The country's second largest private health insurer, Laya Healthcare, has said it is not possible to avoid passing on the proposed increase in the health insurance levy to customers.
Laya Managing Director Dónal Clancy said the suggestion by Minister for Health James Reilly that private health insurers absorb the increase themselves was "unsustainable".
He said the companies simply did not make enough profit to cover a levy that he estimated would cost between €20m and €30m.
He said: "There's no doubt that if we have to pay out that money, we will have to collect that money.
"We do not have profits within any region of that number. There's no way an insurance company could operate in that way and what the minister is suggesting is not sustainable."
Mr Clancy also accused the Government of driving its young and healthy customers out of the market.
He said that the levy increase, combined with a reduction in the tax relief on insurance premiums, and the public hospital bed charges, was forcing young people to give up health insurance and undermining the principle of community rating.
He said the only fair way was to introduce community rating on a standard product, and not the advance product that most members have.
He said young people needed to be incentivised to stay in the market with lifetime community rating or "age entry" - ie that someone who joins as a 25-year-old keeps that rate for the rest of their life, whereas someone who joins as a 55-year-old gets an age-appropriate rate.
Mr Clancy also rejected claims by Mr Reilly that companies such as Laya "cherrypick" young and healthy customers who do not need healthcare and let VHI have other customers.
"We do not pay commission on a cherrypicking basis ... We welcome all members of any age."
Yesterday, Minister Reilly announced increases in the levy on health insurance.
The levy, known as risk equalisation, is designed to ensure that everyone pays the same price for the same level of cover, regardless of age or health status.
Health insurance companies estimate the increase, coupled with budget cuts in tax relief, will result in the average payment for a family with two children increasing by €328 a year.
While the levy is paid directly by insurers, it is believed the hike will affect many of the two million people who have medical cover.
Minister Reilly has said the Government's increase to the levy on health insurance is necessary to make sure that health insurance is affordable for older people.
Speaking on RTÉ's News at One, Mr Reilly said the latest increase would help the Irish health insurance market move away from the current two-tiered health system, where care is based on what people can afford rather than on their medical needs.
Fianna Fáil has accused the Government of driving people out of health insurance.
During Leaders' Questions, party leader Micheál Martin said there was incoherence in Government policy in relation to health and health insurance.
Taoiseach Enda Kenny said the clear objective was to introduce a single-tier health system.
He said the Government would maintain community rating and risk equalisation "so older people in society are not abandoned".
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