Sunday 23 July 2017

VHI will be a very hard sell for Dr Reilly

It appears that when it comes to the VHI the government keeps saying 'please' and the private sector keeps saying 'no thanks'.

Last year, then health minister Mary Harney announced the "privatisation'' of the VHI at a special press conference in Government Buildings and then... nothing.

Now the current administration, led by Health Minister James Reilly, is reviving the idea of selling the loss-making health insurer into the private sector.

While there are lots of reasons for Dr Reilly to do this, most of them relate to re-shaping the health service and lightening the load of recapitalising VHI on taxpayers, but none of that means private sector players have to write any cheques.

The VHI lost €3m last year and €48m the year before. Last year's loss was on premium sales of €1.3bn, a reflection of the company's greying customer base.

The future claims projections for VHI are likely to frighten away many buyers and those that remain interested won't be too impressed by premiums that are barely growing (1.6pc) year-on-year.

If one can't get premiums up, the next option is to get claims down.

That means cutting even more hard-nosed deals with hospitals and consultants and getting a decent risk equalisation plan in place to soak up the losses that will feed through from an older customer base.

Tall order

It is a tall order. Then there is the question of a one-off contribution to the company's reserves, likely to cost any buyer (or the Government) something in the region of €300m, at least according to Ms Harney last year.

The Government could simply give the company away, just requiring buyers to bring its capital levels up to the regulatory minimum and they get the company. The assets of the company, however, are real -- it has almost €800m in liquid assets

Either way the laws of commerce are immutable. Whoever buys VHI must either cut costs sharply (probably impossible because of the customer type) or raise premiums. Over to you Dr Reilly.

Indo Business

Promoted articles

Also in Business