The Voluntary Health Insurance proposal to increase charges by 8.5 per cent this year for 1.5 million members has been cleared by Minister for Health and Children Mary Harney, writes Mark Hennessy, Political Correspondent.
However, the Government, which is facing demands for higher than agreed pay rises from some trade unions, insisted last night that the price rise will add just 0.5 per cent to inflation figures.
Ms Harney informed Cabinet colleagues of her decision yesterday not to object to the VHI application during their final meeting before the summer break, though, legally, she did not require their approval.
"She told them that she intended to maintain her long-standing approach of not interfering in the commercial decisions of the semi-State company," a spokesman for Ms Harney said last night.
The 0.5 per cent inflation estimate from the VHI increase was put together by the Central Statistics Office, said the spokesman, adding that it would mean that VHI members would pay about €85 million for health cover.
Under health insurance regulations, Ms Harney had 28 days to reject the VHI price rise application.
It will now come into effect on premiums paid from September onwards.
The Government's emphasis on the decision's impact on inflation is noteworthy, following the Ictu warning last month that it wanted signs of State action against inflation.
During a meeting with Ictu and the Irish Business and Employers Confederation, Taoiseach Bertie Ahern and Minister for Finance Brian Cowen said that public policy would be "framed" around keeping the State's influence on inflation under control.
Fine Gael TD Brian Hayes last night said Ms Harney's decision not to block the VHI demand was "not surprising, given that she has failed to scrutinise the VHI, or examine its dominance in the market".
The health insurers' price rise is 4.5 per cent above inflation and should be examined closely by the Dáil to see if it could be justified by market pressures, or the increasing cost of healthcare, he said.
Officials from the Department of Health and Children earlier this year told Ms Harney that Irish health insurance costs were too low because the State is offering "hidden subsidies" to cover the cost of private beds in public hospitals.
The Government's decision to raise the daily cost of such beds by 25 per cent had been enough on its own to justify "a significant premium increase", officials told Ms Harney in papers released under the Freedom of Information Act.
VHI subscriptions have increased by about 25 per cent over the last two years, rising by 12.5 per cent last summer.
Quinn Healthcare has committed itself to freezing prices for this year.