The State's 1.5 million VHI subscribers are facing an average price increase of about 8.5 per cent for health insurance cover from this autumn.
The company yesterday submitted an application for the increase to Minister for Health Mary Harney. The increase will come into effect from September unless she rejects the proposal within the next 28 days.
The price increase proposal will be announced by the VHI at a press conference today at which the company will also set out details of its financial results for the year to last February.
The VHI's application will be the first test of the Government's intention to take steps to minimise inflation, currently running at about 5 per cent.
The Government said last month, following a meeting with trade unions and employers' representatives, that it would frame public policy to the greatest extent possible with a view to minimising inflation and keeping costs for enterprise under control.
In 2000, the then minister for health, Micheál Martin, vetoed an application by the VHI for a price increase as part of government measures to curb a spike in inflation at that time.
The VHI increase, however, was subsequently granted by Mr Martin several months later.
A spokeswoman for the VHI last night declined to comment on the price increase to be announced today. However, informed sources said that it would be about 8.5 per cent on average.
VHI subscriptions have increased by about 25 per cent over the last two years. At the time of its 12.5 per cent increase last summer, VHI chief executive Vincent Sheridan warned that there would be further price hikes this year, but he declined to forecast by how much prices would rise.
The company has pointed to the cost of new drugs, particularly in the area of cancer, as well as technological innovation as key cost drivers in the health insurance sector.
The State-owned health insurance company also signalled last December that the Government's decision to increase the cost of private beds in public hospitals by 25 per cent could add up to six per cent to the cost of health insurance subscriptions.
The Government calculated that the increase in the private bed charges would lead to a rise of 4.25 per cent in health insurance subscriptions.
The Government said that the increased cost of these private beds would generate an additional €50 million, which would finance measures to care for the elderly.
It also said that the increases were part of a move towards progressively charging the full economic cost for private facilities in public hospitals. The VHI indicated last year that a High Court ruling paving the way for the operation of a risk equalisation scheme - under which it would receive tens of millions of euro - would mean that its subscriptions would not increase at the same rate as otherwise would have been the case.
However, in setting its price increase for this year, the VHI has also had to bear in mind developments in the market over recent months such as Quinn Group's purchase of its main rival, Bupa Ireland. In a statement when it entered the health insurance market last February, the Quinn Group signalled that it would compete strongly with the VHI on price.
It immediately introduced a one-year price freeze for the 475,000 subscribers it took over from Bupa Ireland's operation.
Quinn group chairman Seán Quinn argued that VHI subscribers were paying too much for health insurance.
