THE STATE-owned health insurer, the VHI, is set to record underwriting losses of more than €80 million this year.
The company also expects to lose almost 120,000 subscribers.
The figures emerged at a hearing of the Joint Oireachtas Committee on Health and Children yesterday where VHI Healthcare chief executive Jimmy Tolan said that the company would lose €170 million this year in meeting the healthcare needs of customers aged over 60.
“These level of losses are unsustainable in a highly competitive marketplace,” he said.
Mr Tolan said that healthcare costs were primarily determined by the age and health status of the subscriber base. He said that the VHI’s customers were “rapidly ageing” and that the company now had 280,000 members over the age of 60 compared with 180,000 10 years ago.
“In 2009 our average healthcare costs per customer will be €900 which is almost double our competitors,” he said.
Following the collapse of the controversial risk equalisation scheme, which was aimed at compensating companies with high levels of older subscribers, the Government earlier this year introduced a temporary levy/age-related tax relief scheme.
However, Mr Tolan said this was only 38-40 per cent effective and he warned about the potential emergence of a risk-related market in Ireland in which older people would pay significantly more for their health insurance cover.
“Historically it was possible to generate margins of 40 per cent to 50 per cent on younger adults and these margins were used to fund the healthcare needs of our older customers,” he said.
“This loss of margins means that the historic support between generations is disappearing and will in our opinion result in a risk-rated market where older customers will pay significantly more for their health insurance.
“Today there are large price gaps between broadly similar plans. This is reflective of a market which is becoming risk-rated and is unstable.”
The chief executive of Hibernian Aviva, Jim Dowdall, told the committee that the introduction of the health insurance levy had resulted in prices being artificially increased. He said this had resulted in cover becoming unaffordable for many people.
Mr Dowdall said the levy had increased premiums at entry level by up to 31 per cent and that prices would reduce immediately if the levy was removed.
“Increasing the levy or restructuring a risk equalisation scheme is not a long-term viable solution to resolve the issues in the market and this will not alleviate the underlying cost pressures that exist.
“The market requires a radical root-and-branch review to protect community rating and competition. This can involve restructuring the market, a redistribution of members across all competitors, possibly splitting up the largest player and also encourage new entrants into the market – one which is regulated fairly for all insurers.”
The general manager of Quinn Healthcare, Donal Clancy, said significant numbers of people were leaving the market or downgrading their level of cover. He described the levy as “a stealth tax” which supported the inefficiencies of VHI.
Mr Clancy said the flat rate levy of €160 an adult and €53 a child was unfair and reinforcing the dominant position of the VHI in the market.
He said that the impact of the levy on lower-income families was disproportionate. “The levy is 39 per cent of our lower level plan, €330, and 6.2 per cent of our highest plan, €2,050.”