VHI price hike expected after ruling ends special treatment
Published 30/09/2011 | 05:00
THERE were fears last night that the VHI will be forced to hike its premiums after the State lost a key European court case over the way the insurer is run.
The European Court of Justice ruled yesterday that Ireland was in breach of its EU obligations by exempting VHI Healthcare from being regulated by the Central Bank.
The court ruled that Ireland broke EU laws by allowing the VHI to operate outside normal insurance rules.
Under these, financial insurance companies have to put aside €4 out of every €10 in premiums so that they have enough reserves to cover the cost of a major increase in claims. But the VHI did not have to meet this target.
Being regulated will require the insurer to increase the amount of money it puts aside to cover medical claims in a move that will mean pumping an additional €330m into the company.
The ruling also means the State-owned health insurer will also likely have to stop offering special deals, such as free cover for children, experts said.
Earlier this year VHI premiums increased by between 15pc and 45pc, which resulted in the cost of some premiums rising by as much as €444 for an adult.
Insurance experts said yesterday that premiums are likely to rise again because the VHI's new funding requirements will have to come from taxpayers, higher premiums or the part-privatisation of the insurer.
Dermot Goode of healthinsurancesavings.ie said the 1.2 million members of the VHI would not be able to withstand new premium hikes.
"Approximately 43,000 people have cancelled their cover this year and affordability remains the biggest concern.
"Any further upward pressure on premiums would simply push more people out of private healthcare and they would then have to rely on the public system which is already under pressure."
Mr Goode said the ruling may restrict the VHI's ability to offer deals. But a spokeswoman for the VHI denied it would be barred from offering deals.
Asked about the prospect of new premium hikes, she said: "The judgment does not relate to prices and we will not comment or speculate on this area."
Healthcare expert Professor Charles Normand of Trinity College Dublin welcomed the ruling and said the State-owned insurer may need to be part-privatised to help raise the additional funding.
As part of the Programme for Government, Health Minister James Reilly plans to break up the VHI into three competing companies in an effort to have more market competition.
There are also plans to use the VHI as part of the plans to introduce a universal healthcare system.
Mr Reilly said he would bring proposals to Government to deal with the regulatory issues. He said that the VHI can continue to trade as normal.