The bad news for VHI subscribers, just recovering from a further 9 per cent price increase, is that there is little prospect of a let up in the future. In the past 10 years, when calculated on a cumulative basis, there have been increases of almost 72 per cent in premiums for their private health insurance.

Against this background, subscribers are entitled to wonder about the hoopla which accompanied BUPA's entry the market in 1997. But it is going to take a lot more than the entry of one other company to set the Irish health insurance industry to rights. Much depends now on whether the Minister for Health, Mr Cowen, is prepared to bite the bullet and, at last sort out the situation. An opportunity is at hand. The White Paper on health insurance, due in the autumn, could provide the catalyst for action. It appears Mr Cowen will come to the issue with no baggage. He maintains he is keeping all options open and that he does not have any "ideological hang ups" about the VHI. Rather, he is only interested in providing the most competitive health insurance market for VHI subscribers.

One of the main difficulties is that VHI's financial reserves are out of sync with international norms in the industry. Last month, the company reported a surplus of £2.8 million, which represents a return of less than 1 per cent on the premium increase of the board. VHI chairman, Mr Derry Hussey, said it was the strongly held view of the board that this level of surplus was no longer adequate.

A number of proposals have been made to the Department of Health on this matter and discussions are continuing. A report prepared by Price Waterhouse identified four options for the company: staying the same; becoming a mutual society; going into a strategic partnership; or being sold.

Whatever decision is made will have a crucial impact on future subscription increases. However, the unpalatable fact is that whatever happens there will be price hikes. Comparatively, Irish health insurance is far cheaper than elsewhere, including the UK.

If the Government decides to provide the £70 million being requested, and makes some other legal reforms, things may well carry on as before, although rivals BUPA may then decide to object to this largesse under EU law.

Another option is to find a strategic partner, but there are some who feel the time for this is past. At various times a large number of international companies have expressed an interest in VHI, but it is highly unlikely that anyone will take any further action until the rules of the game are changed.

If an interested party puts up £70 million it will want a return, and the way to get that would be to increase prices. In this scenario the Price Waterhouse report said a minimum 20 per cent increase in subscriptions would be necessary. The report also suggested the Government simply give away the company to an interested party, who would obviously then have the responsibility of sorting out the financial reserves. But the bottom line is that there is going to be little let up for the consumer.

Instead of price increases VHI could decide to reduce the amount of services offered, but that would hardly be any more palatable and makes little commercial sense.

Part of VHI's difficulties at present centre around the Department of Health's decision to charge, over a period, the full economic cost of private beds in public hospitals. Mr Cowen said last December the Government was going to progressively move towards charging the full rate for these facilities in public hospitals. This is being passed on to VHI subscribers.

In soccer terms the relationship between the VHI and the Minister for Health has been described as the Minister being the owner and manager of a leading team in the league and also the referee. At present the Minister is the operator of the public healthcare system, but with responsibility for private medical insurance and power of appointment to the VHI board.

VHI must seek approval from the Minister to increase prices, to sanction new products and presumably to drop any products. Yet the competition may generally do what they wish. The overall situation is not helped by the continued failure of VHI to appoint a full-time chief executive. It is paying £250,000 a year for a consultant to run the company on a part-time basis. This payment is £100,000 more than a proposed pay package for the position which was refused by the Cabinet in December.

For some time VHI was seen as a golden goose. In the early 1990s a senior Department of Health official described it as "an arm of government social policy", at the time board members were striving to make it a commercial operation. Those negotiating with VHI - hospitals and consultants - are all too well aware of VHI's status when they are hammering out terms.

Customers have long been angered by VHI's inability to exert muscle against powerful interests like the consultants, or to moderate the inexorable rise in medical inflation - the cost of high tech health services and new treatments - which will run at around 7 per cent next year. In July 1999, consultants' fees are up for renegotiation with the company. Consultants in all specialties will be looking for increases, not least to pass on the increasing costs of medical indemnity. Another headache faced by the company is the legal battle involving private hospitals, which have taken a High Court challenge to a new payment system introduced in April by the VHI board.

The matter of community rating - where everyone pays the same for health insurance regardless of age - is still up for discussion. The Director of Consumer Affairs, Mr William Fagan, said recently it needed to be re-examined. One aspect of it which may be changed in the forthcoming White Paper relates to those people who decide to take out health insurance only when they hit 50 and end up paying the same as those who have been in VHI since they were born. A number of those who made submissions to the White Paper backed changes for age of entry premiums.

A review has also taken place of the effects of risk equalisation on the health insurance industry. This involves a complex set of regulations designed to prevent new entrants to the market keeping claims down by "cherry-picking" customers. The regulations as they stand may require BUPA to pay up to £2 million compensation to the VHI following its first year of operation here. Risk equalisation may be essential for community rating, but unfortunately it does not make for good competition in the market.

Undoubtedly the most recent VHI increase will lead to defections to BUPA, which has an estimated 50,000 subscribers. That company, has said it will not be introducing a further subscription increase this year. But this is poor comfort for BUPA customers who suffered a 9 per cent increase already this year.

Despite the increases Irish people are continuing to join VHI at a current rate of over a 1,000 a year, and close to 40 per cent of the population now have private health insurance.

Real competition in this area will hopefully come with decisive action by the Minister for Health paving the way for more companies to enter the Irish market creating the competition that will ultimately keep prices down.