for authorisation, approval of the European Commission under State Aid rules would be required.

VHI’s regulatory status is bound up in a range of issues relating to the private health insurance market which I have been addressing over the past number of months. In order to be considered for authorisation by the Central Bank, VHI will need to present a sustainable business plan. Due to the current imbalance of the community rated private health insurance market, where the vast majority of claims are paid out by the VHI, the market requires an effective scheme of risk equalisation to address that imbalance. Work is ongoing in my Department to legislate for such an effective, robust and permanent scheme in the coming months, following the Government’s recent agreement to my proposals in that regard. The new scheme will need to be cleared at EU level in relation to State Aid rules. In the meantime, on foot of recommendations of the Health Insurance Authority following its analysis of the market, the level of age-related tax credits payable in 2012 in respect of customers over the age of 60 has been significantly increased.

In any application for authorisation by the Central Bank, the Board and management of the VHI will be subject to examination on a range of governance issues. VHI expects to be in a position to satisfy the Central Bank as to its compliance with these requirements shortly.

Following the Court of Justice judgment, the Government made decisions on how best to address the Court’s findings. The Government’s plans and a realistic timetable were outlined to the European Commission on 9 December last. I believe the Commission will be satisfied with the Government’s proposal and they have not indicated that any sanctions are under [523]consideration. Resolution of the issues will involve a number of steps. The timescale for some of these steps is outside of the State’s control and will depend on the time it takes for decisions to be made by the European Commission itself regarding State Aid issues, as well as by the Central Bank.

Once it is clear, following the analysis of the Central Bank and the European Commission, what additional capital the VHI would require in order to secure authorisation and to satisfy any State Aid implications which may arise, the Government will consider the matter and make further decisions in that regard.

It is clear that all of these actions must be undertaken in an orderly and efficient manner but that this will take time. The timescale outlined to the European Commission is intended to allow for these issues to be addressed in such an orderly and efficient way. Officials from my Department remain in contact with the European Commission on an ongoing basis and will work to satisfy the Commission’s concerns and to advance the resolution of the regulatory status of the VHI as quickly as possible.

 460.  Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath  asked the Minister for Health Information on James Reilly Zoom on James Reilly  if he is satisfied with the situation whereby the VHI is currently not authorised by the Central Bank of Ireland and specifically is not required to abide by the consumer protection code; his views on making the code applicable to the VHI, in the interest of protecting consumers, in advance of the full authorisation of the VHI; and if he will make a statement on the matter. [6634/12]

Minister for Health (Deputy James Reilly): Information on James Reilly Zoom on James Reilly The Government has decided, on foot of my recommendations, that the VHI should make an application for authorisation by the Central Bank, subject to further Government decisions to be made relating to capitalisation, once the level of its capital shortfall is clarified. The VHI has been working for some time in preparation for this.

The VHI has voluntarily committed itself to implementing the requirements of the Consumer Protection Code over the past number of years. Subscribers can be assured that VHI is committed to satisfying the Central Bank of its ongoing compliance with the Consumer Protection Code. This forms part of the steps the VHI is taking in the context of the application which it is currently preparing for authorisation by the Central Bank.

In addition to the Code, the VHI is working to satisfy a range of other qualitative issues which the Central Bank requires from any authorised entity.

Question No. 461 answered with Question No. 456.


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