(Limerick East): The Voluntary Health Insurance organisation does not operate as an insurance company. The basic legislation states that it will operate on the basis of community rating, and there are also other restrictions on it. The key to normal insurance is that one hires actuaries to measure the risk and one charges premia in accordance with the expected risk. That is the way the insurance industry works, regardless of the area of insurance involved.
In this case it is a misnomer to even talk about insurance in the sense that it is money in and money out and because of community rating there is no measurement of risk. Everybody can join at the same premium and can enjoy the same conditions. The skills required to run an organisation such as the VHI are not necessarily those needed to run an insurance company, although many of the skills of insurance obviously would be applicable in the sense that there is a core of customers who pay premia and awards are settled in respect of items of service provided by hospitals, consultants and so on.
On why it was necessary to award a 6 per cent increase, under the Act my role is to stop an increase if I choose to intervene, but after notification, if I simply do nothing, the increase comes into effect after a period of time has elapsed. After examining the demand for a 6 per cent increase and taking the advice of the officials in my Department I thought that, in this instance, it was in the best interests of the VHI, its subscribers and its service providers not to intervene. Since the nature of the business is money in and money out, it is not acceptable that the VHI should run its business on the basis that it continually increases premiums on the one hand so that it receives more income and, on the other, tries to restrict services so that less money goes out. That becomes a self-defeating strategy.
While competition, because of community rating, is very limited in terms of price now that BUPA is coming into the market, the VHI will have to compete in the attractiveness or otherwise of the packages of service which it puts before the public. Because of community rating it must increase its market by ensuring that larger numbers of the young and healthy, low liability people are involved in paying premia so that they will fund the draw-downs by people who, as they move on through life, use the health services to a greater extent. It is in that area the weakness exists in the VHI. Regardless of who takes over as chief executive or what arrangements are put in place, the company must compete at that level. It is not acceptable that it would run simply on an accountancy basis of money in and money out. That was acceptable when there was a monopoly, but since there is no longer a monopoly it will have to compete on the attractiveness of the product.