VHI chief warns of further price hikes

IF the announcement that price hikes ranging from 15% to 45% in VHI premiums from next month was not bad enough, the company’s chief executive, Jimmy Tolan, has warned that continuing increases in the cost of health cover over the coming years is practically inevitable.

The demographics of the Irish population mean the number of people aged 65 and over will almost double over the next 20 years to over one million, with a consequent increase in demand for health services and knock-on effect on the cost of health insurance cover.

The VHI has estimated that claims will rise by 10% alone in 2011 after having spent €1.3 billion on funding its customers’ healthcare needs in 2009 — the latest year for which figures are available.

Mr Tolan said it was “an absolute reality” that customers will need increasing healthcare over the long-term future.

VHI has blamed its rising costs on the high percentage of elderly patients which constitute its customer base. They are also the patients who have the greatest healthcare needs of any age group.

Mr Tolan said the insurer’s average healthcare costs per customer are twice that of its main competitors, Aviva and Quinn.

He pointed out that the average customer aged 18-29 made claims worth just €214 in 2009 compared with €2,376 for its customers aged 70-79.

Mr Tolan justified the latest increases due to the continuing loss-making schemes favoured by its older clients.

He observed that VHI had 280,000 customers aged over 60, with the company incurring average losses of €243 per annum for those aged 60-69 and €1,082 for those aged over 80.

According to Mr Tolan, the increases announced yesterday could have been even higher if the VHI had not negotiated a 15% reduction in consultant fees and 6% reduction in private hospital fees over the past two years in addition to the company reducing its own costs by €15m in 2010.

He also warned that the VHI would have to review its relationship with public hospitals after the recent 21% increase in the cost of private beds in such facilities added €60m to the insurer’s costs last year.

However, he expressed concern that the VHI had no negotiating rights with public hospitals, unlike with private hospitals where it recently agreed a 6% cut in fees.

Reacting to the VHI announcement, Health Minister Mary Harney said the Government had already announced a comprehensive strategy for reform of the private health insurance market which would address the issues of choice, competition and financing of the market.

Ms Harney said its core aim was to protect community rating to ensure private health cover remained affordable for older people.

She claimed a comprehensive, robust risk-equalisation scheme was currently being prepared.

Ms Harney stressed that consumers should be aware that there was competition in the market with various health plans for all age groups.

However, Fine Gael health spokesman James Reilly said VHI customers were now being asked to pay for the cost of recapitalising the insurer after years of Government inaction.

Mr Reilly said the latest increases, which come on top of a 48% rise in insurance premiums over the previous four years, would hit people’s pay packets just as they were feeling the full impact of budgetary cutbacks.

The Dublin North TD said he had repeatedly warned that the failure of the minister for health to introduce proper risk-equalisation would have a catastrophic effect on people’s ability to afford private health cover.

“Increasing numbers of Irish citizens will become dependent on the public health service which itself has been undermined to breaking point by this Government’s utterly failed policies,” said Mr Reilly.

Labour’s spokeswoman on health Jan O’Sullivan predicted that many VHI policy holders would drop their health cover which would place extra pressure on the public health system.

Ms O’Sullivan said Labour’s health policy was to promote a universal healthcare system which would remove the distinction between public and private care with access to health services based on medical need.

Age Action expressed shock at the scale of VHI’s price hikes and warned that the cost of policies would put private health insurance beyond the reach of many older people.

The organisation said many elderly VHI customers might find it difficult to switch insurer, while they may also have lost their entitlement to a medical card.

One of the VHI’s main rivals, Aviva, said the VHI’s call for an increase in the health levy, combined with the price rises, showed the company had abandoned community rating in favour of targeting younger customers with lower levels of benefit.

It called on the Government to intervene to prevent the VHI from continually penalising its most vulnerable customers and to force it to implement significant cost-savings in its own operations.