VHI Healthcare has written to the Tánaiste and Minister for Health seeking a 12.5 per cent increase in its health plans from September 1st.
The Tánaiste has decided not to force VHI's rival health insurers to pay the company risk equalisation payments
The decision came following an emergency board meeting this afternoon to discuss the Tánaiste's recent decision not to trigger the so-called risk equalisation measure whereby VHI would be compensated by its rivals for the fact that its client base is older.
In a statement, VHI said it had written to the Tánaiste setting out the implications of that decision for the company and its 1.55 million members.
The body said there were "exceptional cost drivers" in the health insurance market this year that must be reflected in its annual premium review. The single biggest of these was the increased cost of private beds in public hospitals.
Other costs contributing to the "spiralling cost" of healthcare include new technology, developments in drugs and prosthesis, new facilities, new diagnostic procedures, and ageing population and increased "consumption" of healthcare, VHI said.
VHI said it faced an immediate decision whether to continue the pricing policy it adopted last year and to continue to fund the cost of community rating from its reserves. Its second option was to pass the full cost of its community rating to members. The effect of this would be to add an additional 5.5% increase to the standard annual price increase in September.
However, the board said it had decided to pursue the first option and not to deprive members of the value of community rating.
It decided instead to "continue financing the cost of community rating from the reserves of VHI Healthcare for as long as this remains possible.
"VHI Healthcare has therefore notified the Tánaiste and Minister for Health and Children that it proposes to apply an average premium increase of 12.5% on its hospital Plan A-E, Options Plan A-E and LifeStage Choices Plans from the 1st September 2005 as members renew. There will be no price increase for HealthSteps, Multi Trip from VHI Healthcare, Global from VHI Healthcare or VHI DeCare dental products."
Ms Harney decided last week not to pursue the measure recommended by the Health Insurance Agency.
It was designed to compensate for the fact that VHI’s client profile is much older than that of Bupa. VHI would have received an estimated €30 million under the scheme.
VHI claims 80 per cent of the private health insurance market here, representing over 40 per cent of the Irish population.