VHI chief rejects `cosy deal' claim

The chief executive of VHI Healthcare has rejected as "nonsense" and "misleading" accusations that it was involved in a "cosy" deal with the Government regarding its recently sanctioned 9 per cent increase in premium prices.

Mr Vincent Sheridan said "we resent and totally repudiate" the claim, which had been made by Mr Gay Mitchell TD, Fine Gael's spokesman on health.

Addressing the Joint Oireachtas Committee on Health and Children, Mr Sheridan defended the increase, to take effect next September, as the "minimum" required. The rise follows a 6 per cent increase sanctioned by the Minister for Health, Mr Martin, last February.

Mr Sheridan said the earlier rise was to make up for the absence of an increase in 2000, refused at the time by the Minister in an attempt to control inflation. Attempts to portray the VHI's price increase as one of 15 per cent in seven months were "misleading".

Mr Mitchell said the increase, sanctioned after the Dail broke for summer, was an "appalling abuse of parliament". He said: "I resent being taken for a chump."

The Labour party's health spokeswoman, Ms Liz McManus, added the timing of the increase was "far too convenient to be accidental".

But Mr Sheridan said the practice for many years was for price increases to apply from September. The VHI's application was "totally transparent".

He claimed 2 per cent of the latest rise was due to the Government's decision to continue to defer the implementation of risk equalisation. This would discourage cherry-picking by allowing companies with older, more expensive patients on their books to seek compensation through a central fund.

Mr Sheridan said: "I cannot defend that two percentage points of the increase. Indeed, we look to you as legislators to ensure that future increases will not have to provide for the absence of effective risk equalisation."

He noted much had been made of the fact that the VHI had reported profits of €28 million last year but this was largely due to investment returns of €25m in 2000/01 compared to none the previous year. The company's core results showed declining profitability, he said, with the return from health insurance activities, excluding investment income, down from €30m to €11m.

Questioned about the company's decision to build up its reserves, and whether it was linked to possible privatisation, Mr Sheridan said it would not be prudent to run a business without reserves. He added no representations had been made to the Government on the matter of privatisation although he understood a Government-commissioned report on the matter would be delivered very shortly.

Calling for the Minister to freeze the increase pending an independent evaluation, Mr Mitchell said he would petition the Comptroller and Auditor General, the Competition Authority and the Director of Consumer Affairs asking for separate investigations.

The committee chairman Mr Batt O'Keeffe (FF) added there were "very serious questions" to be asked about how efficient and effective VHI management was.

He said the committee, unlike individual deputies, was not entitled to petition the CAG but it would discuss the matter further next September.