Department of Health said premiums too low

Irish health insurance premiums are too low, senior Department of Health officials maintained in internal correspondence earlier this year.

The internal correspondence, written in March when the Barrington committee was examining the market, spoke of the Quinn group freezing its prices "in a market that is already underpriced".

It said that the Government's decision last year to increase the cost of private beds in public hospitals by 25 per cent on its own "should have demanded a significant premium increase".

The correspondence was contained in a number of Department of Health files on the health insurance market released to The Irish Times under the Freedom of Information Act.

Asked yesterday whether it was official Department of Health policy that the market was underpriced, a spokesman for Minister Mary Harney said that she had publicly maintained that health insurance in Ireland was relatively cheaper than in other countries.

The spokesman said that this was due to the community rating rules and also to the "hidden subsidy" for private beds in public hospitals. He said the Government was moving over time to charge the full economic rate for such private facilities in public institutions.

The spokesman said that Ms Harney was considering the application by VHI, the State's largest health insurer, for an 8.5 per cent increase in subscriptions, on average, for its 1.5 million members.

The increase will go ahead unless the Minister exercises a veto within the next 28 days.

Fine Gael yesterday called on Ms Harney to reject the VHI application.

And the Irish Congress of Trade Unions said that it would be raising the issue in discussions with the Taoiseach on measures to curb inflation.

The Government told trade union and employer representatives last month that it would frame public policy to the greatest extent possible with a view to minimising inflation and keeping costs for enterprise under control.

Fine Gael health spokesman Brian Hayes said that the VHI's application for a price hike should be rejected as it was not justified when compared to general health inflation.

He said the consumer price index showed that general health inflation increased by five percentage points over the last two years while VHI subscriptions had risen by by 25 per cent.

"In light of this and the fact that the company's annual report shows a surplus of €70 million, VHI subscribers will be rightly puzzled by this price increase and will justifiably be taking a look at the competition," he said.

Labour Party health spokesperson Liz McManus said that the Minister "should proceed with extreme caution before she grants any further increase in the price of VHI premiums".

She said that the increase would only add to inflation.