Niall Collins (Limerick, Fianna Fail)
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Question 514: To ask the Minister for Health if he will provide an update in relation to the authorisation of the VHI, as required by the European Commission; when he will ensure that the VHI is fully capitalised; his views on whether the proposal to re-designate beds in public hospitals will further undermine the solvency of the VHI, delay its authorisation and increase the risk that Ireland will be subjected to significant fines because of its failure to abide by the ECJ judgement; and if he will make a statement on the matter. [30332/12]

James Reilly (Dublin North, Fine Gael)
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The European Commission took a case against the State regarding the VHI's derogation from the EU Non-Life Directives which have, for some time, exempted it from the requirement to be authorised by the Central Bank of Ireland. 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:

· Work with the VHI and the Central Bank on the VHI's application for authorisation, with a decision to be taken later 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 has informed the Commission that it expects to resolve the matter by 31 December 2013 at the latest. Since the judgement was announced, Department of Health officials have been engaged in ongoing, positive discussion with officials of both the Directorate General for Competition and the Directorate General for Internal Market and Services, on the range of inter-related issues which must be resolved in order to address the Court judgement.

Resolution of the issues involves a number of steps, including a number of EU State Aid matters which are being addressed in consultation with the EU Commission Directorate General for Competition. The Government will make a decision on recapitalisation of the VHI when the Central Bank has determined the amount of any capital requirement and the EU Commission has approved a capital injection under State Aid rules. VHI's capital requirement will be influenced by a range of issues, most notably the level of transfers it can expect under the new Risk Equalisation Scheme which is to be introduced from 1 January 2013.

While the Government's policy of abolishing the bed designation system and to levy charges for all private patients in public hospitals will have an effect, my Department is working closely with the VHI and the other health insurers on the issue of costs in the market. This engagement, through the Health Insurance Consultative Forum, is intended to assist the insurers in reducing their level of costs, thus minimising the impact of the bed designation policy change.

A significant proportion of private patients who are provided with treatment by a public hospital are not currently charged for the services because of the current rules on bed designation. In contrast, the public hospitals' consultants receive private fees even where the hospital cannot levy its maintenance charge. This represents a loss of income to the public hospital system and a significant subsidy to private insurance companies.

It is intended to introduce new arrangements to allow public hospitals to raise charges in respect of all private patients in public hospitals. My officials are carefully examining the potential implications of different approaches to achieving this significant change in policy. I consider that the new system of charging will be fairer and is in keeping with the changes required along the road to Universal Health Insurance.