Vol. 469 No. 2
4 Mrs. Geoghegan-Quinn asked the Minister for Health the plans, if any, he has to intervene in the current controversy at the VHI board; his views on the impact, if any, the controversy will have on the management and morale in the company and amongst subscribers; and if he will make a statement on the matter. [17061/96]
(Limerick East): I assume the Deputy is referring to the recent reported difficulties between the Voluntary Health Insurance Board and its chief executive. As the Deputy is no doubt aware, this matter has now been resolved through the decision of the chief executive to resign with effect from 18 October 1996.
It is primarily a matter for the board to identify and implement whatever steps are required to deal with issues relating to senior management, staff morale or subscriber confidence, and, more broadly, the challenges posed by competition in the private health insurance market. I am confident such of these matters as may need attention will be addressed by the board as a matter of urgency.
Will the Minister tell the House who is acting as chief executive officer in the VHI at present and whether filling the vacancy will be by way of open competition or from within the company? Will the Minister indicate the settlement terms of the chief executive, if they are available, and whether there is any clause in those settlement terms to prevent the chief executive from working for a competitor in the same industry?
(Limerick East): The arrangements between the chief executive who resigned and the board of the VHI is a matter for the board in the first instance because it was an internal matter. The resignation is effective from 18 October so Mr. Duncan is still the chief executive of the VHI, but I understand he does not intend to be active in exercising that function. However, there is no vacancy until 19 October. I await a proposal from the board of the VHI to see how they will deal with the vacancy. I will exercise my statutory function by ensuring that everything will be done properly and in accordance with best practice.
It is very important that with almost 35 per cent of the population insured under VHI and most of us in this House committed to a mix of public and private medicine, the progress we have made in the VHI in the last 18 months or so would continue and that it be a thriving, effective health insurance organisation providing the best possible service to its subscribers. Part of the agreement was that the terms would be confidential between the board and the chief executive. I am prepared to come into the House at a future date and give those terms if Deputies insist, but I would appreciate if I was not pressed on the matter. I am aware there is an issue of accountability when public funds are involved, but rather than announcing the information today I would ask Deputies to reflect on the matter and if they wish to be briefed privately I will do so. If they want the announcement made publicly I will have to inform the people involved that, because there must be accountability for the spending of public funds, I may have to give the terms. The terms are moderate and I do not think there will be an outcry about them. It is always a personal tragedy when a man in such a position resigns, but in the final analysis it is in the best interests of the VHI that matters have turned out this way.
While I have no personal interest in what were the settlement terms to the chief executive, there is an accountability issue here. When one considers the number of chief executives whose heads have rolled in the past two years, it might be interesting to get a figure of how much it has cost the taxpayer in settlement terms. I will be pursuing the matter with the Minister and will ask him to indicate in the House what were the settlement terms. Does he believe that the VHI as a company is behaving in a manner that would be expected of such a company that is facing competition for the first time in its history? Will he indicate why he felt it necessary to sanction a further 6 per cent increase in VHI premiums, bringing to 30 per cent the level of increase in VHI premiums in the last two years?
(Limerick East): The Voluntary Health Insurance organisation does not operate as an insurance company. The basic legislation states that it will operate on the basis of community rating, and there are also other restrictions on it. The key to normal insurance is that one hires actuaries to measure the risk and one charges premia in accordance with the expected risk. That is the way the insurance industry works, regardless of the area of insurance involved.
In this case it is a misnomer to even talk about insurance in the sense that it is money in and money out and because of community rating there is no measurement of risk. Everybody can join at the same premium and can enjoy the same conditions. The skills required to run an organisation such as the VHI are not necessarily those needed to run an insurance company, although many of the skills of insurance obviously would be applicable in the sense that there is a core of customers who pay premia and awards are settled in respect of items of service provided by hospitals, consultants and so on.
On why it was necessary to award a 6 per cent increase, under the Act my role is to stop an increase if I choose to intervene, but after notification, if I simply do nothing, the increase comes into effect after a period of time has elapsed. After examining the demand for a 6 per cent increase and taking the advice of the officials in my Department I thought that, in this instance, it was in the best interests of the VHI, its subscribers and its service providers not to intervene. Since the nature of the business is money in and money out, it is not acceptable that the VHI should run its business on the basis that it continually increases premiums on the one hand so that it receives more income and, on the other, tries to restrict services so that less money goes out. That becomes a self-defeating strategy.
While competition, because of community rating, is very limited in terms of price now that BUPA is coming into the market, the VHI will have to compete in the attractiveness or otherwise of the packages of service which it puts before the public. Because of community rating it must increase its market by ensuring that larger numbers of the young and healthy, low liability people are involved in paying premia so that they will fund the draw-downs by people who, as they move on through life, use the health services to a greater extent. It is in that area the weakness exists in the VHI. Regardless of who takes over as chief executive or what arrangements are put in place, the company must compete at that level. It is not acceptable that it would run simply on an accountancy basis of money in and money out. That was acceptable when there was a monopoly, but since there is no longer a monopoly it will have to compete on the attractiveness of the product.
The Minister has confirmed a report in the national newspapers that the chief executive would not participate actively in the running of the company. I framed my previous supplementary incorrectly when I asked who was acting as chief executive officer, but that question is still relevant. Who is acting as chief executive officer now that Mr. Duncan has decided he will not be an active participant? Is the company rudderless? In view of the fact that it is facing competition for the first time, it is important that somebody assumes control and responsibility, given that Mr. Duncan is not acting in that capacity.
(Limerick East): There is a management team who will be responsible to the board. Before the post of chief executive is filled there will be an interregnum. The board is aware of my preliminary views on this matter and I am awaiting detailed proposals from it to deal with the problem on which the Deputy has rightly put her finger.
