I move: "That the Bill be now read a Second Time."
The purpose of the Bill is to enable the VHI to act as an agent for an authorised insurer in the sale of an international health care plan. This legislation is being introduced on foot of representations received from the VHI board and entails a limited amendment of the VHI Acts to give the board a specific additional power.
More fundamental considerations relating to the corporate status of the VHI must be addressed. I know Members will be keen to hear about these as soon as possible and to have an opportunity to debate the matter. I assure the House that the broader issue of the appropriate corporate status of the VHI going forward is being actively and comprehensively addressed in the context of my Department's preparations relating to the proposed White Paper on private health insurance.
It will be appreciated that pending completion of consideration of the more fundamental issues, I must respond to the board's expressed needs as regards legislation for the effective conduct of its business in the immediate term. I inform the House that in the developing competitive health insurance market, the board considers it imperative that the proposed amendment be enacted as quickly as possible to enable the VHI to compete more effectively. The legislation will lead to easy availability and continuity of cover for VHI members who intend to live outside the jurisdiction for temporary periods. It is geared towards helping the VHI to better serve the needs of the modern consumer.
The VHI was established in 1957 as a not for profit body to provide cover primarily for the 15 per cent of the population who did not have an entitlement to public hospital services. Deputies will be aware and I am sure will appreciate the success the VHI board has made of fulfilling its role within the health care system. In the early days this role was primarily as a provider of cover for those who did not have an entitlement to hospital services and, as time passed, as a provider of health insurance to all those who wished to avail of private health insurance, irrespective of their eligibility for health services.
Its role and importance in our health care system has expanded considerably since its foundation. The environment in which it operates has become more demanding and sophisticated over the years, particularly as regards the expectations of its members in terms of quality of product and service.
Today, membership of the VHI is at an all time high of 1.45 million people, which represents 40 per cent of our population. It has more than 1,000 members joining every week and operates 6,700 group schemes throughout the country. The evolving competitive market has elicited an enthusiastic and vigorous response from the board, management and staff of the VHI. Membership continues to grow and, where it previously had five main plans on offer, it now offers the consumer the choice of ten plans following the introduction of its new options plans at the beginning of the year.
As a not for profit organisation, the VHI aims to return to its members the greatest possible proportion of its income, while maintaining a sufficient reserve. I note that in the five years to the end of February 1998, the total premium income of the VHI was £1.287 billion and the total claims expenditure was £1.274 billion. This represents a payout of 99 per cent of subscription income on members' claims during the period concerned. For the financial year ended February 1998, the VHI's premium income amounted to £304 million, while £294 million was returned to members in the payment of benefits arising from claims incurred. Reserves now stand at £76 million and I am aware of the board's commitment to strengthen them further.
In common with other sectors, the health insurance market was opened to competition pursuant to EU directives. Prior to the introduction of the Health Insurance Act, 1994, the VHI operated as a statutory monopoly. That Act and the associated regulations provided a framework for a competitive private health insurance market, while maintaining the principles of private health insurance in Ireland — open enrolment, lifetime cover and community rating.
It is gratifying to have an insurer of the vast experience of the British United Provident Association, known as BUPA, providing competition to the VHI and offering choice to the consumer. I hope other players will enter and further enhance the competitive environment.
I have already mentioned the benefit which competition brings in terms of invigorating the consumer focus of the existing market player, apart from the new and different approaches which additional competitors may bring to attract and retain the consumer. This is particularly the case in our community rated health insurance market where insurers must rely on quality, service and efficiency, rather than ability in the practice of preferred risk selection or cherry-picking in order to define themselves as a market leader.
The broader environment has also undergone dramatic change since the VHI was founded. As an open economy, Ireland has embraced global change, international trade and foreign investment. Central to this process is the ability of people to move from Ireland to other countries in a free manner. In the modern economic global village an increasing number of people employed by export companies, multinational companies and State agencies will live abroad for significant periods during their working lives.