The projections, compiled for the state-owned insurer by UCD economist Joe Durcan, are based on a 2% fall by 2009 in the two million people who now have private health cover. The decline in cover is forecast at a time when the labour force is expected to continue growing strongly.

"In light of 15% annual price increases, against a general rate of inflation of 4%-5%, there'll inevitably be a bit of fall-off at the margins, " said VHI finance director Willie Shannon. "It's only 2% over three years so we're not talking about a signi"cant change in the market."

The gloomy forecasts have been rejected by Oliver Tattan, chief executive of start-up health insurer Vivas, who accused VHI of scaremongering for its own ends.

"We believe the market will continue to grow. Just look at all of the new hospitals coming on stream, " he said. "VHI is correct when it says more capacity will create more claims. But is it right for the VHI to ration care by refusing to cover new hospitals?"