Michael Lowry (Tipperary North, Independent)
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Question 189: To ask the Tánaiste and Minister for Health and Children her views on the proposed VHI rate increase; if her attention has been drawn to the fact that the proposed additional 12 per cent increase will be on top of a 42 per cent increase since 2002; and if she will make a statement on the matter. [27933/06]

Mary Harney (Dublin Mid West, Progressive Democrats)
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I was notified by letter dated 22 June 2006, of the intention of the VHI Board to increase premiums by an average of 12.5% from 1 September 2006. VHI have highlighted in the notification a number of cost drivers, including the costs associated with an ageing population, increasing drug costs and accelerated technology innovation. VHI state that the proposed premium increase will also finance new benefits and services for its members. I am aware of the level of increases in VHI premiums including 2002.

Under VHI legislation, the VHI Board is responsible for setting premium rates. The legislation obliges the Board to fix premiums to provide sufficient revenue to meet claims costs and to make provision for reserves. For the financial year ended February 2006, VHI will be reporting a loss of €32.3 million leading to a fall in its reserve ratio. I wrote to the Chairman of the VHI Board at the end of 2005, highlighting the need for the Board to build up its reserves. It is a matter for the VHI Board, to take account of all the key considerations in discharging its responsibilities as regards setting premium levels. The Board states that the increase proposed is the absolute minimum increase required. The premium increase notification is being considered against this background.