The Minister for Health has said he has "no objection" to the VHI's 3 per cent price increase given the overall cost level of claims paid on behalf of members.
In a statement this afternoon, the Department of Health said that under VHI legislation, the board has the primary responsibility to set premium rates and to notify the minister of proposed increases.
The minister has the power to direct that notified increases not be implemented, but must give his reasons in writing.
"Any proposed increase must provide for sufficient revenue to meet both the board's present and projected future claims costs and also to make such provision for reserves as it sees fit.
"Given the overall cost level of claims paid for by the board on behalf of its members, the Minister has no objection to the 3 per cent increase being applied."
The Labour Party said the increase in VHI charges "completely unjustified and illogical".
Health spokeswoman Ms Liz McManus, said the Minister for Health must explain the reasoning behind sanctioning an increase at a time when the VHI is highly profitable and when Irish health consumers are "weighed down with a plethora of increased medical charges and stealth taxes".
"This is the latest in a series of dramatic increases in VHI charges," she said.
Ms Liz McManus
Since 1997, VHI charges have increased by approximately 100 per cent, despite the fact that the company continues to show healthy profits. This latest hike follows an increase of 18 per cent in September 2002 and 8.4 per cent in September 2003."
"It would appear that the only explanation for this series of increases in VHI premiums is an attempt by the Government to fatten up the company for privatisation. If this is the Government's policy, they should come clean and say so."
Ms McManus said the consumer had been "hammered" by numerous increased health charges and stealth taxes in the past two years, including increases to the drug refund threshold and the cost of a visit to A&E departments.
"To sanction a 3.8 per cent increase in VHI charges at a time when the company has returned profits of €62 million demands an explanation from the Minister for Health. This is typical of how aloof and inept the minister has become of late and it is time that he followed Charlie McCreevy out of his job in the Cabinet reshuffle."
The net cost of the most popular VHI option, known as Plan B, for an adult is now some €466 per annum.
On June 22nd last, VHI notified the minister that it intends to increase premiums by 3.8 per cent for its hospital A to E plans and by 2.5% for Option plans from September 4th. There is no increase for its primary care HealthSteps plans.
At the time, VHI said the 3 per cent average increase is significantly less than the increases imposed in previous years also significantly less than the rate of increase in the cost of medical care, which is currently running at over 10% per annum.
The company said the increases would finance new benefits and services, such as increases in cover for newborn infances, for MRI scans and for day care radiotherapy and cancer treatments.