The country’s largest health insurer, the State-owned VHI, is seeking Government approval to allow it to negotiate contracts directly with public hospitals as part of moves aimed at cutting costs.
The VHI yesterday announced an increase of 6 per cent on average for its 1.2 million subscribers. The company had wanted to impose a bigger increase, but Minister for Health James Reilly objected to an initial proposal for a rise of 11 per cent and also opposed an 8 per cent rise. He has urged the company to tackle its cost base.
It is understood that in talks with the Department of Health, the VHI has sought provision for entering into direct contract negotiations with public hospitals on the price of private beds in their facilities. At present the cost paid by insurers for private beds in public hospitals is set directly by the Minister for Health.
A spokesman for the Minister said last night that in future it would move away from insurers paying a specific rate for every day a subscriber spent in a public hospital bed.
He said it was intended to move towards a “case mix charge” in which the cost of a bed would differ depending on the treatment provided to the subscriber. The spokesman said the concept of insurers negotiating directly with public hospitals was “further down the line”.
Separately, the VHI has argued that a “robust” risk equalisation scheme was absolutely imperative to keep health insurance affordable.
A risk equalisation scheme effectively compensates companies with a higher age profile by means of money transferred from rivals with younger membership bases.
VHI chief executive John O’Dwyer said yesterday: “While we welcome the introduction of a permanent risk equalisation scheme we still require a fairer distribution of risk throughout the market. Unfortunately the new scheme only compensates insurers with older customers for approximately 50 per cent of the real cost, thus the incentive to cherrypick younger, healthier lives is greater than ever.
“While VHI Healthcare has 56 per cent market share we are paying nearly 80 per cent of the claims. This puts significant pressure on our cost base. The vast majority of older and sicker customers in the market are VHI Healthcare customers.” VHI has more than 90 per cent of those over the age of 80 who have insurance, 80 per cent of those over 70 and 67 per cent of those over 60, he added.
The VHI said it was totally focused on driving down costs in the organisation so that premiums remained affordable. It said it intended to build on the cost savings achieved to date. “Since 2009 this approach has delivered savings of over €300 million. Consultants’ fees are now at pre-2004 levels, there have been price reductions of between 13 per cent and 53 per cent for various procedures and 80 per cent of procedures are now performed on a day-case basis. VHI Healthcare is committed to achieving further savings of €100m a year over the next three years.”
