Vhi inside p1-24 pdf

Operations ReviewDespite the challenges arising from the currentstructure of the health insurance market, the yearended February 2003 was a successful one for VhiHealthcare. We increased membership, improvedthe quality of service to our customers, significantlyreduced our operating cost ratio, and marginallystrengthened our Balance Sheet. On the negativeside, due to the absence of risk equalisation, therate of premium increase that had to be appliedwas higher than it should have been.It is important to thank our members for thesupport they have shown to us in this difficultenvironment.The highlights of the year included:• Total membership increased to over 1.55million people.• Cost of provider claims exceeded €595m i.e.over €11 million paid out per week. Thisinvolved processing over 470,000 claims and1.1 million invoices from doctors.• The increase in operating costs was restrictedto 0.5%. The ratio of expenses to premiumincome fell from 9.7% to 8.4%.• Significant benefit enhancements were madeto our products and services.• Investment earnings increased by 56%.• Our commitment to customer service andquality management processes was recognisedby receiving five major awards.CONSTRAINTS ON OPERATIONS:The detailed review of operations must bepreceded by mention of the significantconstraints that impede the operation of VhiHealthcare and threaten the future of thebusiness. These constraints were recognised inthe 1999 White Paper on Private HealthInsurance and the Government committed totaking action to deal with these issues. Thematters referred to are:1. RISK EQUALISATION: The operation ofcommunity rating without risk equalisationresults in higher costs for health insurance (thesehigher costs subsidise windfall profits andfacilitate inefficiency for our competitor),impedes product development and impinges onnegotiations with providers.Vincent Sheridanand Nicola Farrell,Individual &Corporate Business2. COMMERCIAL FREEDOM: Vhi Healthcare musthave the flexibility and autonomy to pursuestrategies which will ensure it’s continued successand growth in the commercial competitiveenvironment in which it now operates. As indicatedabove this point has been accepted by Government.10Action by Government to remove these constraintsis now long overdue.