VHI Healthcare has announced that its health insurance premiums will increase by as much as 45 per cent for some customers from February 1st.

While the average price hike for the majority of the health insurer’s 1.35 million subscribers will be 15 per cent, people on the popular Plan B and Plan B options face increases of between 35 and 45 per cent.

From the beginning of next month, the premium for an adult on Plan B will go up by €317 to €1,224, while someone who has a Plan B Options policy will see the cost of their annual premium rise by €444 to €1,430. This amounts to an increase of €26 per month for Plan B customers and €37 per month for Plan B Options customers.

Some 29 per cent of the health insurer’s customers currently have one or other of these policies.

VHI Healthcare chief executive Jimmy Tolan said the company was announcing the price increases with “regret” but it could no longer afford to provide cover at current prices. "Even with the announced price increases this will not prevent us from incurring significant losses in providing the cover under these plans," he said.

He said the both the two B plans, which tend to be popular amongst an older demographic, accounted for losses of €100 million last year.

The average family of two adults and two children on a Parents and Kids policy will see their health insurance premiums increase by €331 per annum, or €27.60 per month. The same price increase of 15 per cent will apply to the premiums of a further 60 per cent of its customers.

Mr Tolan said he anticipated its customers would require 10 per cent more healthcare in 2011 compared to last year.

He said the recently announced increases in public hospitals of 21 per cent would add a further €60 million to the VHI bill this year. He said this increase, together with further planned increases for 2012, accounted for 8 per cent of the planned price increase announced this morning.

“Over the last two years we have taken many steps to contain the rising costs of meeting our customers' healthcare needs. These include a 15 per cent reduction in consultant's fees, 6 per cent reduction in private hospital fees, agreeing maximum revenue levels for private hospitals and an annual reduction in administration costs of €15 million. Today’s price increase is necessary to provide healthcare cover for all of our customers.”

More than half of the VHI’s annual expenditure is spent meeting the healthcare needs of older customers and Mr Tolan said he anticipated this would continue to rise. “Our older customers will continue to live longer with more chronic conditions, thus requiring more medical care.”

He denied that the company was targeting older and more vulnerable members of the community and said it was the Government’s responsibility to decide the level of tax credits necessary to provide support for older insured people. "Tax credits at current levels reduce VHI’s annual losses of insuring older customers from €170 million to €147 million post the recent increase in private beds in public hospitals," he said.

He said VHI Healthcare would have faced average losses of €850 on each of its 129,000 customers over the age of 70 if it did not raise premiums. "For as long as the tax credits do not deal with the losses produced by covering older customers VHI must instead, each year, increase its prices much more than it wishes to, or than VHi thinks is fair to any of its customers," Mr Tolan added.

He said the health insurance market was broken and allowed its rivals maximise their profits by targeting a younger – and less costly – customer base. He said that the VHI was a not-for-profit company and had paid out more 96 per cent of the money it had taken in last year in to cover the healthcare costs of its customers. This, he said, compared with a 60 per cent payout from Hibernian Aviva.

The Government recently increased the annual levy imposed on health insurance companies for everyone covered by private insurance. The Department of Health increased the levy from €185 to €205 for adults and from €55 to €66 for children with effect from January 1st.

In a statement issued late this afternoon Minister for Health Mary Harney said the Government had announced strategy for the private health insurance market last May which addressed a number of issues including competition and financing of the sector.



Ms Harney said the private health insurance market was "very complex "and said there were "no easy solutions." to making it fair for everyone.



"It was built around one core policy aim to protect community rating in order to ensure that private health insurance is affordable for older people. The first steps to implement that policy have been taken which include the process of restructuring the market and disposing of the VHI," she said.



"The introduction of a comprehensive robust, risk equalisation scheme to support the core policy of community rating is in preparation and will be implemented, and this will further support competition in the market."



Ms Harney noted that there was choice in the sector with plans available for consumers of every age group. She added that those with insurance were able to choose alternative insurers without penalties or barriers to switching.