Insurance firms give muted welcome to reform plan

COMPANIES' REACTION:ALL THREE health insurance companies gave a muted welcome to the Government's move towards reform in 2013, but the VHI warned that more urgent changes are also needed if it is to be effective.

The State-owned company said the system of interim supports for holder customers, mostly through tax relief, must be “significantly strengthened” in 2011 and beyond. If this does not happen, the proposed community rating scheme could be “overwhelmed by market forces,” according to the VHI’s chief executive, Jimmy Tolan.

Community rating, the cornerstone for the Government’s proposals for the health insurance market, means policies cost the same for all customers, regardless of age or health status. In effect, younger customers subsidise the policies of older customers.

The VHI has 65 per cent of the overall health insurance market but 82 per cent of over-60s, and says it is losing €170 million per year on this market. Mr Tolan is concerned about “cherry picking” by competitors in advance of the new system being instituted.

The existing temporary system ends in 2011 and will be replaced by another interim arrangement that will be closer to the permanent risk equalisation scheme to be instituted from 2013.

Aviva, the smallest player in the market, was more worried yesterday at what it called the “staggering” solvency hole at the VHI, which will need to be plugged with public money before the proposed sale of the company can move ahead. This gap, between the VHI’s existing solvency cushion and the level required by the European Commission, could reach €300 million or more.

“There is now an obligation on the VHI to act responsibly, trade profitably and stop imposing its increasing losses on the Irish public,” Aviva said in a statement. In general, the reforms would be good news for health insurance customers, according to the firm.

Quinn Healthcare’s general manager Donal Clancy said competition should be strengthened under the proposed reforms.

The main union in the VHI was cautious on the proposal to sell the company, despite Government assurances that all 900 jobs at the firm are secure. Unite regional officer Colm Quinlan said difficulties in the financial services market could not be allowed to compromise members’ jobs. He also underlined the union’s support for the protection of the VHI’s most vulnerable customers.

“What might make sense on a balance sheet must not ride roughshod over a long established and socially cohesive policy that VHI has long been to the fore in supporting,” Mr Quinlan siad.

Mr Tolan was positive on the planned sale, saying it was in the best interests of customers and employees. It will also allow it to develop additional services in care in the community and chronic conditions management, he added.