Dáil Éireann debate -
Thursday, 21 Nov 2002

Vol. 557 No. 6

Written Answers. - Medical Insurance.

Jimmy Deenihan

Question:

12 Mr. Deenihan asked the Minister for Health and Children if, according to EU law, a risk equalisation scheme in the private medical insurance market is unlawful State aid; if this scheme will be cleared with the European Commission before he brings it before Dáil Éireann; and if he will make a statement on the matter. [22894/02]

Brendan Howlin

Question:

66 Mr. Howlin asked the Minister for Health and Children when he intends to bring the promised draft regulations on risk equalisation within the health insurance industry before the Oireachtas, especially having regard to the recent claim by VHI that the absence of equalisation had led to increased charges; and if he will make a statement on the matter. [22924/02]

Minister for Health and Children (Mr. Martin)

I propose to take Questions Nos. 12 and 66 together.

The position is that EC Council Directive 92/49/EEC completed the internal market in direct non-life insurance as regards right of establishment and freedom to provide services. Expressly, in the area of health insurance, the directive allowed for member states to operate specific legal provisions to protect the general good. In Ireland, the directive gave rise to the passing of the Health Insurance Act, 1994, with the objective of maintaining the core principles of community rating, open enrolment, and lifetime cover in our established health insurance arrangements. Under the Act, provision was made for the implementation of risk equalisation between insurers in order to sustain, across the entire insured population, the solidarity between the old and ill and the young and healthy, which is at the heart of effective community rating. In that connection, EC Council Directive 92/49/EEC refers to the specific legal provisions being able to include requiring insurers to participate in "loss compensation schemes".

My Department has had extensive contacts with European Commission services on the regulation of community rated health insurance in Ireland under the Single Market. The approach adopted has at all times been one of full constructive engagement and willing co-operation with the EU in the process of developing the common good regulatory framework for our health insurance system. This close liaison resulted in the EU's internal market directorate determining that Ireland was entitled, in principle, to have specific legal provisions protecting the common good, including risk equalisation, in the area of voluntary health insurance.

Having regard to the specific question of State aid, the EU's competition directorate carried out a thorough examination of the Irish market in 1998-99 arising from an objection made to it by the British United Provident Association, BUPA. The outcome of this process, as advised to my Department by the directorate, was that it did not have any particular State aid concerns about risk equalisation. A copy of the Health Insurance (Amendment) Bill, 2000, which provided for revised risk equalisation arrangements was for warded to the directorate for information and did not give rise to any further queries from it. This was subsequently enacted by the Oireachtas in June 2001. Therefore, my Department has proceeded on the basis of the finding made by the directorate that risk equalisation does not give rise to State aid concerns.

More recently, arising from further approaches by BUPA, the directorate has indicated that it is again considering the matter of risk equalisation by reference to State aid rules. I understand its considerations in this matter are ongoing. It has not informed my Department that a risk equalisation scheme in the private health insurance market is an unlawful State aid. I trust the directorate will adhere to the determination it previously made on foot of its detailed examination of risk equalisation, especially as, in the interim, the proposed arrangements have been modified to further reflect the fundamental principles of necessity and proportionality under EU law. I remain satisfied that risk equalisation is a necessary support to the operation of community rating going forward.