No guarantees over insurance costs

PRIVATE healthcare costs will not fall significantly under plans to restructure the insurance market, a health expert warned yesterday.

Chief executive of the VHI Vincent Sheridan said risk equalisation, which would see BUPA Ireland forced to compensate the State insurer for an estimated €25 million annually for having more elderly members, would help "control the cost of health insurance".

But healthcare consultant with Mercer Human Resource Consultants Aongus Loughlin said neither the introduction of risk equalisation nor its level of impact on the cost of private health insurance was guaranteed.

"Risk equalisation has been passed by the EU, but it is up to the Health Insurance Authority to make a recommendation to the Government on whether it will be introduced here. It is not guaranteed that it will be introduced here and even if it does come in, while it will have an impact on VHI's premiums, it won't reduce premiums significantly because of the rate of health inflation," he said.

The debate on risk equalisation was sparked by the announcement that VHI is seeking an 8% increase in premiums the fourth rise in less than three years. Minister for Health Micheál Martin has until July 25 to decide whether to grant VHI the increase.

According to BUPA, which has guaranteed its customers it will not be reviewing prices until next year, if this 8% rise goes through the average family of two adults and two children will be able to save 269 a year for similar cover if they switch from VHI.

Managing director of BUPA Ireland Martin O'Rourke has vowed to fight the introduction of risk equalisation, dismissing the measure cleared by the EU today as anti-competitive and anti-consumer.

"The market needs more rather than less competition and the introduction of such a scheme deters new entrants to the market. Our position is very clear. We continue to explore every possible avenue to protect our company's position in Ireland," said Mr O'Rourke.

Given comments made by the Health Insurance Authority in its recent annual report, the prospect of risk equalisation being introduced here is very slim. While the authority accepted the introduction of risk equalisation could be justified in some circumstances, it was not fully convinced this was the best way to improve competition for consumers in the health insurance sector.

Speaking on RTÉ radio yesterday, Mr Sheridan said that because risk equalisation was not in place, the arrival of competition in the health insurance sector actually drove prices up. "Risk equalisation will help us control costs much better than in the past," he said.

Mr Sheridan said the VHI was committed to keeping its premium rates as low as possible and attributed the need to seek a hike in charges on increasing costs of new drug treatments and advances in technology.