VHI only insurer to welcome levy plan

The State’s biggest health insurer VHI has welcomed a Government plan to introduce a health levy to cover the cost of tax relief for older customers.

However, the State's other two main health insurers, Quinn and Hibernian, have severely criticised the proposal.

VHI said the new levy would not be passed on to consumers directly but that premiums would increase for other reasons in the near future. Quinn said price increases were “inevitable” while Hibernian said it would be challenging the Government move before considering price increases.

VHI chief Jimmy Tolan said the proposed initiative would "ensure that the current system of community rating remains intact.

“It will help bring stability to the health insurance market while also helping to ensure that health insurance remains accessible to as many people as possible.

"It should also over time increase competition and product innovation for all customers across all ages.”

A VHI spokeswoman said this afternoon the Government proposal was "cost neutral" and would not in itself drive up costs. But she added: "While the levy will not drive up costs, other factors including the rising demand for medical services and medical inflation will drive up costs."

She said the levy itself would not be passed on directly but said an increase in premiums would be sought "in the not-to-distant future".

Quinn Healthcare said it was "disappointed" by the move adding it was “merely reinforcing the dominant position of the VHI and could have serious implications on the level of competition in the market which is not in the interests of health insurance consumers. .

"The new scheme reinstates a version of the old risk equalisation scheme which was overturned by the Supreme Court in July. The scheme fails to take account of the dominant position and significant pricing advantage enjoyed by the VHI and simply makes it much more difficult for VHI's competitors to compete,” a company statement said.

Quinn said its main concern was that the new levy would apply irrespective of the level of cover a member has, which "ultimately means that less well-off people on lower plans are subsidising those better off who can afford premium plans".

"In essence, this is an additional tax on health insurance consumers".

The company, which took over British insurer Bupa’s Irish arm in January 2007, said it would “do everything possible to minimise price increases, but at this stage increases are inevitable because of this announcement by Government".

Hibernian Health said it would not be increasing premiums "at the moment" and described the move as "anit-competitive". A spokeswoman for the company said: "At the moment these are only proposals and we will challenge them. We will be keen to understand the European view on this.

She said the company would investigate "regulatory and legal avenues" to challenge the scheme.

Hibernian Health MD Jim Dowdall said: “These proposals are blunt in nature and short term in outlook. They are clearly a means to prop up the finances of the VHI at the expense of its competitors and they appear to take no account whatsoever of the need for continued and expanding competition in the health insurance market.

We believe these changes amount to a form of state aid. This does not serve the consumer well. The changes are complex and unfortunately will penalise all consumers in particular the lower economic segments.”