Health Insurance (Amendment) Bill, 2000: Second Stage.

I move: "That the Bill be now read a Second Time."

The purpose of the Bill is to amend and extend the Health Insurance Act, 1994. Private health insurance plays an important role in the provision of hospital services to a large proportion of the population. It is the intention of the Minister for Health and Children that the Bill will provide a framework which further supports the development of a vigorous and competitive private health insurance market. It implements improvements and innovations in the general regulatory framework outlined in the White Paper on Private Health Insurance, published by the Government in September 1999. It aims to provide enhanced scope for competition in the market while at the same time strengthening the basis on which solidarity between generations operates through community rating.

As the House considers this Bill, I suggest to Members that the essence and challenge of legislation in this area is to strike a successful balance between common good values that have served our significant insured population well and the encouragement of competition that can benefit consumers in terms of choice, price and service. It is the achievement of this balance that is at the heart of this legislation.

The voluntary private health insurance system in this country has developed to its current high penetration levels on the basis of specific, and widely accepted, core principles of community rating, open enrolment and lifetime cover, which provide extensive safeguards for individuals in the operation of health insurance. The health insurance market was opened to competition through the Health Insurance Act, 1994, which was enacted in the interests of the common good. The Act provided significant safeguards for insured persons in the context of the opening of our health insurance market to competition in accordance with our EU obligations for the completion of the Single Market.

The 1994 Act requires health insurance undertakings to operate in accordance with community rating, open enrolment, and lifetime cover. It also provides for minimum benefit, that undertakings cannot provide less than a specified level of cover, risk equalisation, undertakings to share community risks and the registration of undertakings.

The Act provided for the registration of insurance undertakings which either made cover available to the general public or on a basis restricted to a particular vocational or occupational group, referred to as restricted membership undertakings.

I am sorry to interrupt the Minister, but can I take it that a copy of the Minister's speech is on the way?

I understand it is on the way.

Yes, that is correct.

The Act also provided for the establishment of an independent regulatory body, to be known as the health insurance authority. When the 1994 Act was being processed it was indicated that because regulation in this area represented a completely new departure, the framework would be reviewed in five years. The Programme for Government laid the ground for the preparation of the first ever policy statement on private health insurance which was delivered in the White Paper. The White Paper described how the private health insurance system played a complementary role to the arrangements for the provision of health services to the public generally. In that context, it referred to the advantages resulting from the mix of public private-practice established in our hospital system.

Notwithstanding this, as stated in the White Paper, the Government's primary concern is to ensure equitable access to the public health services. Since taking office the Government has pursued this responsibility through an extensive programme of current and capital expenditure to improve public health services and facilities. The Government has progressively and significantly increased investment in the delivery of public health services and is continuing on this course in order to address the very real challenges which still exist to providing an optimum health service to the general public.

Specifically, the Government has made available an extra £1,500 million to health since taking up office. This is a 56% increase in the day-to-day resources going into services. This level of increased investment will be sustained. The Government has also recognised that in moving forward the current health infrastructure is inadequate for the delivery of a truly modern and efficient service. The total of £2 billion made available by the Government under the National Development Plan, 2000-2006, represents almost a trebling of investment compared to the previous seven year period. The serious approach adopted by this Government to health capital funding is highlighted by the fact that this is the first time a national development plan has included the health services to any significant extent. The NDP will bring positive benefits to all sections of our health services and will enable substantial improvements in the physical infrastructure and equipping of acute hospitals, and in facilities for the intellectually and physically disabled, older persons, the mentally ill and children in need of care and protection. The whole thrust of the plan will be to create an infrastructure that will bring significant and tangible advances in delivering a more patient centred and accessible service.

Public patients who take up 80% of our public hospital bed capacity will benefit significantly from the investment in the hospital sector. The NDP will, for example, enable considerable progress to be made in implementing the recommendations set out in the report of the waiting list review group, the national cancer strategy, the report of the cardiovascular strategy group, and the programme for the development of renal services which is now being progressed. These strategies will have a significant impact in enhancing public health services.

With the approach I have described, focusing on immediate practical steps as well as long-term measures, the aim of the Department is to achieve real progress in addressing the underlying factors affecting access to certain services and I am convinced that the health and social gain for all persons in the public health system will be very much enhanced.

A key change provided for in the Bill relates to the definition of a health insurance contract which forms the basis for any insurance arrangements offered by insurers. The principal change from the existing definition is the removal from the scope of the legislation insurance plans which are solely concerned with ancillary health services, such as out-patient, general practitioner and dental services.

There is provision to support the financial stability of community rating by allowing insurers discretion to apply late entry premium loadings in specified circumstances where cover is being availed of for the first time at an older age, or where there has been a significant break in cover. This is known as a lifetime community rating. As a corollary to this measure, open enrolment provisions of the 1994 Act, which provide individuals with an entitlement to purchase health insurance, will be extended to persons of, or over, the age of 65 years.

The Bill includes revised arrangements in relation to risk equalisation aimed at facilitating competition while providing a necessary safeguard to community rating against the threat of instability which would arise from the development of risk selection in the market. Under the proposed arrangements the Minister will give the health insurance authority, which is to be established shortly, a significant role in relation to the commencement of risk equalisation. A special measure in the area of risk equalisation, aimed at supporting entry to the market, will give any insurers coming in an option not to participate in risk equalisation arrangements for a specified period immediately following the commencement of health insurance business in this country.

I will now deal with the provisions of the Bill. A number of sections provide for the making of regulations by the Minister in relation to the detailed arrangements to enforce the provisions concerned. Pursuant to the 1994 Act every such regulation shall be laid before each House of the Oireachtas and may be annulled by resolution passed by either House.

Section 1 is a standard provision which defines the principal Act as being the Health Insurance Act, 1994. Section 2 substitutes the key definition of "health insurance contract" contained in section 2(1) of the principal Act. The amended definition provides that the focus of the legislation shall be on health insurance contracts which have, to any extent, the purpose of providing for hospital in-patient or day patient services. To reflect the actual market situation and basic differences required in product financing and structure, the definition provides that the term "health insurance contract" does not apply to arrangements which provide cover against the cost of long-term nursing care. Section 3 provides for a number of further definitional changes which are of a technical rather than a policy nature.

Should it be permitted to develop, self-insurance on the part of employers would have the effect of damaging community rating by removing a predominantly young and healthy population from the general risk pool. Clearly such a development would threaten the solidarity between generations which underpins community rating. In this connection, section 4 inserts a new provision which elaborates the type of arrangements which are deemed to constitute health insurance contracts. It provides that an employer who pays, or undertakes to pay, the fees or charges incurred by employees in respect of hospital in-patient services, will be defined as a provider of health insurance and will be subject to the legislation. Recognising the existence of a limited number of public service employment related arrangements, an exemption from this provision will apply in the case of specific arrangements entered into by a Minister of the Government. Such established arrangements relate to some Defence Forces personnel where full physical fitness and health relate directly to the nature and terms of the employment. The effect of the exemption will be to enable these arrangements to continue as before, outside the ambit of the health insurance legislation.

Section 5 substitutes section 7 of the 1994 Act which provides for the community rating of health insurance premiums. It maintains all the essentials of community rating provided for under the 1994 Act. In addition to maintaining the existing protections for consumers in relation to the setting of premiums on a community rated basis, it prohibits the varying, on the grounds of age, sex or sexual orientation, of amounts payable by insurers in respect of the treatment and care of insured persons. I wish to point out that the section will no longer contain a reference to contracts concerned with the cost of nursing care arising from long-term illness or disability. Such contracts are in the nature of long-term care insurance and not health insurance. Health insurance contracts do provide benefits for convalescent care arising from a hospital in-patient stay but not for long-term care. Essentially, this approach removes a non-operational provision and a potential complication for insurers who may wish to consider developing long-term care insurance products in our market. The section retains the provision requiring insurers to operate significantly reduced premium costs in respect of children. It provides for the scope of discretion by insurers to reduce premiums for dependent persons who are receiving full time education, to be increased from under age 21 to under age 23. It also maintains the discretion of insurers to reduce premium charges for members of group schemes and persons in receipt of a pension who are members of a restricted membership undertaking.

Section 6 inserts a new section which supports community rating by giving an incentive for individuals to take out health insurance at a young age and by ensuring that those who join late also contribute appropriately to community rating. It does so in the context of strengthening and making more robust our system of community rating. Under the section, insurers will have the power to apply late entry premium loadings to persons of or over the age of 35 years, but only in the circumstances specified and subject to arrangements which the Minister will provide for in regulations. This form of premium regime is known as lifetime community rating.

Subsection (1), on foot of actuarial advice, clarifies that the measure applies to those aged 35 and over. The actuarial advice received was that people who join the system before their mid-30s already make a significant contribution to the solidarity of the system. Subsection (2) provides that in specified circumstances, set out in subsection (4), premiums may be greater than the norm. Subsection (3) provides the requirement to pay a greater premium amount is to be subject to regulations.

Subsection (4) provides that the circumstances in which a premium loading may be applied include the case where a person was not previously insured by a registered undertaking, had a lapse in cover of greater than 12 months duration or was availing of a higher level of cover. Another circumstance set out in the subsection relates to members of restricted membership undertakings who choose to remain outside the wider community rated pool by choosing not to participate in risk equalisation arrangements.

Subsection (5) provides a definition for the purposes of the operation of the section. Subsection (6) provides that the amount of the premium loading shall be determined in accordance with the regulations. In framing and implementing these regulations, careful regard will be had to ensuring that the maximum permitted loadings are appropriate and do not represent an unfair burden on late entrants. Subsection (7) provides that the regulations may specify different methods or percentages in determining premium loadings, depending on the circumstances set out in subsection (4). It also provides that credit be given for previous periods of community rated insurance cover held.

Section 7 arises from section 6 of the Bill. Given the intention to introduce late entry loadings, it provides for the disclosure of information relevant to the operation of such loadings between insurers. The information concerned is to relate to the extent and duration of an individual's insurance cover and is to be sought exclusively for the purpose of operating late entry premium loadings. The provision of information will not extend to claims or medical records. The section provides for the Minister to prescribe the arrangements for such disclosure between insurers.

Section 8 substitutes section 8 of the 1994 Act which concerns access to health insurance cover on an open enrolment basis. A significant change is provided for in relation to facilitating the provision of cover to persons aged 65 and over who had not previously taken out community rated insurance. Heretofore insurers were not obliged to provide cover for those aged 65 and over who were not already enrolled with another insurer. The section maintains the original provisions relating to the capacity of insurers to impose waiting periods, the operation of which are subject to regulations made by the Minister.

Subsection (1) provides that the Minister may prescribe the circumstances in which a registered undertaking, other than a restricted membership undertaking, may refuse to effect a health insurance contract. Subsection (2) provides that the Minister may prescribe the circumstances in which a restricted membership undertaking may refuse to effect a health insurance contract and imposes certain obligations on such undertakings to provide cover.

Subsection (3) provides for the Minister to prescribe waiting periods for eligibility for cover under a health insurance contract. Open enrolment regulations were made pursuant to the 1994 Act and these prescribe maximum permitted waiting periods for payment of benefits in circumstances including where a person joins for the first time and where a person has a pre-existing medical condition. Subsection (4) obliges registered undertakings to provide health insurance contracts other than in circumstances to be prescribed.

Subsection (5) maintains the existing statutory arrangements which protect individuals from having to re-serve waiting periods on changing insurers where no significant lapse in cover has occurred. Subsection (6) provides that the protection for individuals against re-serving waiting periods on transferring between insurers shall not apply in the case of members of restricted membership undertakings which have decided not to participate in risk equalisation.

Debate adjourned.