The Minister for Health, Mr Martin, has defended his decision to allow a proposed increase of 3 per cent in VHI premiums despite the fact that the firm has made record profits in the last 12 months. Liam Reid reports.
The State-owned health insurance firm is expected to post a surplus of over 60 million for the year to the end of February when it publishes its annual report in the next week.
The latest increase, which will come into effect in September, is the third such rise in as many years. In September 2002, policies increased by an average of 18 per cent, with a further 8.4 per cent rise last year.
Yesterday the VHI acknowledged it was due to make a significant surplus, but claimed that the increase was "small" compared with previous years. It was required to maintain necessary reserves, pay for improvements in health services and to keep in line with the rising healthcare costs in Ireland, the company claimed.
Under legislation, the board of the VHI must notify the Government of any proposed price rise increase, which it did last month.
The Minister has the power to direct that notified increases not be implemented, although he must give his reasons for doing so in writing, but a spokeswoman for Mr Martin said he had decided not to. "Any proposed increase must provide for sufficient revenue to meet both the board's present and projected future claims costs and to make such provision for reserves as it sees fit," she said.
"Given the overall cost level of claims paid for by the board on behalf of its members, the Minister has no objection to the 3 per cent increase being applied."
Dr Bernadette Carr, medical director of the VHI, said that last year's financial performance had been better than expected, with a surplus of 7 per cent.
However, most of this surplus - 5 per cent of overall revenue - would be maintained in reserves to meet current and projected claims, she said. The 3 per cent increase in premiums will pay for additional new health services, including two new facilities in Galway and Cork.
"Being able to restrict the rise to 3 per cent is because of the fact that we have had a surplus of 7 per cent," she said."The rise will result in an adult paying an additional 34 cents a week, or €18.00 a year. This rise is, we hope, manageable."
The VHI claimed the rise was small considering the fact that the rate of inflation in the health sector was running at 10 per cent.
Yesterday opposition politicians claimed the additional charges were "unjustified and illogical". Labour's health spokeswoman, Ms Liz McManus, said that VHI charges had doubled since 1997. "It would appear that the only explanation for this series of increases in VHI premiums is an attempt by the Government to fatten up the company for privatisation."