James Reilly (Dublin North, Fine Gael)
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Question 42: To ask the Minister for Health and Children if the VHI fulfilled its legal obligation to achieve solvency by the end of March 2010 deadline set by herself; the number of times she has extended the deadline for VHI to achieve required reserves to date; if the EU Competition Commissioner has contacted her concerning a possible legal action and sanctions if VHI does not meet the requirements of the Financial Regulator regarding appropriate levels of solvency; the potential sanctions against the State from the EU in this regard; and if she will make a statement on the matter. [20716/10]

Mary Harney (Dublin Mid West, Independent)
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Arising from a derogation under the non-life insurance directives, VHI continues to be exempt from prudential solvency requirements. 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 originally fixed by that Act was 31 December 2008 but this was subject to the right of the Minister to appoint a later date by order if satisfied that there is good and sufficient reason for so doing. At the time the original date was fixed, the Supreme Court had not yet ruled on the risk equalisation scheme, which it struck down in July 2008. Since then I have extended the date by which the VHI must accrue the necessary reserves on five occasions. The date is now 1 January 2012.

The EU Commission has commenced proceedings against the State in the European Court of Justice regarding the VHI's derogation. The State has forwarded a comprehensive written defence to the court and fully intends to mount a vigorous defence of its action. The matter of sanctions would only arise in the event of an adverse judgment if nothing was done to ameliorate the situation and further proceedings were then brought to seek financial penalties against the State.

The capital position and authorisation of the VHI are only two of many interrelated and complex issues that need to be resolved in order to achieve a stable community rated private health insurance market. I have been examining the broad range of issues involved with my officials, expert advisers and the Health Insurance Authority. The matter has also been considered by the Government on a number of occasions since the Supreme Court judgment. I will make a full statement at the appropriate time on the measures required to support the Government's key policy goal of a community rated health insurance market.

James Reilly (Dublin North, Fine Gael)
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I ask the Minister to indicate to the House the solvency target for the VHI in monetary and percentage terms and the level of solvency achieved by the company by the end of March 2010. Does she see any inconsistency between the State's treatment of the VHI, in respect of which it once again extended the deadline for solvency, and of Quinn Insurance? An article in The Irish Times cites Seán Murphy, the deputy chief executive of Chambers Ireland, as agreeing that the situation "clearly isn't fair" and Tom Carney, a partner with Dillon Eustace, as stating:

It emphasises the stark contrast between the State's regulatory approach towards Quinn and that of the VHI. One company is completely and utterly exempted from solvency arrangements, while, on the other hand, another company is in permanent administration – and both companies are pursuing the same market.

Perhaps the Minister can inform the House how many times she has extended the deadline.

Mary Harney (Dublin Mid West, Independent)
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I introduced the legislation on the deadline but that was prior to the Supreme Court's decision to strike down risk equalisation. I want to point out some facts. We are discussing the reserves ratio. The VHI has 82% of the over 60s market and 92% of the over 90s market. I strongly favour community rated health insurance because it allows older and sicker people to afford insurance on the same basis as younger customers. If we are to retain that system, it will require intergenerational support. The scheme which was introduced when the market was opened up to competition on foot of an EU requirement was, unfortunately, struck down by the Supreme Court in 2008. That changed everything and, in the interim, we have introduced tax relief at source.

I remain determined to bring before the Government shortly a comprehensive set of measures not only in respect of the capital requirements of the VHI but also on a sustainable financial model for the company. If one company has an unfair risk burden, we clearly will not have a market that is capable of being fair in all circumstances. We need a new risk equalisation scheme in Ireland and in the meantime we have provided for a scheme of tax relief at source which has been approved by the EU as a temporary measure. We also need to sort out the VHI's capital requirements and the three companies' respective market ratios. The ratios vary considerably at present but I would like to see a healthier market where at least three players have similar shares.

Notwithstanding the financial pressures we currently face, it is encouraging that only 1.6% of people have dropped out of health insurance. This is because we keep insurance costs affordable, particularly for older and sicker people.

James Reilly (Dublin North, Fine Gael)
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I contend that the reason 53% of the people in this country take out private health insurance is because they do not have any faith in the public system to deliver in a timely fashion. I do not wish to do a disservice to the late and very brave Susie Long but people do not want to find themselves in her situation. Otherwise, how could one explain the decision? Our hospitals are supposed to provide a system of free secondary health care but this a virtual system. It is not available to our citizens, who as a result, wait months and years for outpatient appointments.

As the Minister failed to answer, I remind her that this is the sixth time that she extended the deadline.

Mary Harney (Dublin Mid West, Independent)
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I said "five" in my reply.

James Reilly (Dublin North, Fine Gael)
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She has admitted that the market is not fair. Given that the VHI's shortfall is estimated at over €200 million, might it indeed face the same fate as Quinn Insurance? I do not believe we have a fair market and that is why we do not have more players.

Mary Harney (Dublin Mid West, Independent)
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We will not have a fair market if some participants have to carry the burden of older and sicker people. That is a fact. There are other unfair aspects to the market. I want to see a market that is fair to all the players. Deputy Reilly's party favours providing private health insurance to everybody but that is also based on a risk equalisation model.

James Reilly (Dublin North, Fine Gael)
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One that works, as opposed to the one the Minister introduced.

Mary Harney (Dublin Mid West, Independent)
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No. First-----

Brendan Howlin (Wexford, Labour)
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The Minister should be allowed to make her reply.

Mary Harney (Dublin Mid West, Independent)
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Deputy Reilly seems to think we will have a market where no one will pay more than they pay at the moment and everyone will get unlimited hospitalisation, treatment and diagnostics.

James Reilly (Dublin North, Fine Gael)
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There is no such thing as unlimited anything.

Mary Harney (Dublin Mid West, Independent)
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I would like to see Deputy Reilly's plan worked out. I have not seen it yet.

James Reilly (Dublin North, Fine Gael)
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The only thing that is unlimited is the Minister's promises.

Brendan Howlin (Wexford, Labour)
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Deputy Reilly, please.

Mary Harney (Dublin Mid West, Independent)
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That is a thoroughly non-objective judgment.