The European Commission is preparing to take formal action against the Government over what it sees as an abuse of VHI's dominant position in the health insurance market.
The action could result in the European Court of Justice's forcing the Government to restructure VHI and open the market to greater competition.
RTE News has learnt that the EU internal market commissioner, Charlie McCreevy, is finalising a draft letter of formal notice to be sent to the Government, probably next week. Such a letter would be the first step in infringement proceedings against Ireland at the European Court of Justice.
The action has been triggered by a complaint to the Commission from Vivas, the private health insurance company which recently entered the Irish market. The Commission is arguing that by offering travel insurance, running online retail stores and operating a primary care clinic, VHI is engaging in activities which has breached a condition laid down by Brussels in an earlier directive.
That condition allowed VHI to be exempt from the strict requirements faced by VHI's competitors - so long as VHI kept to its core health insurance activity. VHI's competitors have to show they have sufficient capital to underwrite their business, but under the exemption granted to VHI, it does not.
This action is separate from the complaint by BUPA over the risk equalisation scheme. That complaint is the subject of ongoing correspondence between Charlie McCreevy and the Minister for Health Mary Harney. The Government will have 60 days to respond to the Commission's letter.
