The country's 1.5 million VHI subscribers are facing price increases of nearly 50 per cent over the next three years, according to a confidential report on the health insurance sector commissioned by the Department of Health.
The report by BDO Simpson Xavier Corporate Finance says the State-owned health insurer has forecast that it will require increases of 15 per cent per year irrespective of whether it receives millions of euro in payments from rivals under a controversial risk equalisation scheme for the industry.
BDO Simpson Xavier says rises over 15 per cent annually over the next three years will be required to meet future commercial solvency requirements.
The report says the Government instructed VHI to take steps to build up its reserves following a decision in December to reform the company's corporate status.
It says Bupa Ireland has forecast increases of 20 per cent in 2006, 12.5 per cent in 2007 and 9 per cent in 2008 for its 440,000 subscribers if risk equalisation payments have to be made.
The report says VHI has projected, irrespective of the introduction of risk equalisation, that the overall market will decline by 2.3 per cent to February 2009, that there will be premium increases of 15 per cent and that its loss ratio will improve due to a better claims mix, lower medical inflation and higher premium income.
It forecasts that if risk equalisation is not introduced, Bupa Ireland would make profits of more than €20 million annually over the next three years.
It says Bupa's contention that a 20 per cent increase in prices required to meet risk equalisation payments would make the company uncompetitive ignored the fact that VHI will have to raise its prices by at least 15 per cent annually to move towards reaching solvency requirements.
