Irish State health insurer VHI Healthcare today reported an after tax loss of almost €42m in 2009, a year in which customer payments rose 14%. The insurer said premiums will rise by at least 6% to 7% for the next 10 years to keep up with the increasing health requirements of its customers.

At the launch of the Annual Report for 2009, chief executive Jimmy Toolan said the company lost 120,000 customers last year. The insurer spent over €1.3bn in funding the healthcare needs of its customers. This was up 14% on the previous year with over 50% spent meeting the healthcare needs of its older customers. In 2009, VHI’s average healthcare spend per customer was €900 which is twice the level of its market competitors due to the age profile and health status of its customers.

VHI said it is currently losing €170m annually in meeting the healthcare needs of its older customers. It says healthcare is primarily age related, particularly in the critical areas of cancer care, cardiac, chronic conditions and orthopaedic care. The current market environment encourages newer entrants to pursue younger customers as they are highly profitable, while avoiding insuring older customers who are significantly loss making. For example the insurance policy on a 25 year old can generate profits of approximately €400 while that of an 80 year old can generate losses of €1,000.

The insurer says the current support mechanism that is in place to protect older health insurance customers is only 40% effective and this means that health insurers with older customers are inadequately compensated for meeting older peoples healthcare needs. Consequently the current support mechanisms for older customers will need to be significantly strengthened in 2011 and beyond or it is inevitable that the health insurance sector will effectively become risk rated and older health insurance customers will pay significantly more for their health insurance.

VHI said in terms of overall spend, cancer related medical care remains the largest spend with almost €232m paid out during 2009. The next highest spend involved treatment for orthopaedic care including replacement knee and hip joints, fractures and back problems amounting to €167.5m followed by €163m for heart and circulatory problems. Other areas of medical cost included €126.6m for diseases of the digestive system, €66.2m for mental health care and almost €53m for maternity care.

Over the next ten years the number of citizens in Ireland over the age of 65 is expected to increase by over 50% from 510,000 to 798,000 and this will have a profound impact on the future funding of healthcare costs. This increase, coupled with a significant expected increase in chronic healthcare conditions, will have major consequences for healthcare funding and healthcare delivery.

Last May, the Government announced plans for the sale of the VHI. Tolan said today that this could be a long and complex process, taking up to two years to complete. Before its sale, the State is to make a substantial capital investment in VHI to help it attain the solvency levels that apply to other insurers.

The Government has said the sale of VHI is to coincide with the full introduction of a new risk equalisation scheme. The scheme will start on a transitional basis in 2012 before taking full effect in 2013.

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