Preferential treatment for VHI must end, warns European Commission
THE European Commission has ordered an end to the preferential treatment given to the state-owned VHI, saying there is not a level playing field in the Irish health insurance market.
The Commission has called on the State to abolish its unlimited guarantee to the VHI as it gives the insurer “undue financial advantage” over its competitors.
If the Government fails to act, the Commission has said it will launch a state aid investigation into the sector.
VHI is a statutory body and cannot be declared bankrupt.
This means that it can get loans on preferential terms as lenders know the State will be left to pick up the tab should the VHI default.
The Commission has proposed that the State scrap the guarantee by the end of 2013.
Joaquin Almunia, Commission vice-president, said: “A level playing field on the Irish market for private medical insurance can only exist if all operators compete on equal market terms.
“The removal of the unlimited State guarantee to the Voluntary Health Insurance Board is essential to ensure that competition on this market takes place on the operators’ own merits.”
VHI welcomed the Commission’s proposal but said the introduction of a robust risk-equalisation scheme will be needed.