THE COUNTRY’S largest health insurer, VHI Healthcare, recorded a net deficit of €65 million in the 10-month period to the end of December 2008, compared with a surplus of €62.8 million for the year ended February 2008.
Speaking at the release of the company’s annual results yesterday, chief executive Jimmy Tolan revealed that the VHI requires additional capital of at least €100 million if it is to meet the solvency requirements of the Financial Regulator.
Mr Tolan explained that the €65 million after-tax deficit arose because the insurer paid out more in meeting its customers’ medical needs than it received in premium income. Claims paid in the period rose by 17 per cent, due mainly to a significant increase in the number of medical procedures being paid for on behalf of customers.
The VHI spends an average of €775 per customer on medical care, which it estimates is twice the average of its competitors. This disparity is a function of the older age profile of its customer base and the quality of healthcare provided, he said.
A €43 million loss sustained by the VHI’s investment portfolio also contributed to the deficit.
The company has “derisked” its investment portfolio as much as possible, and it is expected to deliver a positive return this year. However, Mr Tolan predicted that the VHI would make an underwriting loss again this year.
The insurer “remains very well capitalised”, with a solvency ratio (the ratio of free reserves to premium income) of 27.7 per cent at December 2008, he added.
Although this solvency level is acceptable by European standards, the VHI is due to become regulated by the Financial Regulator later this year.
To satisfy the solvency ratio of 40 per cent required by the regulator, the VHI will need additional capital of at least €100 million if it is to bridge this gap. The company is currently in discussion with the Department of Health in relation to sourcing this additional capital.
Despite the slowdown in the economy during the period, the VHI’s membership held relatively steady and ended the year at over 1.5 million people.
However, Mr Tolan said that there was “no doubt” that the current difficult economic climate would affect membership levels in 2009. It would not be possible to make an accurate assessment of the extent of the impact until September or October, he added.
“Redundancies will be the critical factor for the rest of the year,” he said.
A significant number of members have been in contact with the VHI looking for cheaper health insurance plans, according to Declan Moran, director of marketing and business development.
Mr Moran added that they have offered “thousands” of customers who can no longer afford health insurance as a result of being made redundant, the facility to rejoin the VHI in the future without serving the usual waiting period before their policy once again becomes effective.
Waiting periods usually range from 26 weeks upwards, depending on the person’s age.
As part of its medium-term strategy, the VHI plans to concentrate more resources on developing new products that focus on chronic disease management, care in the community and prevention of diseases such as diabetes.
Some elements of this strategy have already been rolled out. In January of this year, the VHI began a pilot diabetes screening programme. Already, close to 800 people have been screened.
“It is our intention to provide screening services to 30,000 customers a year by the year 2011,” Mr Tolan said.
In addition to diversifying its product offering, the insurer also intends to expand internationally in the medium term.
VHI changes
VHI Healthcare announced a number of changes to the day- to-day benefits available under its LifeStage Choices range of healthcare plans yesterday.
These changes include a number of benefit enhancements, but also some reductions in benefit levels.
For example, until now, members of LifeStyle Choices could claim for up to 30 GP visits a year. This has now been reduced to seven visits and the maximum amount that can be claimed in respect of each visit has also been reduced.
Similar changes have been made in relation to visits to consultants, dentists and physiotherapists.
Declan Moran, director of marketing and business development, said: “When faced with a choice between increasing premiums or adjusting benefits, we chose the latter to ensure a minimum impact on the vast majority of LifeStage Choices customers.”
