The board of State health insurer VHI will hold an emergency meeting this week to consider increasing charges after Minister for Health Mary Harney decided against asking its biggest competitor to subsidise it.
Ms Harney yesterday revealed she would not introduce risk equalisation into the Irish health insurance market until the Government had at least started the process of converting the VHI to a commercial State body.
Last night, VHI's chief executive, Vincent Sheridan, told The Irish Times that it cannot continue to dip into its reserves indefinitely. He said its board would hold an emergency meeting this week to discuss Ms Harney's decision.
One of the options it will examine will be to pass on the cost to customers. Mr Sheridan said that last year the board had decided against passing on the extra cost of its liabilities to its customers.
"I do not envisage that that will change, but I cannot anticipate the outcome of a board meeting," he said last night.
The introduction of risk equalisation would have meant that, from the end of this year, VHI's biggest competitor, Bupa, would have had to make payments to the State operator to compensate it for the fact that the VHI's customers are older, more at risk, and thus less profitable, than Bupa's.
The Health Insurance Authority (HIA) recently advised her that risk equalisation was the best way of ensuring health insurance charges continue to be community rated. This means that two people with the same level of cover pay the same premium to an insurer, no matter what the level of risk.
Last month, Bupa claimed that risk equalisation would cost it €34 million this year and threatened to pull out of the market if it was introduced.
Department of Health officials said yesterday that, according to a HIA review of the market, VHI's older customer base cost it an extra €16 million in claims in the last six months of 2004. The State company has been using its €300 million reserves to cover these costs, which are said to be growing, and has warned Ms Harney, who is Minister for Health, that it will make a loss this year as a result.
Mr Sheridan said the company already intended increasing its charges to cover the 25 per cent increase in the cost of private beds in public hospitals as a result of Ms Harney's decision to end effective State subsidies for these facilities.
Mr Sheridan said there were also increases in the cost of the benefits provided under its policies and for access to new technology and treatments for patients.
Health insurers expected Ms Harney to introduce risk equalisation from July 1st after she wrote earlier this month to all three companies operating in the Irish market stating that the HIA had recommended the move.
"My proposed determination is that the risk equalisation commencement day will be July 1st 2005," the letter said. She gave 21 days to the companies to make representations to her.
She stressed yesterday that when she wrote the letter, she had not made a decision and pointed out that the legislation governing how risk equalisation should be introduced, if it was to be introduced, made it necessary for her to frame it in that way.
A statement from her office said that an introduction of risk equalisation payments at this time would be premature in advance of a Government decision regarding the commercial status of the VHI.
She intends publishing the heads of a Bill to change the VHI's status from a statutory body to a commercial State company by September. The actual change in status could take several years.
Last night, Mr Sheridan said there was no link between the two issues. "That's something we called for and it has nothing to do with community rating or risk equalisation and it has nothing to do with private health insurance," he said.
