The European Commission has ruled that that the Irish government must abolish its State guarantee to the VHI.

Because the VHI is a State body it cannot be liquidated, wound-up or declared bankrupt.

The European Union has ruled that position gives it an unfair commercial advantage over its competitors.

Commission Vice President in charge of competition policy is Joaquín Almunia.

“A level playing field on the Irish market for Private Medical Insurance can only exist if all operators compete on equal market terms” he said.

“The removal of the unlimited State guarantee to the Voluntary Health Insurance Board is essential to ensure that competition on this market takes place on the operators’ own merits” he added.

Steffen Schulz is from the EU office in Dublin.

He says the VHI may be investigated if the matter is not addressed by the government.