Health insurers are feeling the strain from a rise in the cost of hospital fees — and that could lead to higher premiums for policyholders next year.

In its half-year results published yesterday, insurer BF&M Ltd. said the sum paid out on policy benefits — which include health insurance claims — was $11.4 million, or 34 percent, higher than in the same period last year.

Much of the rise occurred in the April through June period, BF&M said. The hike in hospital fees came in on April 1.

MPs approved a seven-percent rise in hospital fees in March this year to cover spiralling health care costs and the $300 million upgrade and expansion of the King Edward VII Memorial Hospital.

April also brought in a rise in the rate for the minimum level of cover which employers must by law provide insurance for, causing a rise in premiums of more than ten percent.

BF&M chief executive officer John Wight said yesterday: "We had expected those costs would be higher in the first six months than they were in 2008, but they've gone up more than anticipated.

"In addition to the new hospital billing model, we've seen the urgent care centres introduced and additional fees passed on to local insurers to fund the hospital improvements and that will result in higher premiums.

"We at BF&M had been advocating health care reform for several years, but we did not anticipate it taking the form it has done. With the economy facing challenges, it's a difficult time for costs to be passed on to local insurers to bear, or for us to pass them on to customers."

Mr. Wight said it was too early to give guidance on the likely impact on health insurance premiums for 2010.

"The new billing model came in in April, so we will have to review recent claims and look closely at what happens in the next few months to be able to give any indication of that," Mr. Wight added.