VHI urges higher tax credits for elderly

VHI has promised that controversial price hikes of up to 45% in premiums this year are unlikely to be repeated in 2012 if the Government increases the current level of tax credits for elderly customers of health insurance firms.

VHI chief executive Jimmy Tolan predicted any increase in premiums next year could be kept to single-percentage figures if the Government ensured the health insurance market operated a proper community rating system. Under this, all customers would pay the same premium regardless of age.

However, he warned that existing tax credits on private health insurance for customers over 60 were “at the wrong level”.

VHI has called on the Government to significantly increase tax credits for elderly consumers in order to ensure that other health insurance companies did not continue to “cherry-pick young lives”.

Mr Tolan said the health insurance market was being allowed to operate in a “flawed regulatory environment” through the failure to implement a proper community rating system.

However, he acknowledged that an increase in tax credits would require the levy payable by health insurers to increase from the current rate of €205 per adult to €295.

He claimed such an increase was required to ensure that VHI was not punished for its more older and costlier customer bases.

VHI has lost 210,000 customers under 60 since 2005 but gained 31,000 customers over the age of 60 in the same period. It insures 129,000 people aged 70 and over compared to 13,000 by its competitors, Quinn and Aviva.

Mr Tolan expressed frustration at how the company had contacted the previous government 65 times in 15 months about increasing the age-related tax credits without success.

“It is the biggest issue in the health sector,” remarked Mr Tolan. “There is no competition for older customers because they are loss-making.”

Announcing the company’s annual results yesterday, Mr Tolan said VHI’s overall losses fell to €3.1 million in 2010 compared to a loss of €41.7m the previous year.

The expenditure on healthcare fell 1.4% to €1.307 billion largely as a result of a reduction in consultants fees and in rates paid to private hospitals as well as the cost of private beds in public hospitals.

However, Mr Tolan said actual healthcare services provided rose 8%, with the average spend per customer increasing to €935.

While Mr Tolan said the 2010 figures represented an improvement, he said VHI still suffered underwriting losses of €25m. He also warned that VHI would need to improve its annual performance by €60m to fund the needs of its 1.3m customers as well as meet the funding requirements of the Central Bank and European Commission

Mr Tolan welcomed the Government’s decision to abandon the policy of the previous administration to sell off VHI and retain the company in state ownership. He also expressed hope that VHI would be centrally involved in the Government’s plans to implement a universal healthcare system, which Mr Tolan described as “the most radical and ambitious healthcare strategy in the history of the state”.