Health insurance customers face new prices increases after a Government move to pay for the cost of insuring older people.
The Government is to introduce a €300 million tax-relief scheme to subsidise health insurance costs for subscribers aged 50 and over and will pay for the scheme by introducing a new €160 levy on companies for every adult with health insurance.
All or part of this levy may be passed on to consumers, although Minister for Health Mary Harney said she hoped that some of the levy would be absorbed by health insurance companies.
VHI has welcomed the move but the State's other two main health insurers, Quinn and Hibernian, have severely criticised the proposal.
The Government move follows the Supreme Court decision in July that struck down the risk-equalisation scheme that compensated insurers with a greater number of older people on their books.
The Supreme Court, in a unanimous ruling in a case brought by Bupa Ireland, found that the introduction of a risk equalisation scheme by the Minister in December 2006 had been based on a wrong interpretation of law and should be set aside.
Risk equalisation was a compensation scheme under which companies such as the VHI, which has a larger number of older subscribers, would receive payments from rivals with a relatively younger membership profile. The Government had said the scheme was essential to underpin the concept of community rating, under which everyone pays the same for the same product, regardless of age.
Under the new measures, a new “community rating levy” of €160 for adults and €53 for children will be placed on insurance companies. It is unclear if this will be passed on to consumers or not.
A VHI spokeswoman said the the Government proposal was "cost neutral" and would not in itself drive up costs.
But she added: "While the levy will not drive up costs, other factors including the rising demand for medical services and medical inflation will drive up costs." She said the levy itself would not be passed on directly but said an increase in premiums would be sought "in the not-to-distant future" to cover the other increases in costs.
A spokeswoman for Quinn healthcare said the insurer would "do everything possible to minimise price increases, but at this stage increases are inevitable because of this announcement by Government."
Hibernian Health said it would not be increasing premiums "at the moment" and described the move as "anit-competitive". A spokeswoman for the company said: "At the moment these are only proposals and we will challenge them. We will be keen to understand the European view on this.
She said the company would investigate "regulatory and legal avenues" to challenge the scheme.
Under the scheme, tax relief will be introduced for health insurance for those aged 50 and over. The additional tax relief will be €200 for those aged between 50 and 59, €500 for those between 60 and 69, €950 for those between 70 and 79, and €1,175 for those 80 or over.
The implementation of the measures is subject to approval by the European Commission. The new scheme was described by the Department of Health as an "interim, three-year measure".
Ms Harney said the measures were "fair, reasonable and proportionate. Older people will benefit by the price of their policies not rising massively based on their age.
"But it is not just older people who will benefit. Those under 50 who look forward to continuing their health insurance as they get older need to know it will continue to be affordable, and will not rise in price just because they get older."