12.5% price hike for VHI users

VHI subscribers face a steep hike in annual fees after Tánaiste Mary Harney signaled last night she would not block demands from the insurance giant for premium increases of 12.5%.

The rise would see members on VHI’s Plan B paying €61 more per year and the cost for a family would leap by €165.

The VHI board insisted the price rise would have been 18.5% if it had not decided to internally absorb the cost of the health minister’s controversial decision to reject risk equalisation.

Ms Harney has the power to turn down the VHI price rise, but it became clear she is unlikely to do so.

“The Tánaiste’s view is that it is a matter for the board of VHI to determine price increases. She does not believe in getting involved in commercial decisions,” her spokesman said.

The move was described as a “financial mugging” of VHI subscribers by Labour health spokesperson Liz McManus.

“An increase of this size would place a real burden on VHI members who have seen their premiums increase by more than 100% since 1997.”

Fine Gael insisted the hike would hit the elderly hardest.

“An increase of this size would be desperately bad news,” the party’s health spokesman Dr Liam Twomey said.

It is the elderly people who have been subscribing to VHI all their lives who run the risk of not being able to afford their soaring premium and therefore not have access to health care at the time in their lives when they need it most.”

Under the risk equalisation scheme, the VHI would have received an estimated cash transfer of up to €30 million from BUPA Ireland to compensate for the fact that VHI insures more elderly people

The VHI board has criticised the Tánaiste’s move, saying it had been dipping into its reserves since September 2004 in the expectation it would receive the windfall from its rival.

“We are going to absorb the costs of that decision not to bring in risk equalisation ourselves.

“The increase would have been over 18% if we had passed that on. This 12.5% increase is simply due to the increased costs of medical care,” said VHI’s medical director Bernadette Carr.

Ms Harney has denied flip-flopping on the risk equalisation issue or caving in to pressure from BUPA after it threatened to quit Ireland if the measure was introduced.

“I am a strong fan of risk equalisation. I am equally strongly committed to a vibrant insurance market.

“It’s not a question of whether we will introduce risk equalisation, it’s a question of when we will introduce it,” Ms Harney said.

“We all know we have to have risk equalisation. I have to see what the Health Insurance Agency recommends in their next recommendation,” she added.

VHI remains dominant with 80% of the Irish market, covering some 1.4 million people.

BUPA has a 20% share and Vivas, which has just come into the market, has less than 1%.

BUPA, which has begun legal challenges to risk equalisation in the Irish and European courts, threatened to pull out of the Irish market if the scheme was introduced and Vivas also warned it would not be able to compete with VHI if the plan went ahead.