Tuesday 21 February 2017

Health insurance market and VHI role for review

Multi-million euro contract won by joint bid

Emmet Oliver, Deputy Business Editor

Published 04/04/2011 | 07:33

GOODBODY Stockbrokers and Matheson Ormsby Prentice are to be awarded a major consulting contract to review the health insurance market in Ireland and VHI's role in it, the Irish Independent has learnt.

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The contract is expected to be announced within days by Health Minister James Reilly. The multi-million euro contract was won by a joint bid involving the law firm and Goodbody's corporate finance arm.

With government consultancy work drying up in the past two years, the contract is understood to have attracted widespread interest.

The previous Government wanted a broader study of the health insurance market, but it is understood this contract is slightly narrower in its terms of reference.

The last Government was committed to privatising the VHI, the country's largest health insurer, but the Fine Gael-Labour administration wants to keep it in state control.

However, Mr Reilly is looking at splitting the company into two or three separate entities -- and the consultants will look at how this might be achieved.

DOMINANCE

Mr Reilly has spoken of the VHI's "dominance" of the market after the recent closure of the Cork Medical Centre, which failed to secure cover from the VHI.

''We are going to set about this in an aggressive fashion," the minister said. ''If we had three VHIs, and one of them refused to cover this clinic, this clinic would not be in the trouble it is in now. But because the VHI is in such a dominant position, it is in trouble."

The VHI has a market share of more than 60pc of the health insurance market, but suffers losses because of its far older customer base than either Aviva or Quinn Healthcare. At present the VHI loses about ¿170m a year on its customers who are over 60 years of age, a key reason for its overall financial position.

Last May, the then Health Minister Mary Harney announced plans for a new risk equalisation scheme to be introduced in 2013 to shore up the VHI, and safeguard community rating.

VHI chief executive Jimmy Tolan has set a target of getting VHI back towards "sustainability" in its finances, and some kind of new risk equalisation scheme is seen as essential to this.

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