Michael McGrath (Cork South Central, Fianna Fail)
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Question 202: To ask the Minister for Health when he intends to comply with the instruction of the EU Commission to bring the VHI under the regulatory authority of the Central Bank of Ireland; and if he will make a statement on the matter. [12052/12]

James Reilly (Dublin North, Fine Gael)
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The Government has decided, on foot of my recommendations, that the VHI should make an application for authorisation by the Central Bank, subject to further Government decisions to be made relating to capitalisation, once the level of its capital shortfall is clarified. The VHI has been working for some time in preparation for this.

As the Deputy is aware, the European Commission took a case against the State regarding the VHI's derogation from the EU Non-Life Directives which had exempted it from the requirement to be authorised by the Central Bank. The Court of Justice of the European Union ruled against the State on 29 September last. In response to this judgement, the Government agreed to:

Engage with the Commission to address the ruling;

Work with the VHI and the Central Bank on the VHI's application for authorisation, with a decision then to be taken regarding the question of capitalisation;

Examine the legal and legislative requirements to allow for the incorporation of the VHI as a limited company, in order to address the concerns of the EU Commissioner for Competition that the VHI may benefit from an unlimited State guarantee;

Examine other options for the future status of the VHI.

The Government's plans and a realistic timetable were outlined to the European Commission on 9 December last. Resolution of the issues will involve a number of steps. The timescale for some of these steps is outside of the State's control and will depend on the time it takes for decisions to be made by the European Commission itself regarding State Aid issues, as well as by the Central Bank. 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 by which the VHI must accrue the necessary reserves is set at 31 December 2013.Should the State decide to provide the funding requirements for authorisation, approval of the European Commission under State Aid rules would be required.

The Commission responded this week by way of a Letter of Formal Notice, a procedural notification that the Commission is obliged to issue within six months of a judgement. The letter had been expected and the Department has been in regular contact with the Commission in relation to the case.

The Department will continue to work with the Commission to progress a range of issues relating to the legal status of the VHI. It is making good progress in relation to these and will press ahead with them as planned.

I will now consider the terms of the Formal Notice in the normal way and respond to the Commission within the two month period specified by the Commission.