VHI: Cost of funding claims to rise 7% in 10 years

VHI Healthcare has warned that the annual cost of funding illness claims over the next 10 years will increase by at least 6% to 7%, compounding fears that the upward spiral in premiums will continue.

Last year VHI spent €1.3 billion in funding the healthcare needs and medical expenses of its customers, up 14% on the previous year, with more than 50% spent meeting the healthcare needs of its older customers.

The health insurer has reported a loss of €41.7m after tax for last year, compared with a deficit of €65m for the 10 months to the end of 2008.

VHI also confirmed that it finished the year with 120,000 customers less than it had at the beginning of the year and currently has 1.36m customers.

Launching the company’s annual report for 2009 yesterday, chief executive Jimmy Tolan said it remained “financially strong” but that the delivery of healthcare in the years ahead would have to be redefined.

“We anticipate that our customer healthcare needs by 2020 will cost €2.5bn,” said Mr Tolan who said that in future healthcare plans may be more tailored to customers’ individual needs.

He pointed out that the company that had “liquid” financial assets of €705m and retained reserves of €306m was better off financially than its competitors.

Mr Tolan said VHI was losing €170m annually in meeting the healthcare needs of its older customers and believed the loss of customers was reflective of a market that did not protect older customers.

“An insurance policy on a 25-year-old can generate profits of approximately €400 while that of an 80-year-old can generate losses of €1,000,” he said.

He said the current support mechanisms to protect older customers were only 40% effective, meaning that health insurers with older customers were inadequately compensated for meeting their needs.

Without a significant strengthening of the support mechanisms it was “inevitable” that older people would end up paying more for their health insurance because the sector would effectively become risk rated, Mr Tolan warned.

At the end of May the Government announced a comprehensive set of measures that dealt with protecting older health insurance customers, a capital injection, financial regulation and eventual sale. Mr Tolan said plans to prepare VHI for sale would be a long and complex process that could take up to two years.

He said VHI would need to satisfy both the Financial Regulator and the European Commission that it had a sustainable business that would require the company to generate a net underwriting margin of 3% to 4% in 2012.

VHI also announced plans to devote greater resources to disease prevention, chronic disease management, care within the community and the management of its customers’ well-being in the years ahead.


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