VHI to decide on fee increase next week

The VHI will wait until next week to decide whether or not to increase charges as a result of Tánaiste Mary Harney's decision not to force its biggest competitor subsidise it.

On Monday, Ms Harney said that she had decided against introducing a risk-equalisation scheme into the Irish health insurance market until the Government had begun the process of converting the VHI from a statutory body to a commercial company.

The introduction of risk equalisation would have meant that VHI's biggest competitor, Bupa, would have had to compensate it for the fact that the State operator's customer base is older, more at risk and thus less profitable, than Bupa's.

According to a Health Insurance Authority (HIA) review of the market, VHI's older customer base is costing it an extra €16 million in the second half of last year. Its chief executive, Vincent Sheridan, says that it is funding this cost from its reserves, and cannot continue to do so indefinitely. It has already told the Government that it will lose money this year.

Its board held an emergency meeting yesterday to consider the implications of Ms Harney's decision. However, a spokeswoman said that the meeting was adjourned until next Monday, when it is likely to decide on a response to the Tánaiste's move.

One of the options it has is to pass the extra cost onto its consumers. Mr Sheridan has said that it decided against doing this last year. As it is, the VHI will have to hike charges to deal with a number of other cost increases, including a 25 per cent jump in charges for private beds in public hospitals. Risk equalisation is designed to ensure that health insurance is sold on a community rated basis. This means that everybody pays the same amount for the same cover, no matter what their individual risk.

Trade unions yesterday criticised Ms Harney, who is also Minister for Health and Children, and warned that her decision could result in increased health insurance costs. John Tierney, general secretary of the State's second biggest union, Amicus, argued that it could result in premium increases of 600 per cent to 700 per cent for older people. He added that her decision had created further instability in the health insurance market.

David Begg, secretary general of the Irish Congress of Trade Unions (Ictu), accused her of caving into pressure from Bupa, which had threatened to pull out of the Irish market if she introduced risk equalisation. However, Ms Harney has already dismissed suggestions that the British company's suggestions had swayed her.