Vhi Healthcare, the Irish State health insurer, today reported an after tax loss of €65 million in the 10 month period ended the 31st December 2008, compared with a surplus of €62.8 million for the year ending February 2008. Claims paid in the period under review were €981 million, an increase of 17% on the previous year. The rise was due to a significant increase in the number of medical procedures being paid for on behalf of our customers.
Vhi said its claims ratio, i.e. payment for medical care as a percentage of earned premium, was 94.8%, which is significantly higher than the market average. The insurer paid out an average of €775 for each customer to meet their medical care needs in 2008 compared with what it says "others in the market whom we estimate spend between €350 and €450 per customer."
The insurer said the solvency ratio i.e. the ratio of free reserves to premium income currently stands at 27.7%. It says this is acceptable by European standards and Vhi remains well capitalised and financially strong.
Under the Vhi Amendment Act, passed in 2008 by the Oireachtas, Vhi is obliged to obtain an insurance licence and be regulated by the Financial Regulator. However, the company says to satisfy the Financial Regulator solvency requirements Vhi will require additional capital.
According to Jimmy Tolan, Chief Executive, Vhi Healthcare “The deficit for the period under review can largely be attributed to the substantial increase in the number of medical procedures paid on behalf of Vhi Healthcare’s customers in the past year combined with investment losses. Currently Vhi Healthcare is spending an additional €3.3 million per week, compared to this time last year, in meeting the cost of our customers’ medical care needs. The cost of providing high quality medical care continues to increase year on year - a factor of ongoing improvements in technologies, treatment and drugs. The key cost driver however is the increase in the number of procedures for which our customers are treated. Significantly, the number of medical procedures which our customers accessed in private hospitals increased by 14% in 2008 compared to 2007.”
He continued: “Vhi Healthcare estimates that it currently spends between €300 and €400 more on each of our customers in meeting their medical needs compared to that spent on their customers by other operators in the health insurance market. Cancer related medical care remains the number one in terms of benefit paid during the year with €185 million paid out. The cost of treatment for heart and circulatory system illnesses was €129 million and this was followed closely by payments of €128 million in respect of orthopaedic care including hip replacements, complicated breaks and knee replacements. Other key areas of medical costs included €112 million which was paid out for illnesses related to the digestive system, nearly €54 million for mental health care and almost €50 million for the delivery of over 16,100 babies.”
There has been no signal of a premium increase but it looks likely.
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