VHI Healthcare, whose premiums are to rise by 18 per cent next month, has reported profits of €14.7 million for its last accounting year, writes Joe Humphreys
In its annual report, published yesterday, the health insurers said the profit margin for the year ended February 28th, 2002, represented a decline of 48 per cent on the previous year.
It was only "just sufficient" to maintain the level of free reserves - namely, those reserves which had not been absorbed by claims - at 30.5 per cent of earned premium income, VHI added.
The company's chairman, Mr Derry Hussey, said the rate of inflation in medical costs was "consistently and significantly exceeding cost-of-living increases".
He said: "The reasons for the disproportionate escalation in costs are well known; an ageing population, greater use of diagnostic procedures, advances in treatment and technology and pay settlements in the health sector."
In response, however, a Dublin GP and member of the Eastern Regional Health Authority, Dr Maurice Guéret, said it was "not good enough" to insist that VHI's profits were down solely because of medical inflation.
Citing various cases of waste in the sector, Dr Guéret said private healthcare was being "milked" on a daily basis by those who saw it as "an easy way for a quick buck".
He said the Minister for Health should have insisted on a proper audit, reform and improved efficiency in private healthcare before sanctioning the latest increase.
In its report, VHI pointed out that for the first time since 1998, it had had to include an "unexpired risk reserve" of €15 million in its accounts. It said it was clear at the balance sheet date that the premium rate increase on renewals from September 1st, 2001, "was not sufficient to meet the rate of medical cost increases until the next premium review date" on September 1st next. "The board had no option but to provide for this shortfall in these accounts," it said.
The VHI accounts showed that the cost of members' claims increased by €49 million to €520 million last year while premium revenue increased by €48 million to €597 million. The latter was partly due to the addition of 70,000 new members, bringing total membership to a record 1.54 million people.
There was an 11 per cent (€7.1 million) reduction in operating expenses, leaving the ratio of operating expenses to earned premium at 9.7 per cent. This compared to a ratio of 11.8 per cent in 2000/2001.
Among the developments highlighted in the report was VHI's introduction of "Healthsteps", a new stand-alone primary healthcare produce.