Leo Varadkar says discussions are continuing with other insurers
The Health Service Executive (HSE) is expected to receive €100m from the VHI.
The Health Minister Leo Varadkar says both parties have agreed to speed up the processing of claims and payments for insured patients in public hospitals.
The €100m will be paid by the VHI before the end of the year.
Mr Varadkar also says discussions are continuing between the HSE and other health insurers.
Minister Varadkar said: "I very much welcome the first of these arrangements concluded between the HSE and VHI. There will always be a lag time between insurance claims made and paid. This is true for all forms of insurance".
"However, the level of outstanding charges relating to unsubmitted claims has been an ongoing issue for the Department and the HSE".
"This new arrangement, which we hope to finalise very soon with the main operators, will ensure that insured patient charges are submitted and received by public hospitals in a timely manner in the future" he added.
The agreement commits all parties to introduce electronic claims processing.
It follows discussions with the Insurance Ireland Health Insurance Council - which includes the State's four main health insurers - and the health minister last year over the management of claims costs.
The lack of certainty around public hospital charging was cited as a key driver of costs for all insurers.
This agreement is expected to be finalised in January 2016.