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Last Updated:
Apr 24, 2009 - 5:31:05 PM |
Irish Health Insurance: Vhi to hike premiums in 2009 by 23%; Quinn Healthcare to hike by average of 16% - Inflation in 2009 may be Negative
By Finfacts Team
Nov 28, 2008 - 3:27:33 PM
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| Minister for Health Mary Harney. |
Irish Health Insurance: Vhi Healthcare today announced plans to hike health insurance premiums by 23% and Quinn Healthcare plans to raise rates by an average of 16%. Inflation in 2009 is likely to turn negative.
Last week, the Government announced plans to introduce a levy to prevent costs for older patients from jumping as the Supreme Court ruled that the existing risk equalisation system was unconstitutional (Check link in Related below).
A €300 million tax-relief scheme to subsidise health insurance costs for subscribers aged 50 and over will paid for through a new €160 levy to be imposed on insurance companies for every adult with health insurance.
A large segment of the Irish population pay health insurance because despite the billions that have been spent during the Celtic Tiger period, the public system compares poorly with well run State systems in France and Scandinavia.
Powerful vested interests call the shots and second-rate politicians have been no match for them.
Vhi Healthcare
Vhi Healthcare today announced that the company will increase its prices by an average of 23% with effect from 1st January 2009 to fund what it termed the high quality healthcare needs of its 1.5 million customers over the next 12 months. The sole purpose of the price increase is to ensure that Vhi Healthcare can continue to meet its customers’ needs for high quality medical care and pay the costs of its customers’ medical bills as they fall due. Vhi Healthcare is currently spending an additional €3.6 million per week, compared to this time last year, in meeting the cost of its customers’ medical care needs.
There are four key factors which have determined the price increase. These factors entirely relate to meeting the cost of the healthcare needs of our customers.
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Key Factors |
Impact on Annual Price |
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Increase in demand for medical care |
8% |
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Required recovery in claims / premium ratio |
7% |
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Increase in cost of services within public hospitals |
6% |
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Increase in costs of private hospitals and consultants |
2% |
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Necessary Price Increase |
23% |
* Vhi Healthcare say it is not passing on the cost of the recently announced Community Rating levy to its customers. This levy was introduced as part of a package of measures designed to secure community rating and stabilise the market.
Jimmy Tolan, Chief Executive, Vhi Healthcare, stated that “Vhi is committed to maintaining and expanding access to high quality healthcare for all our customers and providing real value for money in terms of the amount we pay out on their behalf. We fully recognise that all our customers are under increasing financial pressure and that these are very difficult economic times but we also have to ensure that we continue to meet the costs of our customers’ medical care needs. 52% of the Irish population chose to purchase private health insurance compared to 10% in the UK which demonstrates how highly Irish people value this product. Our aim is to ensure that we continue to offer all our customers access to the latest and best medical care when they need it.”
He continued “Vhi Healthcare currently anticipates that it will generate a deficit of €60m for the ten months ended 31/12/2008. This is because Vhi Healthcare is paying out €30 million more than it has received in premium income in meeting its customers’ medical care needs combined with projected losses on our investment portfolio of €30m. The loss on our investment portfolio which has supported the growth of the organisation for the benefit of its customers equates to a 4% loss. We have the lowest administration costs in our sector and will ensure that there will be no increase in our administration costs in 2009. We are targeting a very modest underwriting surplus for 2009.”
Vhi Healthcare will have paid out an average of €745 for each customer to meet their medical care needs in 2008. This is significantly higher than our competitors which we estimate spend between €350 and €450. The average paid out in meeting our customers’ medical care needs increases as our customers get older and is in excess of €3,000 for our customers over the age of 80.
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Average cost per customer by age |
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Age band |
Average cost |
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50-59 years |
€913 |
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60-69 years |
€1,678 |
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70-79 years |
€2,699 |
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80 and above |
€3,040 |
High Quality Medical Care:
Over the last four years the number of medical care procedures Vhi Healthcare has paid for on behalf of its customers in private hospitals has increased from 293,000 to 440,000 an increase of over 2,800 procedures per week. This represents an average annual 12% increase over the last four years.
The table below shows the increased costs of meeting the medical needs of our customers over the past five years.
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Y/e Feb 2003 – Medical costs paid |
Y/e Feb 2008 -
Medical costs paid |
Increase over 5 years |
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Cancer |
€80.5m |
€165m |
€85m (105%) |
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Cardiac |
€76m |
€128.6m |
€53m (70%) |
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Orthopaedic(inc. MRI) |
€57m |
€111m |
€55m (96%) |
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Psychiatric |
€33m |
€53m |
€20m (60%) |
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Maternity |
€29m |
€48m |
€18.3m (63%) |
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Accidents |
€17m |
€32.5m |
€15.7m (95%) |
Price Increase by Plan – January 1, 2009:
Plans A-E & Plan A-C Option
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Core |
Option |
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A |
22.7% |
21.7% |
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B |
24.6% |
24.9% |
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C |
26.5% |
25.7% |
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D |
30.1% |
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E |
29.7% |
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LifeStage Choices Plans
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% Increases |
Level 1 |
Level 2 |
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First Plan |
19% |
19% |
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First Plan Plus |
18.6% |
18.6% |
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Family Plan |
18.2% |
18.2% |
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Family Plan Plus |
17.9% |
17.9% |
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Forward Plan |
25.6% |
28.7% |
Price Increase - What it will cost Vhi Healthcare customers?
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The price increase will see the price of Plan B for an adult increase by €163.34 annually from €664.66 to €828.
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The cost for a family on Plan B will rise by €442.84 to €2,256 for 2 adults plus 2 children.
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The cost for a family on our Family Plan Level 1 will rise by €281.82 to €1,752 per year.
New health insurance levy and increase in public hospital charges force Quinn-healthcare to implement larger price increases for 2009:
Quinn-healthcare today announced that it is increasing prices by an average of 16% for 2009, with increases ranging from 10% to 19%. These price increases are mainly due to the new health insurance levy imposed by the government last week to protect the dominant position of the VHI and the 20% increase in public hospital bed charges announced in the budget.
Before the announcement of the new health insurance levy we were planning an average price increase of 8% to reflect the increased costs of providing health cover, with the 20% increase in public hospital beds being a significant driver of this. The new levy amounts to 12% of premium for us and, while we are bearing some of the impact, we have no option but to increase our prices by 8% more than that we would have otherwise done. As well as not passing on the full impact of the levy to our customers we have ensured that the pricing increases on lower level plans are kept to a minimum.
Despite these price increases, Quinn-healthcare says it continues to have lower prices than VHI (even before its upcoming price increase). The adult cash prices of Quinn-healthcare’s mainstream products, Essential Plus (Excess) and Essential Plus are €642 and €715 respectively, compared to €720 for VHI’s mainstream plan, Plan B Options. Our Family Care has an adult cash price of €735 compared to €845 for VHI nearest comparable product Plan B Options with Healthsteps Silver. Naturally these price differences will increase in Quinn-healthcare's favor when VHI applies its price increases.
Commenting on the increases, Colin Morgan, Chief Executive of Quinn Insurance stated: “We are very disappointed that the government continues to be more concerned with protecting the dominant position of the VHI, which made record profits of €112m last year, than providing for fair competition in the health insurance market. The measures announced last week will result in VHI’s competitors paying in excess of €40m per year and, while it appears that some of this is going to the government, the VHI will benefit the most from this. In essence these new measures represent a stealth tax on health insurance consumers.
The measures themselves are fundamentally flawed, as the €160 levy is due per member, irrespective of the level of cover a member has (i.e. a 50% levy on lower plans and only 8 % on higher level plans). This means that less well-off people on lower plans will be subsidising those better off who can afford premium plans.
However, we remain committed to the health insurance market for the long term and in offering consumers a real alternative to the VHI with better value and more innovative products. In addition, our offer of €200 free home insurance and free worldwide travel insurance for customers who have both health and motor policies with us continues to be very popular and offers consumers the opportunity to make real savings by combining their insurance needs with us”.
