VHI subscribers could face a rise in premiums of at least 6 per cent a year for the next two years, according to information provided to the Department of Health.
Even with these premium increases, the VHI still faces significant operational losses over the next three years unless it can achieve savings. The warnings are contained in projections drawn up by company management to support a price increase which came into effect last September.
The projections show a poor financial outlook with last year's operating surplus of £3 million becoming a deficit of over £500,000 this year. This deficit is projected to rise to £7.2 million next year and £10.4 million in 1998/99.
Sources close to the organisation said last night that the financial position had improved since the projections - in a letter dated July 26th - was sent to the Department. It was signed by former chief executive, Mr Brian Duncan, with forecasts from the finance director, Mr John Looney.
The letter said that after the 6 per cent increase in September, similar premium rises would be needed in 1997 and 1998. It warns that new health insurance regulations will mean a larger increase in the popular Plan B.
It also says one option would be to seek even heftier premium rises. The VHI could also reduce payments made to private hospitals with which it does not have annual agreements, the letter says, but this would expose its members to higher top-up bills for treatment.
Even with 6 per cent premium rises each year, the letter says significant deficits" would emerge from next year onwards - unless savings were found - and the VHI's reserves would be below the legal minimum by 1999, with no money available to invest in sales and marketing to meet new competition.
Sources close to the organisation say these forecasts are overly pessimistic, given the strong rise in membership recently and tighter cost control. But clearly the VHI faces continued pressures on its finances, with the risk of losing some of its more profitable customers to BUPA, the British health insurer whose products come into force on January 1st.
The VHI has objected strongly to BUPA's cash plans, which charge more to older customers and which are the subject of discussion between BUPA and the Department of Health.
The letter to the Department also says the VHI must urgently find higher margin products, while a major problem is the lack of an agreement with some of the big private hospitals.
Former Taoiseach Dr Garret FitzGerald has called on the Minister for Health to ban the BUPA age-rated cash plan which is due to be introduced on January 1st. He describes it as an "undermining of our health services".
He argues that it is vital that this issue be satisfactorily dealt with in the next few days "by the withdrawal of the present BUPA scheme and its replacement by a genuine community-rated scheme".
