The VHI is considering taking legal action against a decision by the Health Insurance Authority (HIA) not to introduce risk equalisation into the Irish health insurance market.
Its chief executive, Mr Vincent Sheridan, said the company was consulting lawyers with the intention of securing a judicial review of the decision.
The VHI has long campaigned for risk equalisation, a scheme designed to compensate one insurer when its customers have a significantly higher risk profile to ill-health than the others.
It was estimated that the scheme, if introduced, would involve a financial transfer of up to €20 million a year from BUPA, the VHI's main rival, to the VHI. BUPA is delighted risk equalisation is not going ahead.
Yesterday the VHI did not rule out a rise in the cost of its insurance policies as a result of the decision. It said last year 3 per cent of its price rise was due to the absence of risk equalisation.
It said it would not continue passing on this 3 per cent to its customers and would instead fund it from reserves.
Premiums are nonetheless still likely to rise in September when the company conducts its annual review of prices.
The VHI warned it could not go on indefinitely funding from its reserves the cost of the absence of risk equalisation. It hoped the HIA would change its decision or be forced to change it in the courts.
"As a result of this decision Irish consumers will continue to pay higher prices than they should in order to subsidise BUPA's windfall profits," Mr Sheridan said.
The HIA decision is based on its review of returns from the health insurers for the six months to December 31st, 2003.