VHI premiums will rise by 9 per cent in September with the State-owned company claiming the increase is necessary to provide members with access to the latest technologies and treatments and to cover medical inflation costs.
The increase means the average family health insurance policy, Plan B, covering two adults and two children, will rise by £64.62 to £782.50 (#993.57) from September for members who are part of a group scheme. For an individual, the increase will add £24 a year to their premium, bringing it to £286.85.
The new rates will apply to policies renewed from the beginning of September.
The rise, which follows a 6.5 per cent hike in 2000, was sanctioned by the Minister for Health, Mr Martin, last week after the VHI presented its case for higher premiums.
The VHI has said this increase will hold until September 2002 and will be reviewed again at that stage.
In the 12 months to February 2001, the VHI reported an after-tax profit of #28 million, a 23 per cent increase on the previous year. This will be transferred to the company's reserves, which now stand at #167.2 million.
Its profitability was largely driven by investment gains of #25 million achieved during that period on its funds.
Operating costs were increased largely by the cost of putting structures in place to facilitate the transition to the euro next year. System developments and e-commerce initiatives to this end cost the group #17 million.
As well as covering the increased cost of healthcare, the VHI will use a portion of the higher premiums to build its reserves.
Commenting on the year's performance, VHI chairman Mr Derry Hussey said that while it had been a successful year for the company, the VHI still needed to build its reserves to levels required by the European non-life assurance Directive.
"The #28 million has been reinvested in reserves, bringing them to 31 per cent of premium income. However, this remains significantly short of the 40 per cent solvency ratio required for insurance companies," he said. The VHI estimates that it could take up to three years for the company to achieve the required reserves.
The company also claims that around 2 per cent of this year's increase is due to the Government's decision to continue to defer the implementation of risk equalisation in the Irish market. Risk equalisation would ensure all health insurers would pay a share of all the claims of older and sicker members and would discourage companies from cherry-picking members from the younger and healthier population.
VHI chief executive Mr Vincent Sheridan said the introduction of risk equalisation was an urgent priority.
"The current situation in which VHI members are forced to subsidise the profitability of a major international competitor in this market is totally inequitable."
Mr Sheridan added that failure to implement risk equalisation threatened the long-term stability of the community-rated health insurance market.
VHI is the State's largest health insurer with 1.52 million members, or just over 42 per cent of the population. The group attracted 76,666 new members last year, a rise of 16.7 per cent. It paid out a total of #453 million on behalf of its members in the last financial year covering 390,000 claims and 1.1 million doctor invoices.
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