Profits at VHI up 20% as costs and pay-outs fall

Profits at State-owned health insurer VHI were up 20 per cent last year, mainly due to a “relentless focus” on cost containment and claims management, its chief executive has said.

The company’s financial results for the year ending December 31st 2016, published on Friday, showed a net surplus of €56.4 million for its consolidated business activities compared with €45.5 million in 2015.

"One reason is a relentless focus on cost containment and claims management," VHI chief executive John O'Dwyer told The Irish Times. "That's probably the big thing that makes the difference here."

Revenue for 2016 totalled €1.43 billion, which was up slightly on the €1.428 billion the previous year.

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The firm also recorded a 7 per cent increase in its reserves position to €558.2 million, strengthening its regulatory capital position.

The improved financial results were also helped by a small increase in membership for the second consecutive year to 1.069 million customers.

Over the course of the year, VHI paid €1.34 billion to cover the healthcare needs of its members. This was down from €1.38 billion in 2015. The company said the reduction was influenced by the timing of payments made to providers in public hospitals.

The company processed more than 984,000 claims. Of these, more than 766,000 were for in-patient and day-care claims while a further 218,000 were for outpatient and primary care claims.

The most significant areas of claims expenditure during 2016 were for cancer and related care (€194.3 million); heart or circulatory system (€164.8 million); and orthopaedic care such as hip and knee replacements (€145.1 million).

Other areas of significant expenditure included claims related to the digestive system, which totalled €107.6 million; respiratory illness which came to €74.7 million; and the central nervous system, for which the insurer paid out €74.2 million.

Mr O’Dwyer said the results were achieved “despite the difficult dynamics of an ageing population, medical inflation and the persistence of low investment returns”.

“We welcome the improvements made to help sustain the community rated market in Ireland through the changes to the Risk Equalisation Scheme announced by the Minister for Health at the end of last year,” he said.

“However, to ensure the market can operate in a sustainable and fair manner for the medium to long term, the risk sharing scheme requires further and continued enhancement to more effectively balance the cost of care between older and younger, sicker and healthier policy holders.”

The insurer’s claims investigation unit “continued to perform well” and recovered more than €21.4 million in 2016 having reviewed more than 37,000 claims.

In terms of VHI’s strategy for the future, Mr Dwyer said the board had agreed a “strategic direction” for the next five years focused on positioning the organisation to better respond to customers’ changing healthcare requirements.

“We need to encourage people to take steps towards a healthier lifestyle through the promotion of health and wellness,” he said. “VHI is doing this already and delivering positive results.

“By 2046, the population of those over 80 years old will increase dramatically to 470,000. This has major implications not only for the healthcare system as a whole, but also for VHI.

“With more people living longer and with complex chronic diseases it is clear that the market and those providing services within that market need to change and adapt.”

Mr Dwyer added that since the VHI was established in 2010, it has treated over 6,000 people in their own homes, saving 78,000 hospital bed days and delivering savings of €26.8 million.