Quinn Healthcare, which acquired the operations of BUPA Ireland in 2007, has announced a price hike of 15% in 2010 - - this is against a backdrop of deflation currently at an annual rate of 6.6%.

The company said the price increase is a direct result of the Government imposed health insurance levy and called for its removal. If the levy was removed, Quinn Healthcare said it would freeze its prices for 2010.

Dónal Clancy, general manager, said: “The health insurance levy is forcing us to increase prices in 2010. We believe that it is completely unfair, is making health insurance unaffordable for some consumers and is designed to support the inefficiencies of the VHI.

“The Government is charging €160 per adult whether you are on a higher priced plan or a low cost starter plan. The levy represents 48% of the premium for the cheapest product in the market and just 6% on higher level plans.

He continued: “As currently structured, the levy is reducing the number of new customers to the market and forcing existing customers to leave the market because they can’t afford it.

“This is effectively a stealth tax purely designed to compensate for the inefficiency of the VHI. The most recently available market claims costs (which are driven by VHI’s costs) are between 30% and 94% higher than those of Quinn Healthcare. In addition, VHI’s overhead spend per member is 27% higher.

“We fully support community rating but don’t believe that the VHI requires any compensation from its competitors for it’s older book as they enjoy a higher average premium per member (€800 for VHI versus €526 for Quinn Healthcare for 2008). They do not appear to be managing their claims costs as effectively."

The State's Health Insurance Authority says that in a community-rated market, health insurance is provided at the same cost to all individuals regardless of age or health status.

However, the cost of claims is far higher for older people than it is for younger people. In fact, on average, health insurance claim costs for people in their 70s are seven times the costs for people under 40. If the higher costs of insuring older people are not shared fairly, then insuring older people will result in losses for insurers.

There would then be the following consequences. First, insurers would have a strong disincentive against insuring older people. There would be an incentive to design products that would be less attractive to older people and to charge more for products that are attractive to older people.

Insurers could also target their marketing in such a way that younger people are predominantly informed of the better value products.

The second difficulty is that insurers which would become most profitable and thrive in such a market would not necessarily be the most efficient or those who produce the best products; instead, they will be the ones who attract the youngest clients.

The HIA says every country in the world that has community rating either has or is introducing a risk equalisation scheme, or some other system to share the costs of insuring older people throughout the market.

The Government announced in November 2008, a €300 million tax-relief scheme to subsidise health insurance costs for subscribers aged 50 and over and a levy of €160 was introduced for every adult who has private medical insurance and a levy of  €53 for every child applies, in addition to gross health insurance premiums.

Finfacts Health Insurance Comparisons Page