THE VHI is increasing the cost of its health insurance policies by an average of 8 per cent from the beginning of next month, it has been announced. The company says the increases, which will affect about 1.4 million policy-holders, are necessary to fund increased claims from customers.
The number of private hospital procedures it covered increased, it said, by 59,000 between 2008 and 2009, and would increase again by 9 per cent this year.
Next month’s increases will result in families paying €180 extra a year and single people paying an extra €90 on average a year for VHI health insurance.
The price increases, which range from 6 to 9.5 per cent across different policies, come just days after a price increase announced in November by Quinn Healthcare came into effect. Its policies went up by an average of 15 per cent on January 1st while Hibernian Aviva Health imposed increases averaging 12 per cent in October.
Jimmy Tolan, chief executive of the VHI, said the company’s overall price increase was significantly lower than that of its competitors notwithstanding the fact that the VHI had an older customer base whose healthcare needs were more costly.
However he claimed the price of the VHI’s popular Plan B policy for a family of four including two adults and two children was still lower than it was this time last year – as a result of special price reductions during the past year.
The VHI, which had underwriting losses of €80 million last year, increased its prices by an average of 23 per cent in January 2009.
Mr Tolan confirmed that the VHI lost about 120,000 customers last year – some to competitors and some who cancelled their policies due to the recession. He expected the health insurance market to contract by another 3 per cent in 2010. The current system of community rating, under which an older person pays the same for health insurance as a younger person, was “breaking down”.
While the Government introduced a temporary levy/age-related tax relief scheme last year following the collapse of a plan for risk equalisation, which was aimed at compensating companies with high levels of older subscribers, Mr Tolan said this was only 40 per cent effective, which meant older customers were significantly loss making. The VHI’s older customers generated losses of €170 million in 2009, he said, as he warned that unless changes were introduced, older people would have to pay more.
Meanwhile, the VHI has been given until the end of March to boost its capital reserves. To become regulated and obtain an insurance licence from the financial regulator, it must meet the regulator’s minimum solvency requirements which require that its premium income-to-reserves ratio stands at about 40 per cent.
At present the VHI’s solvency ratio is at 22 per cent. Mr Tolan said an injection of equity capital would be required and the source of this was “open to debate” but was a matter for Government.
Donal Clancy, Quinn Healthcare’s general manager, said that following the VHI price increase, the VHI continued to be more expensive for a family of two adults and two children than the equivalent level of cover with Quinn Healthcare.
“We do not understand why this increase is necessary as the VHI will be net beneficiaries to the tune of around €40 million from the Government-imposed health insurance levy. This levy was increased by 15 per cent in the recent budget,” he said.