Irish government puts VHI up for sale

State owned Irish insurer will be privatised as part of a plan to ensure that the elderly and ill are not targeted for higher health insurance premiums. But while it is good news for older customers, steeper premium rises are likely to be imposed on its 1.2 million members as the VHI comes under pressure to build up its reserves in readiness for its sale. The government plan aims to spread the cost of treating older patients across all the insurance companies, meaning VHI will be compensated by its rivals. There are only two competitors who will both be under pressure to raise prices; Aviva and Quinn Healthcare, the latter already in trouble as it is part of Quinn Insurance, recently put into administration by the Irish insurance regulator.

It is the biggest shake-up in health insurance since the market was opened up to other companies in 1996. VHI is set to reveal its 2009 results, which will show a loss of €70m, weakening the company further and making government assistance all the more urgent. Taxpayers will now face having to pump in about €220m into the company. The company has €300m in reserves, but it needs to come up with about €520m to pass strict tests set down by the Financial Regulator.

The Government plans to introduce a new regime in 2013 allowing insurers to share the cost of claims from older and sick customers, ensuring a person's age, gender or health condition does not determine the level of premium they pay. VHI has 65.5% of the private health market and insures 83% of over-60s and 94% of the over-80s.

VHI must be sold off or the government would stand accused of running a scheme to compensate a state-owned company, and it has already been under strong pressure from the European Commission to sell the company as ownership and the way it is set up currently breaches EC rules on insurance and competition.

VHI has been in State ownership since its establishment in 1957.Half the population of the Republic, or 2.2 million people, are covered by health insurance. The government says it wants to keep cover voluntary but it is looking at the best way of applying its funds in the health services.

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Irish government puts VHI up for sale
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