Vhi Healthcare, the Irish State-owned health insurer, today announced that it will increase its prices by an average of 8% with effect from the 1st of February 2010 in order to fund what it termed "high quality healthcare needs of its customers." Vhi says average healthcare spend per customer was €900 which is twice the level of its competitors and the number of customer medical procedures has jumped 73% in 5 years.

Commenting on the planned increase Jimmy Tolan, chief executive said: "As a not for profit organisation the sole purpose of the price increase is to fund the healthcare needs of our customers. We are particularly aware of the pressure that families are under and have kept the cost of a family of four on Plan B lower than it was this time last year. Our overall price increase is significantly lower than our competitors notwithstanding their market share of customers over the age of sixty is only 15% and consequently their average spend in meeting the healthcare needs of their customers is only 50% of Vhi Healthcare's."

In 2009 Vhi says it spent over €1.3 billion in funding the healthcare needs of its customers with over 50% spent meeting the healthcare needs of older customers.

Vhi expects to generate total underwriting losses of at least €80m in 2009. It will generate losses of over €170m in meeting the healthcare needs of its 280,000 customers who are sixty years and older.

For 2010 the health insurer says the key driver of increased healthcare costs will be the expected year on year growth in the healthcare needs of customers particularly our older customers.

Over the last five years the total number of medical procedures which Vhi Healthcare has paid for on behalf of its customers in private facilities has increased from 293,000 procedures to 507,000 procedures which is an increase of 73% and it expects this to increase by a further 9% in the year ahead.

In 2010 it expects that over 70% of its customers healthcare needs will be delivered within private facilities.

According to Jimmy Tolan, "Age and health status are the greatest determinants of healthcare costs for our customers. There have been significant advances in technologies, new drugs and medical devices in the critical areas of cancer and cardiac care and these are having a positive impact on the quality of our customers' lives. However, demand for healthcare services continue to increase and our biggest single challenge is funding our older customers healthcare needs within the current market environment.

Vhi Healthcare believes that the current age related tax relief system is only 40% effective and international markets which maintain community rated systems are at least 80% effective. The recent changes to the levy/age related tax relief system for 2010 has worsened our financial position by over €15m as the additional levy which Vhi Healthcare will pay in 2010 will exceed the incremental age related tax relief which our older customers will receive".

Tolan continued: "We expect 2010 to be another challenging year as our competitors will continue to cherry pick by focusing on younger profitable customers and consequently the health insurance market is becoming a risk rated marketplace. Within a highly competitive market place it is not possible for Vhi Healthcare to continue to sustain annual losses in excess of €170m in funding the healthcare needs of its older customers and due to the absence of a robust support mechanism for older members of society it is becoming inevitable that older members of society will pay significantly more than younger members of society for their health insurance".

Health Insurance Comparisons Page