VHI subscribers are facing another rise in premiums from next September, the only questions being the size of the increase and whether it will be sanctioned by the Government.
VHI acting chief executive Mr Oliver Tattan confirmed that the State-owned health insurer will be looking for an increase in its premiums, but emphasised that the size of the increase may be moderated by the introduction of new products, enhancement of existing products and better cost containment by healthcare providers.
Over the past 10 years, VHI premiums have increased by a cumulative 72 per cent. The most recent increase was last year, when they rose by 9 per cent.
Mr Tattan was speaking after the VHI reported a much-improved financial performance, with pre-tax profits jumping from £2.8 million (€3.56 million) to £11.2 million (€14.22 million) and premiums rising from £304.4 million to £343 million. The increase in profits has allowed VHI to add a further £8.8 million to its reserves. But Mr Tattan warns that the total reserves of £87 million are still only 25 per cent of premium income and are well short of the 40 per cent of premium income needed to maintain the group's solvency requirements.
VHI's future is inextricably tied to the proposals in the Government's White Paper on health insurance, which is due to be published at the end of the month. This White Paper is expected to propose fundamental changes to the way health insurance is provided, but will also propose major changes to the VHI's corporate structure and outline future investment requirements.
A change in the VHI's corporate status as a result of the White Paper would also allow the group to regularise Mr Tattan's employment status. He is currently employed under contract as an acting chief executive, a move which allows the VHI to pay more than a permanent chief executive would otherwise receive under Government guidelines on pay for top management in the semi-state sector.
"It is far from satisfactory that the board is not in a position to appoint a permanent chief executive because of Government constraints on the remuneration package which it can offer. The problem of remuneration levels for top management in the semi-state sector becomes an increasing difficulty with the continuation of the country's economic success," VHI chairman Mr Derry Hussey states in the annual report.
Mr Tattan has already said that VHI will need up to £60 million in new investment and that the provider of those funds will require a return on that investment. Consultants PricewaterhouseCoopers have already said that the introduction of an outside investor might require a 20 per cent increase in premiums, although Mr Tattan has played down the prospect of a premium rise purely to reimburse an outside investor. "We have to reimburse an investor, but our bottom line shows that we can do that without necessarily increasing premiums - by providing new products, enhancement of existing products and better cost containment," he said.
He added that VHI could be become involved in primary healthcare if its statutes were changed to allow it do so, and also said that the group could become involved in providing dental/orthodontic insurance as well as occupational healthcare.
Mr Tattan warned that, while this year's profits from VHI are a record, "they are still not enough to fully reimburse all that investment that will need to be made". He said: "There are many ways to improve the bottom line and not just through increasing premiums. Premiums will go up from September 1st, but they will be accompanied by product enhancement."
There is no doubt that VHI has been transformed in recent years. Its financial fortunes have improved significantly despite the arrival of BUPA on the Irish market as a rival health insurer. BUPA has built up a customer base of more than 100,000, but is still well short of the VHI's 1.46 million - a rise of 64,000 on last year. More than 340,000 of VHI's subscribers also joined its Options programme, which provides enhanced benefits.
Claims paid by the VHI rose by 9.5 per cent to £322 million, but this pay-out was more than covered by the 12.7 per cent increase in premium income to £343 million.
