The State-owned health insurance company, VHI, is expected to report losses of about €30 million for the year to the end of February. This is bad news for its 1.5 million members. They can expect to face increases in premiums of about 15 per cent next September which will go towards a Government-ordered restructuring of the company. That will involve establishing a higher solvency ratio and tighter regulatory structures.
In 1994, there was broad welcome for the government's decision to encourage competition within the health insurance market where the VHI had enjoyed a monopoly. Older voters were reassured they would not have to pay higher premiums than younger, healthier citizens. A system of community rating, involving "risk equalisation" was provided for in legislation that would compensate insurance companies carrying a disproportionate percentage of high-risk persons on their books.
Two private companies, Bupa and Vivas, have entered the market since then. But, in spite of reforming promises, there has been a pattern of political neglect. The Tánaiste and Minister for Health, Mary Harney, promised legislation a year ago that would restructure the VHI and subject it to the same kind of regulatory discipline as its competitors. That Bill is still awaited. At the same time, when Bupa threatened to leave the market, she refused to accept the advice of the Health Insurance Agency (HIA) and trigger the "risk equalisation" process that could have cost the British-based company up to €50 million a year. Since then - following considerable pressure from the VHI - Ms Harney has introduced "risk equalisation". But legal challenges in the High Court and at the European Court of Justice by Bupa have prevented its implementation. The EU Commissioner for Internal Markets, Charlie McCreevy, has also become involved. All this activity would suggest a resolution of problems in the market will be slow and complicated.
Ms Harney has made no secret of her wishes to attract more private investment into the health sector. But a market dominated by the VHI might not be regarded as attractive to prospective investors. In her commitment to change, the Tánaiste runs the risk of seriously damaging the VHI, which is already exposed to higher medical claims and a need to significantly increase its reserves. The State-owned company may control more than 75 per cent of the market, but the great majority of its members are over 50 years of age, with 90 per cent of new entrants going to its competitors. Health insurance is a profitable enterprise and urgent action is required to protect the interests of all consumers.