Dáil Éireann debate -
Tuesday, 11 Mar 2003

Vol. 563 No. 1

Health Insurance (Amendment) Bill 2003 [ Seanad ] : Second Stage.

Minister for Health and Children (Mr. Martin)

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

I am pleased to address the House today on the Second Stage of the Health Insurance (Amendment) Bill 2003. This is a brief Bill aimed at facilitating the early submission of a draft risk equalisation scheme for affirmation by the House, as provided for under the Health Insurance Acts 1994 and 2001. The need for the further provisions set out in the Bill arises from comprehensive consultations held with the Health Insurance Authority since its establishment and matters that arose in the course of preparing the detailed risk equalisation scheme. The authority will have a key role in the determination of whether risk equalisation is commenced, and also in the monitoring and the administration of the scheme.

The Bill has two main provisions. The first provides a broad immunity from liability for damages for the Health Insurance Authority when discharging its statutory functions in good faith and provides for indemnification. The second is to ensure that the temporary exemption from risk equalisation, which has as its objective the encouragement of competition, can be availed of only by genuine new entrants to the market.

The remaining provisions of the Bill cover procedural matters relating to proposed risk equalisation arrangements and to funding advanced for the establishment of the Health Insurance Authority.

A draft risk equalisation scheme has been prepared by my Department and is currently the subject of consideration by the EU Commission Competition Directorate General. I will refer to the position on bringing this to the House for approval a little later. The provisions of the scheme will aim to achieve a balance between safeguarding the stability of community rating and facilitating competition in the provision of health insurance. They will reflect the central role to be carried out by the Health Insurance Authority, HIA, both in relation to determining the necessity for the commencement of risk equalisation and the manner of its application.

The following are to be among the key features of the scheme as they relate to the HIA. It will evaluate statutory data returns from participating insurers concerning the nature and distribution of insured risks between those insurers. It will prepare and submit reports and recommendations to the Minister for Health and Children, on the basis of its evaluation and analysis of the returns received from insurers. The scheme provides for the HIA to have a major responsibility in relation to any decision to commence risk equalisation payments between insurers. Between two specified parameters, set out under the scheme as measures of differentials in the risk profiles of insurers, the HIA will recommend for or against the commencement of equalisation transfers between insurers. Within these parameters, it will not be open to the Minister to commence actual risk equalisation between insurers without a recommendation to that effect from the HIA. If the measure of differentials exceeds the higher parameter the Minister will be obliged to consult with the HIA as to whether there are good reasons for not commencing risk equalisation between insurers. The authority will have power to determine the basis on which risk equalisation payments should be calculated. The HIA's role in this regard will relate to the risk factors that are to be taken into account in the process. Age and gender differentials are automatically taken into account. The third factor to be included is a measure for health status, based on hospital bed utilisation. The HIA will have the power to determine the extent to which this factor is taken into account, subject to the authority having established that this is warranted by circumstances relating to the differences in risk profiles between insurers and is in the best overall interests of health insurance consumers.

The necessity for risk equalisation to support the operation of community rating in our voluntary private health insurance market going forward has been extensively discussed in the House previously. I trust that most Members will support a draft scheme that strikes a balance between maintaining community rating and facilitating competition. Under the existing legislation, a draft scheme must be submitted to each House of the Oireachtas for approval. This will remain the position on the passing of the Bill now before us for consideration.

At the general level, the objective of risk equalisation is easily appreciated. It follows logically that, in a market where the principles of community rating, open enrolment and lifetime cover apply, there must be a provision to share risk between competing health insurers. These common good principles curb the usual commercial instincts and incentives that insurers have to select good risks and avoid or discourage bad ones. In order for these principles to be sustainable, they must be supported by a balancing mechanism that enables insurers with worse than average risks to be compensated for the disproportionate level of the sick and elderly in the insured community they must cover.

From the perspective of insurers, risk equalisation addresses the competitive imbalance that can occur as a result of risk selection, whether this occurs due to deliberate actions by insurers or inadvertently because of the more mobile nature of the young and healthy and employer paid insurance. In effect risk equalisation seeks to tackle risk selection as a source of competitive advantage. This is equitable given that the usual insurance levers of underwriting and risk-based pricing are not available to competing insurers.

The consequence of risk selection is that the per capita claims cost, and consequently premiums, start to rise for those insurers who are left with a higher proportion of less healthy individuals. This is a breach of the “solidarity” principle, which is fundamental to genuine community rating. Risk equalisation addresses this by limiting the extent to which certain healthier people, by benefiting from lower premiums, and-or their insurers by taking a higher profit margin can gain at the expense of other health insurance consumers. In short, risk equalisation aims to equitably adjust differences in health insurers' costs that arise due to variations in risk profiles.

The detailed preparation of a risk equalisation scheme has been a complex matter, which has involved considerable actuarial expertise and also legal input, in addition to the consultations with the Health Insurance Authority. It has also been necessary to approach the formulation of the scheme in a manner that takes account of considerations that apply at European Union level. These relate to matters such as observance of general European Union legal principles of necessity and proportionality, competition rules and creation of the Single Market. It is widely known that plans for the regulation of our health insurance market have been the subject of fundamental differences with The British United Provident Association, BUPA, which entered the market in 1997. Given this situation and that the operation of this country's private health insurance market is subject to EU obligations, the regulatory measures to be implemented have attracted close and recurring interest on the part of EU Commission services.

My Department has, at all times, kept the Commission advised of proposed regulatory arrangements. Although the Commission has formally accepted, in principle, Ireland's entitlement to have specific legal provisions in the interest of the common good in voluntary health insurance, as allowed for under the third non-life insurance directive, it has emphasised the need for necessity and proportionality in any measures that may be taken. Furthermore, ongoing representations and complaints by BUPA have resulted in the Commission revisiting the matter on a number of occasions, up to and including the present time.

The current position is that BUPA Ireland has made a complaint to the Europe Union Commission that risk equalisation would constitute an illegal State aid and the EU's Competition Directorate General is considering a detailed notification made by my Department in response. This makes the case in relation to the necessity for risk equalisation, and furthermore that its introduction does not constitute State aid under EU competition rules. The timetable for bringing the draft scheme to the Houses of the Oireachtas will be determined in the light of the outcome of these latest deliberations at EU level. It is however my desire and intention that consideration of a draft scheme by the Houses of the Oireachtas can take place at an early date.

While the experience of EU Commission services revisiting the matter of risk equalisation on a number of occasions has impinged on the process of implementing a scheme, I would characterise recent contacts with the EU Competition Directorate General as being positive and constructive.

This is a short Bill and while some aspects are technical its provisions are relatively straightforward. Section 1 provides for interpretation. Section 2 relates to the provision of a definition of functions in the Principal Act. The authority's existing functions are addressed in sections 12, 14, 15, 17, 18 and in particular, section 21. This section clarifies that the authority's functions, inter alia, include the exercise of powers and the carrying out of duties and is thus to be construed broadly.

Section 3 arises from a request made by the Health Insurance Authority that it have protection from suit for damages corresponding to the statutory protection given to other public regulatory bodies. Accordingly, the provision gives a broad immunity to the authority itself, to individual members of the authority and to its staff where they are engaged in the discharge of their functions in good faith. It has been drafted having specific regard to a similar provision in the Irish Takeover Panel Act 1997 in respect of the takeover panel. Related provisions also apply in respect of the Commission for Electricity Regulation, while immunity from liability for damages is also provided under section 69 of the Central Bank Act 1997, section 53 of the Stock Exchange Act 1995 and section 53 of the Investment Intermediaries Act 1995.

Section 4 amends Part II of the Second Schedule to the Defamation Act 1961. As part of its functions, the authority will be required to make reports and recommendations in relation to the question of commencing financial transfers between insurers under a risk equalisation scheme. The effect of the provision is to add the authority to the bodies that have qualified privilege in respect of a copy or fair and accurate report or summary of any recommendation that the authority may produce. Qualified privilege of the same nature is contained in the Irish Takeover Panel Act 1997.

Section 5 is about refining certain procedures that will apply in the steps to be taken after a risk equalisation scheme has come into effect. The limited changes being made arise from consultations with the Health Insurance Authority. The first subsection deals with the requirement for the authority to include in its report to the Minister a recommendation on whether he ought to commence risk equalisation payments under a scheme. The legislation as it stands makes it clear that recommendations by the authority are for that purpose alone. The amendment is entirely consistent with the current position but clarifies that the authority shall not include a recommendation on the matter in a report where the Minister has already exercised the power to commence risk equalisation transfers under a scheme. The health insurance legislation already contains a provision requiring the authority to submit annual reports with respect to the operation of a scheme, once risk equalisation payments have been commenced. The legislation provides that the Minister shall cause such reports to be laid before each House. The Bill does not change this reporting requirement.

The second subsection relates to giving advance notice to parties, by either the authority or the Minister, of its proposed recommendation, in the case of the authority, or the proposed exercise of his powers to commence risk equalisation payments, in the case of the Minister. As the legislation stands, notice in such instances must issue to all registered undertakings, which are also given the opportunity to make representations. However, the legislation provides that a scheme may include a provision allowing restricted membership undertakings, such as, the occupational schemes that apply in the case of the Garda and the prison officers, to opt out of risk equalisation. It should not therefore be necessary to give notice to undertakings about proposed developments relating to the commencement of transfers under a scheme where such an option may have been used.

Section 6 is concerned with the arrangements in place to facilitate and encourage the entry of new insurers into the market to provide greater competition and choice to consumers. The legislation provides for insurance undertakings that have not yet commenced business to avail of a three year exemption from risk equalisation. The purpose of this is to allow new insurers to establish a critical mass of customers and recover start-up costs that could arise before being liable to make payments in respect of risk equalisation.

The provision in the Bill retains this measure. The main purpose of amending the existing provision is to avoid a possibility that the exemption could be availed of through the creation of a subsidiary or some other form of associated company by an existing undertaking. This approach is considered desirable to remove any possibility of an issue of avoidance arising in the arrangements. As there is no indication that an associated company of an existing undertaking was intent on, interested in or to be created for the purpose of availing of the exemption, the amendment is most appropriately regarded as a precautionary one. It aims to ensure the exemption will only apply in circumstances where the added value for consumers of private health insurance is a genuine increase in the choice of insurers and greater real competition in the market.

The section retains the three year exemption for new entrants. However, it contains provisions aimed at securing a clearer indication of the com mitment and serious business intent to actually follow through on entry to the market on the part of insurers who decide to serve a notice of exemption in the future. In that regard, it requires insurers to be registered with the Health Insurance Authority before serving a notice of exemption and to commence business not later than three months after the date of the notice. Neither of these is an onerous step and it remains in the hands of the new entrant insurer to decide the timing in relation to becoming registered and subsequently serving a notice of exemption.

Section 7 relates to financial arrangements made in relation to the Health Insurance Authority at the time of its establishment. The ongoing operational costs of the authority are funded by the proceeds of a levy on the premium income of registered insurers. The levy is currently set at a rate of 0.14% of that annual premium income. However, the legislation allowed for the Minister to advance funds to the authority and during 2001 sums amounting to more than €500,000 were advanced to the authority in respect of initial costs. As the legislation stands, the authority is obliged to repay in full the amount advanced. The authority considers that costs incurred in its establishment should be borne by the State on the grounds that it is a public body and was established to carry out a public service in relation to the common good aspects of health insurance.

This section maintains the option of the Minister effecting repayment of the €500,000 provided towards establishing the authority. It is clear that the provision is an enabling one and does not mean that part or full repayment will automatically be waived – this will be looked at strictly on its merits and will be subject to consultation with the authority.

I commend this short Bill to the House. The proposed early introduction of the risk equalisation scheme to follow enactment of the Bill will meet national requirements for sustaining the operation of the core common good principles of our voluntary private health insurance system, together with taking account of EU Commission concerns about necessity, proportionality and competition.

Ms O. Mitchell

I thank the Minister for outlining the sections of the Bill and welcome his presentation on the progress being made on preparation of the draft scheme. I was interested to hear the Minister's interpretation of the difficulties with risk equalisation at EU level.

This is a short Bill with only seven brief sections. I watched its progress through the Seanad. While each section is in itself important the real importance and significance of this Bill lies in the fact that it presages the introduction of risk equalisation into health insurance in this country. This matter was discussed long and hard before I entered this House in 1994 and subsequently in 2001. It is, I am sure the Minister will agree, an unresolved and contentious issue among those who know what it means. It may not be an issue discussed by the man on the street but it is extremely important to those who depend on private health care. It is in its impact on private health care that this Bill is hugely significant.

While listening to the news today I was thinking that this is a rather esoteric topic to discuss on a day when the health service is growing ever close to implosion. One of our major acute hospitals is closing ward after ward and is unable to provide cover for staff on sick leave. Health services are in crisis. Nevertheless, this Bill highlights how important it is that we get it right when we make decisions. Some 49% of the population depend on private health care insurance and on the success, stability, prudence, efficiency and vibrancy of the health insurance sector to ensure they have access to health care when they need it.

The State will, in theory, provide hospital care to the entire population but the reality is that it is ill-equipped to do so. The de facto situation is that the State provides, increasingly poorly and with increasing difficulty, health care to approximately one third of the population. The vast majority of the population depends on private health care and insure themselves, for the most part, to meet the cost of hospital provided services. Any act of ours which impinges on their ability to do so by making changes in the circumstances in which their insurer's operate is of enormous and lasting significance to the majority of the population.

When the Minister's Department wrote to the Whip's office seeking urgent enactment of this Bill it did so on the grounds that the Attorney General recommended that the period between publication and enactment should be as short as possible. I have no problem with expediting this legislation. However, I question the further contention that there was significant ongoing political, industry and consumer demand for the early introduction of the scheme as a necessary part of the arrangements to support community rated private health insurance. I have not been deafened by any clamour for its introduction. I am aware the VHI is anxious to have it implemented. Apart from a few desultory inquiries from political parties in the House, which I would not describe as significant ongoing demand, I am not conscious of any clamour from the public for it.

I have no desire to be difficult or contrary on the passage of this Bill into law. I wish to place on record my serious and deeply felt reservations about the whole concept of risk equalisation. Even without detailed knowledge of the specific Irish circumstances into which it is proposed to introduce risk equalisation one intuitively feels it is utterly bizarre and illogical to try to argue that small new entrants into any market should be obliged to pay the existing monopoly supplier for the privilege of having the temerity to seek to compete with it.

I realise that in the case of medical insurance it is not that simple. On the face of it, it seems like an extraordinary and draconian response to the safeguarding of the principle of community rating. I fully support the concept of community rating but I dispute the necessity to bolster it by introducing risk equalisation as an institutionalised ongoing prop for future inefficiency rather than as a compensation for historically different risk profiles. It is ironic that risk equalisation should flow from a desire to promote competition in the health insurance sector. We deregulated the market to encourage new entrants and to achieve competition in health insurance. At the first indication of a new entrant we immediately introduce legislation to ensure it or future entrants cannot compete.

In a situation such as exists in Ireland whereby there is one dominant market supplier, a monopolist, and where following deregulation a new entrant to the market has a much lower risk profile than the incumbent, one can and should argue the case for compensation by new entrants for the worse than average risk profiles of the incumbent so as to ensure a level playing pitch at the initial stages. It is almost impossible if risk equalisation continues for it not to become a compensation for inefficiency. The initial objective may be to achieve a level playing pitch but if it is ultimately to sustain that level playing pitch, it is also self-defeating because it effectively eliminates the purpose of introducing competition in the first instance. It is simply impossible, over time, to distinguish between the deviation in risk profiles due to historic circumstances and the deviation in risk profiles which may emerge simply as a result of the failure to compete effectively and consequently to attract new, young, healthy customers. Either way, we wipe out all the benefits of competition to the consumer.

Ireland has had extremely high market penetration in health insurance. Therefore, the only competition of substance in the future will be in the new, young and healthy market. An efficient and successful firm succeeds to the extent that it attracts more of this segment of the market than others – in fact, that becomes the definition of success. However, under risk equalisation, whatever firm succeeds in attracting this young age group, it is immediately penalised. What then, in those circumstances, is the incentive to entice new customers and to provide them with better, cheaper, newer and more advanced products? What is the incentive for them to negotiate any advantages with the hospitals or the health care providers, including the Minister? What would be the point of any company competing if the more successful they are, the more they are penalised and the less successful and more inefficient they are, the more they get paid by their competitors? It is a bizarre market. To think that all of this comes about as a result of the desire to introduce competition in the health insurance market. It is difficult to see how any of this serves the interests of the consumer which, presumably, was the purpose of the whole exercise.

Because of the importance of the survival of insured private health care to the majority of the population and because of the enormous impact risk equalisation will have on the market, it is important it is handled with extreme sensitivity and the greatest care. The 2001 Act, governing the introduction of risk equalisation, went to great lengths in at least paying lip-service to the necessity to ensure that competition survived under the new dispensation. The legislation laid down safeguards to protect the public interest if ever risk equalisation was introduced. It went to great lengths to do so in recognition of the threat that risk equalisation posed to the functioning of a normal competitive market.

For that reason, the Minister should be more circumspect in expressing support for and a determination to bring in risk equalisation given that, at least in theory, the legislation requires a recommendation from an independent agency before the Minister can do so. If the Minister gives the impression that he has already made that decision, then it makes something of a farce of enshrining the need for that recommendation in legislation.

A related problem I have with this legislation is contained in section 5 which removes the ability of the authority to make a recommendation to the Minister once the Minister has exercised the power to introduce risk equalisation. This may be an innocuous measure but it may be about precluding the authority from making any future recommendations, that is, a recommendation to abolish the process altogether or to change it in a fundamental way. I may be wrong in assuming this is an attempt to limit the power of the authority and I would like the Minister to clarify this. I do not want to see the power of authority effectively emasculated. It is supposed to be the protector of the public and of the continuation of competition and, as the Minister said, to strike the balance between the stability of community rating and facilitating competition.

The authority has two roles, the first being the commencement of equalisation. If it does not have power to make recommendations to the Minister, its only other role is in operational matters which does not provide any protection to the consumer.

I am not alone in having concerns. As the Minister will be aware, the EU Commission is currently investigating the scheme as proposed. It is not beyond the bounds of possibility that it will prevent its introduction. I am not saying this is, by any means, a foregone conclusion but the possibility exists. Similarly, the Competition Authority has expressed its reservations. Only very reluctantly and in recognition of the need, at least at the initial stages, to underpin the concept of community rating did it accept the undoubted interference in the market which risk equalisation represents. The Competition Authority has stated in quite unequivocal terms that risk equalisation is a barrier to entry into the Irish health insurance market and that competition, as we all know, is the best protector of the consumers' interest. Competition will ensure that higher service levels are provided at lower prices to the consumer. We are, effectively, interfering with the possibility of that happening.

Against a background of concerns about its introduction, I am sure the Minister will appreciate my concerns about the introduction of section 5 which is rowing back on the powers given to the Health Insurance Authority, powers which may have worked to settle anxieties which exist in the wider marketplace about risk equalisation. There are also justifiable concerns that there is a less than healthy relationship between the Minister, the existing dominant market player and the Health Insurance Authority. Each agency may believe it is acting in the public interest but the reality is that the authority and the VHI are both creatures of the Minister and cannot but act in concert with him.

I accept that the VHI faces a difficult situation in terms of the much older age profile and, therefore, I accept the need for some form of risk equalisation. However, my concerns are, in the first instance, that risk equalisation is an extremely blunt instrument to introduce in order to deal with what is a specific time related problem. The assumptions underlying risk equalisation will change. Markets will change and age profiles will certainly change – there is nothing more certain than that – yet we are introducing in legislation a permanent structure which institutionalises support for inefficiency. This is not in any way to accuse the VHI of inefficiency in that it applies to whatever firm is the recipient of risk equalisation. Should it or any other insurance agency become inefficient – this will be reflected in its inability to attract new, young and healthy customers – then it can be assured of the support of risk equalisation. That cannot ultimately be in the consumers' interest. It is this permanent structure of support for inefficiency which is the most worrying aspect of the proposal.

Will the Minister consider, either as part of this Bill or in the regulations he intends to bring forward to govern the scheme, the possibility of giving the Committee on Health and Children the power and the funding to appoint its own actuaries who, from time to time, would be empowered to assess and determine the need for ongoing risk equalisation? In any event, will the Minister clarify the intent of the new section 5 before Committee Stage and, more specifically, that it is not an attempt to limit the ability of the Health Insurance Authority to make any recommendations beyond the initial ones to introduce the equalisation scheme? I would like an assurance that it will not be emasculated once it has performed its function in a hands off way, that is, giving the impression that this is not a political decision but an independent one made by an independent body which will have no power to protect the public thereafter.

My main concern in preserving and promoting competition is to ensure that private health care is available to the 50% of the population which depends on it. I am sure the Minister shares that concern. Despite deregulation in the health insurance market, which was introduced for that very purpose, we do not have competition in any real sense. It is true there has been another entrant into the market but the reality is that it does not have to compete. It can track the existing dominant provider. Until there are more health insurance companies, we cannot say there is competition. If there are no further entrants into the market, which risk equalisation may well prevent, will the Minister consider – in the context of the privatisation of the VHI which I believe he is considering – breaking up the VHI to ensure that at least we have some competition in the provision of health insurance? I realise this was down the road but we must be conscious of it on an ongoing basis. The Minister is aware of how close to implosion the health services are at present. It is important that people are allowed to provide for their own health care and that we encourage competition, not just in the procurement but in the provision of services.

The Minister should consult me on section 5 or I will bring in amendments to that section on Committee Stage.

Ms McManus

The reason for this Bill is a curious one. In 2001, the Health Insurance (Amendment) Bill was passed to provide for risk equalisation and the establishment of the Health Insurance Authority. This Act is now being revisited because of a failure by the Minister for Health and Children to provide good law that could stand up to scrutiny. The most important flaw, according to the Minister's statement to the Chief Whip, has been the subject of a recommendation from the Attorney General to bring this amendment Bill through the House quickly to pre-empt any possible legal challenge. If the Minister and his Department were doing their job properly, there would be no need for this Bill.

There is something perverse about debating this Bill in the House while the crisis in our major Dublin teaching hospitals, which is deepening daily, cannot be debated with the Minister. Even when it is raised at an appropriate time, the response of the Government to this crisis is abysmal. Last Thursday, I asked the Minister to outline the likely overruns in budgets in hospitals like Beaumont, the Mater and St. James's if cutbacks were not made. He replied that he could not provide this information and implied that it was ridiculous to expect him to do so.

The case for the debate on health insurance has been made on the grounds that amendments to the Act are urgently needed. I do not argue with that but the urgency of the need is open to question. I wonder at the priorities of the Minister when he has shown himself so unwilling to confront the serious problems in the acute hospital sector. Last week, for example, we discovered that not only has the management of Beaumont Hospital a clear view of the overruns it faces but it is actively considering cuts in patient services of the most acute kind. Today, we learn that the Mater Hospital has closed 22 beds and is now closing a further 50 beds. To have fewer operations and fewer staff is the only way this hospital can cope with the fact that its budget in real terms has been cut by 10%.

Regrettably, these hospitals are not alone in their predicament. One hospital consultant has estimated that if this situation is replicated elsewhere, 80,000 patients this year will be denied the care they need. It is surprising we have not heard from the Minister on how he is dealing with this crisis. We have heard his views on risk equalisation and the Defamation Act but surely it would be comforting to know that the risks patients face today as a result of cutbacks decided upon by the Government are also being tackled. Time has been provided to debate this Bill on the grounds that the need to amend the Health Insurance (Amendment) Act is urgent, yet time is not being provided to debate a crisis in our hospital service which directly affects patient care.

This is a short and largely uncontentious Bill but I would like to make a few points on it. It is surprising that an Act passed in 2001 is already being made the subject of further amendment. It is not long ago that the Committee on Health and Children debated the issue of risk equalisation and its importance in providing a balanced framework for competition in the health insurance market. I disagree with Deputy Olivia Mitchell's views on risk equalisation and recognise fully the need for it. The principles of community rating, open enrolment and lifetime cover require a mechanism that will protect subscribers from predatory companies that will cherry-pick the healthier, younger subscriber out of the ever-increasing pool of subscribers to the detriment of older, more vulnerable people who have health insurance cover. Risk equalisation spreads the load equitably and I am not convinced by the argument put by BUPA that it will have a deleterious effect on its business activity.

Health insurance activity is clearly flourishing. The growing proportion of the population taking out voluntary health insurance is noteworthy. Now approaching a figure of 50% of the population, the number of people with health insurance bears no relation to the original proportion of people included when the scheme was introduced. Though entitlement to hospital care has been extended during the intervening period to include all patients, anyone who can afford to take out health insurance is choosing to do so and the reasons for that are well known. Primarily, people buy access to hospital services – this has been confirmed by research time and again – and, generally, they get what they pay for. The hospital service responds to demand from private patients because the money follows the patient and the system is thereby incentivised to deliver.

The experience of the public patient is diametrically opposed to the experience of the insured patient, unless they are emergency cases in accident and emergency units. Waiting lists, waiting times, waiting to get to see the specialist, waiting to get a hospital bed – that is the common experience of the public patient. Public hospitals have to respond to fixed budgets set down by the Minister for Health and Children through the ERHA and other health boards. Patient needs become secondary to budgetary needs. Empty beds, closed wards and under-used operating theatres are the result, because treating patients costs money.

There is the most graphic example of this in today's news that the Mater Hospital is shutting down wards and laying off staff. If, instead, the hospital continues to respond to the need to treat its public patients, it will be set on a collision course with the Minister and the ERHA. The tight budgetary strategy is getting in the way of doctors and hospitals providing care for patients who are often in desperate need of treatment.

Creating an integrated stream of patients to whom care is provided on the basis of need and which rewards efficient activity is the kind of structural reform that the Minister should have embarked on. Health insurance could play a part in devising such a system. Sadly, the structural reform has not been developed during the lifetime of the last Government and I fear the focus of the new Government has shifted significantly rightwards to a Progressive Democrats agenda which is all about cost cutting and not primarily about patient care. It is no accident that one of the most important reports which will come out on the health service is being carried out under the aegis of the Department of Finance under the direction of a professor of accountancy and, according to media reports, without one health care professional on the committee charged with creating efficiency in the health service.

Talking about reports, yet again I am forced to raise the issue of the plethora of reports that have been commissioned by the Minister. I tabled a parliamentary question seeking information on the number of reports and their cost approximately five weeks ago, but got no answer apart from an acknowledgement. I tabled an identical question last week and am still waiting for a reply. This failure to provide information makes a joke of a system that is supposed to be accountable, efficient and operated within a timeframe. If the information is not forthcoming from the Department, it is impossible for any Deputy to function in a way that meets the public need for accountability. I ask the Minister to deal with this matter.

The Bill brings about some changes which should really have appeared in the original Act of 2001. One change is inexplicable in these straitened times – in section 7, there is a proposed waiver of repayment of advances made to the authority by the State, which accounts for €500,000. I understand that there is discretion on the part of the State in this regard but it is inexplicable, at a time when such difficulty is being experienced in the hospital service, that whatever good could have been done with €500,000 is not being done because the Minister proposes to support the authority in this way. In effect, he is supporting insurers because the authority is paid for by way of subscriptions from insurers, which should also cover the start-up costs.

It is noteworthy that the Mater Hospital budget for 2003 is approximately €155 million and has not increased at all since 2002. The Minister is always very quick to announce how much additional money is going into the health service, but it is quite remarkable how little money is given to one of our major hospitals to run its services. Even in that context, €500,000 could have been spent is some way that would have made at least a small difference.

The reason this Bill is being brought forward at this time and in this way is outlined in the letter from the Department to the Chief Whip, which spells out the need to process the legislation quickly – given the risk of a legal challenge under section 5(b), “the period between publication and enactment should be as short as possible.” It is extraordinary that we have to deal with this on the basis of advice from the Attorney General. The Department should have prevented this from arising.

There has certainly been a demand for risk equalisation. I, and others who understand the importance of ensuring risk equalisation, have sought it from the Minister. There is a genuine demand to ensure that it operates well to protect the subscriber. I do not see why we should be protecting the €500,000 that the Department seems so keen to give away.

I look forward to the draft scheme and to having an opportunity to comment on it. I hope the European Commission and the Director General for Competition give a positive response to the Minister for Health and Children. One can argue about State subvention of private health insurance, and there clearly is State subvention, given all the tax breaks and other supports for people with private health insurance. The objection being tabled by BUPA to this particular proposal, however, cannot possibly stand up. We are not talking about insuring in some minor way somebody out on the open market. We are talking about health insurance and about essential services that people need to protect themselves. I hope that health insurance would be understood to fit into a different category to other discretionary forms of insurance. Looking at the various insurance models across Europe, there is a very strong argument for a universal insurance system that would protect patients and, at the same time, achieve efficiencies. I will leave that matter for another day.

This Bill represents a tidying up of bits and pieces that should not have been dealt with so messily in the first place. Section 3, for example, provides immunity to the authority from suits for damages. This is a standard provision in other sectors, and I am mystified as to why it was not included in the original Act. There is also the pro vision relating to the Defamation Act 1961. This is not new legislative ground. These are standard protections that have been included in other legislation. The legislation referred to in the Minister's statement goes back to 1997 or even earlier. It is very hard to fathom why these provisions were not included in the Health Insurance (Amendment) Act 2001. I ask the Minister to indicate, in his response, whether the Department of Health and Children has its own parliamentary counsel. I recall that the last time I asked, it did not. Has such a change been made in the Department? It might bring about some improvement to the drafting of legislation. I recall that the Department of the Environment and Local Government had such in-house experts, and such a move might create a pool of expertise within the Department of Health and Children that would be beneficial. Section 6 contains a good, common sense proposal providing greater protection. Again, however, it is difficult to see why the provision was not included in the original Act.

I look forward to the draft regulations. I also look forward to hearing what the Minister for Health and Children has to say about any moves to privatise the VHI. He would face stiff opposition to such a move from the Labour Party. So far, it has been extremely difficult, impossible even, to find out what the Minister's views are on this proposal. It is clear that the right wing agenda of the Progressive Democrats exerts a powerful, potent influence in this Government and has certainly damaged the Minister for Health and Children in his efforts to improve the health service. I acknowledge that. I am fearful of a push to privatise the VHI in a way that would not serve the public interest. It would not improve the present situation, flawed and dysfunctional as it is, with so many people taking out private health insurance. I ask the Minister to ensure that we have a debate at some stage, perhaps at the Committee on Health and Children, on the central issue of the future of health insurance.

Mr. Connolly

I wish to share time with Deputies Cowley, Gormley and Ó Caoláin.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Mr. Connolly

This brief Bill is to be welcomed because it contains some very important amendments which contribute handsomely to the aspirations of social inclusion, accountability and a worthwhile return on health care investment by the State. I welcome this Bill principally because it enshrines the principle of risk equalisation, or the transfer of an equalisation premium or levy from companies with niche markets to other companies which refrain from such practices.

Since the entry of BUPA into the Irish market some years ago, its over-concentration on the under-35 age group has been compensated for by its payment of an equalisation levy to the VHI. The element of competition introduced by new entrants to the market will be instrumental in keeping private insurance costs down and will hopefully deter people from abandoning private health insurance and overtaxing the public health care system.

Risk equalisation is designed to protect rating across the insured population. It means that private health companies cannot cherry pick the best risks and cream off the profits associated with doing so, while ignoring the elderly and the sick, who are more likely to claim. If risk equalisation is not implemented, the entire system of community rating, where everyone pays the same premium for health insurance, irrespective of age, will collapse. Risk equalisation is essential to ensure that premiums for people over 50 are maintained at a realistic level. Competition between health insurers is good because a monopoly situation can make a single operator become complacent. It is vital that equipment and services in hospitals be upgraded to reduce delays and replace antiquated equipment with modern, state-of-the-art medical equipment.

The take up of the national treatment purchase fund has been somewhat sluggish, with people voting with their feet and waiting even longer for treatment at home. This scheme certainly does not represent the way forward. People dependent on the public health system invariably have higher mortality rates than those who are privately insured. Cancer survival is often related to the stage of disease at the time of detection. While cancer patients who are uninsured have lower survival rates than the insured because of late detection, higher mortality is also caused by lower access to the fullest treatments even when the cancer is detected early.

Uninsured cancer patients die sooner than people with insurance, largely because of delayed diagnosis. The uninsured are less likely to receive timely screening services such as mammograms, smear tests and colon exams. By the time cancer is diagnosed in uninsured patients, it is more likely to be at an advanced, often fatal, stage.

Spiralling health insurance costs in a sluggish economy are causing more people to join the ranks of the uninsured. An uninsured person in the United States who is seriously injured in a car accident could be in debt for the rest of his or her life. In Ireland, such a person would be treated in an overcrowded accident and emergency ward, with beds and trolleys scattered between cubicles. The Irish person might have a remote possibility of occupying a bed several days later. Such a patient living in County Monaghan would have to be transferred to Cavan, Dundalk, Navan, Drogheda or Dublin, where hospitals are bursting at the seams. Staff morale in such hospitals is at an all-time low and it is a miracle that any emergency treatment can be provided in such circumstances.

The Government should reverse its recent trend of reducing tax credits for private health insurance if it is to encourage uninsured persons to purchase health insurance. The provision of increased tax credits to uninsured people would help such people, who comprise 48% of the population, to purchase health insurance. I welcome the creation of a health insurance authority as a regulatory body for the private health insurance market. A level playing field in the health insurance market is required. New insurers entering the market in the future will be subject to the requirements of risk equalisation, but only after an exemption period. I support the Bill and wish it well in its passage through the House.

Dr. Cowley

We live in an unfair world. It is obvious that health apartheid exists in this country, as almost half the people invest in private health insurance. They have no faith in the public health system as a result of the Government's inability to deal with those in need in a humane way. People are not confident that they will be treated properly or quickly if they do not have private health insurance. As a general practitioner, I agree with them. People have been driven into private health care programmes, meaning that they have to pay for medical services to which they are entitled. Those who cannot afford to pay for such services have to try to do so, even if this means they have to beg, borrow or steal.

Someone needing a routine mammogram will have to wait for a year under the public health system, even though it can be done within a week in a private hospital if one has adequate insurance. These problems are getting worse all the time. As the standard of the health service declines, more people feel the need to invest in private health insurance. One has to wait for four years for a first rheumatology appointment in the west of Ireland, during which time one's joints seize up. People with rheumatoid arthritis need to be seen within a few weeks, but this will not happen if one does not have money.

It is not right that some Irish people should receive better treatment than others. Rather than invest in the public health service, however, the Government plans to build more private hospitals. Millions of euro are being poured into private health care at home and abroad by the Government, which is a wonderful benefactor to private medicine. Public hospitals do not have enough beds, consultants and essential equipment. The care received by those who benefit from this staggering apartheid contrasts with that received by those who do not. The fact that the Government is pouring millions into the private health system, thereby starving the public health system of the funds it needs to meet its basic running costs, represents a vote of no confidence in the latter system. The Government is closing beds in the Mater Misericordiae Hospital because it is unwilling to provide the money that is needed. The funds allocated at the start of the year will not be increased. Health boards are being made to do things that they do not want to do and people suffer as a result. The Government seems to have a limitless fund for private health care, however.

Although Mayo General Hospital is recognised by the Department of Health and Children as the most efficient hospital in Europe, it has been starved of funds. There is no plan to replace equipment in the hospital, and other hospitals, that no longer works. There are no waiting lists in the departments of Mayo General Hospital that have fine staff, including consultants, but there are problems in units such as urology, rheumatology and orthopaedics, where there are no consultants. Over 1,000 men in the west have to leave their beds many times each night as a result of the fact that they have been waiting for over five years for an operation that takes 20 minutes. The procedure could be performed within a couple of weeks if those involved had money. These problems are getting worse.

The Government should invest more money in the public health system, for example by employing more consultants. Increased investment would mean that people from Belmullet would not have to travel to Galway, which is virtually the same distance as from Dublin to Galway. It would not be considered good enough for a person in Dublin to have to go to Galway so it should not be good enough for those in Mayo. Many children's ears have become damaged as a result of waiting for years for an operation. There are 33 empty beds and an idle theatre in Mayo General Hospital. Although the Government is paying for people to attend private hospitals in Ireland and abroad – there have been advertisements in the newspapers about it – it will not employ consultants to treat people in their own county. It intends to close general hospitals in Monaghan and Roscommon and it will not support Mayo General Hospital, but it seems to have a great deal of money for new private hospitals.

There is an old saying that if one gives a man a fish, one will feed him for a day, but if one teaches him to fish, one will feed him for life. A similar strategy should be adopted in terms of Government resources, to allow us to look after our own people at home, not abroad. Interim solutions are not the answer. Why does the Government not support the existing public health system by employing enough consultants and providing enough beds? Hospitals like those in Monaghan and Roscommon should be retained because people matter. Mayo General Hospital should be upgraded to regional status because it is already providing a regional service and because County Mayo is the third largest county in Ireland. I challenge the Government and the Western Health Board to appoint the consultants that are needed and to stop closing hospitals. The increased level of bureaucracy is also not needed as the funds should be used to employ more doctors and nurses. We should have faith in the public health system and we should not allow millionaires to become multi-millionaires. We should remember those who do not receive enough money to run the service.

Mr. Gormley

The health care services provided by a society reflect its values. In the United States, the provision of health care is not seen as society's obligation but as a voluntary consumer purchase in an environment in which social solidarity plays second fiddle to economic forces. One in five Americans is under-insured or does not have health insurance. Access to health care is curtailed without health insurance. Health care systems in most EU member states, by contrast, have been based on the concept of social solidarity. Ireland's two-tier health care system reveals values that are closer to those of Boston than Berlin. Good quality health care does not come cheap. There is a growing realisation in the United Kingdom that if health care spending is to rise, people must be convinced to pay for it. If the Government wants to deliver equitable, high quality health care, it will have to convince the electorate to pay.

The economic fundamentalism of the Fianna Fáil-Progressive Democrats Government leaves very few options open in relation to adequately funding the health care services. The Government's self-serving rhetoric about the need for greater efficiency and accountability in the health care system is a clear attempt to distract from the fact that it is not prepared to invest in the kind of health care services found in other EU member states. Given the free market ethos which informs most of the Government's policies, it is likely that our health care system will move in the direction of the US system, where expensive private health insurance is essential if one is to avail of basic health care and the less well-off become the casualties of the system.

When I recently read that the Republican Party in the United States is vehemently opposed to the community rating system proposed by Bill Clinton, I immediately thought that the system must be a good thing. The usual arguments were put forward in opposition to community rating. If we are to have an equitable system, community rating and its adjunct, risk equalisation, are vital. We need to examine in greater detail the type of risk equalisation being proposed.

Like many other Deputies, I have had meetings with BUPA and the VHI, both of which are superb lobbyists. I am sure the Minister has had his fair share of lobbying as well. I leave these meetings a little dissatisfied because neither insurance company is an angel. Both are plying their trade and putting forward their own pitches. When I spoke to Mr. Sheridan from the VHI, for instance, I asked him what is the problem. The problem, of course, is the average age. I asked if it were theoretically possible to transfer patients of a higher age rather than having a fund and putting the money into that fund, where BUPA effectively pays the VHI. I proposed this, perhaps as devil's advocate, but it was completely out of the question. This makes me think that the VHI is seeking to gain on the back of BUPA. It is a very difficult area. However, I welcome community rating very much.

This Bill is short and non-controversial and the Minister knows that it passed through the Seanad in record time. It will probably do the same in the Dáil this evening. It is a necessary precursor to the introduction of regulations by the Minister concerning a risk equalisation scheme for private health insurance companies. The Minister, Deputy Martin, stated in the Seanad on 26 February 2003 that the need for the further provisions set out in the Bill arose from consultations held with the Health Insurance Authority, set up in February 2001. It was given the responsibility of managing and administering risk-equalisation schemes.

VHI has specific views on this Bill, which it regards as having a tidying up function. It feels that certain procedures and issues need to be examined. However, as far as it is concerned, the really important step in implementing a risk-equalisation system for insurance companies will be the introduction of regulations by the Minister. It argues that even following the introduction of these regulations, it will take up to 18 months to implement them.

We are dealing with an extremely complex area and I am trying to find other countries where similar circumstances obtain. Australia has been mentioned, but one is not comparing like with like. It has up to 44 companies in operation, whereas we have only two. I would like the Committee on Health and Children to examine this further because we now know about the difficulties that have arisen in respect of competition. Will the Minister tell us what Brussels is saying on the issue if he is in a position to do so?

Will the introduction of a community rating system give an unfair advantage to the VHI? Will the Minister elaborate on what kind of advantages would be involved? How satisfactory is the implementation of a community rating system at present? Is the Minister aware that the VHI and BUPA are laying down rules that undermine the concept of community rating? For example, many new or rejoining customers who are 60 years of age or over have to wait several years before they can avail of any benefits from the health insurance plan. This is discriminatory and I would like the Minister's views on the matter. It has been communicated to me by doctors in my own constituency, who are dissatisfied with the arrangement. Patient Focus is not happy with it either. Furthermore, people with pre-existing conditions such as diabetes or heart conditions have similar waiting periods to endure. The rules in this respect are discriminatory. What can consumers do? Given the lack of a regulator in the area, the companies are answerable only to the Minister, who has not challenged them about discriminatory practices.

Is the Minister concerned about the track record of the private health insurance companies? Does he believe, as I do, that it leaves a lot to be desired? Patient Focus has told me that the insurance companies are not answerable and that there should be a regulator or a health ombuds man to whom consumers can appeal if they feel they are being discriminated against in terms of their insurance premiums or policies. Perhaps the Minister will outline his views on this in his reply.

Some contributions from the Labour Party and Fine Gael seem to have favoured either VHI or BUPA, but I am not in favour of either one. Both have major faults. Patient Focus believes that they are not very committed to the idea of consumer participation. The VHI has a consumer group comprised mainly of representatives of companies with large numbers of employees but its members threatened to resign several years ago because its recommendations were being ignored. When BUPA first joined the Irish market, the Irish Patients' Association, now known as Patient Focus, approached it regarding the issue of consumer participation. It showed little interest in the idea and the discussion went nowhere. This must be addressed.

We have noted the crisis in the Mater Hospital, which is due to a lack of investment. It is true that there are matters of efficiency to be addressed, about which the Minister has spoken. I am sure he is blue in the face listening to the Minister for Finance talking to him about efficiency and management. However, we will continue to have a black hole in terms of health investment if we do not address the fundamental problem of health. Why are we getting ill more often? We are living longer, but we are enduring more stress. Generally speaking, the amount of tablets we are consuming indicates that we are becoming sicker and sicker. The answer lies in our consumer lifestyle. Good health is essentially about the air we breathe, the food we eat and the water we drink. All of these have become steadily more polluted over the years and they are steadily inducing illness in the population.

What about the purity of our water? Can one talk about pure water when we are actually putting fluoride into it? Why do we have the highest cancer rates in Europe? The Minister knows that it costs a considerable amount of money to treat cancer patients.

Caoimhghín Ó Caoláin

I welcome the Health Insurance (Amendment) Bill 2003 in so far as the measures relating to risk equalisation protect those taking out health insurance from being penalised on the basis of their health status. I am glad the Minister and his Department did not cave in to the pressure from BUPA, which was opposed to the introduction of risk equalisation. Without risk equalisation, there would be an incentive for insurers to target younger, healthier and cheaper risks while discouraging older, less healthy individuals. Risk equalisation, with community rating, ensures that for those who can afford it, private health insurance is not restricted to low risk individuals or applicants.

The retention of the three-year exemption from risk equalisation for new entrants to the health insurance market causes me some concern, but I welcome section 5(c) which prevents an associate company of a registered undertaking from availing of it. Section 7 of the Bill relates to the financial arrangements to establish the Health Insurance Authority. Apart from the fact that it is to be a public body, I have yet to hear a clear explanation of why the costs should be borne by the State rather than by the health insurance companies for which the authority is to be responsible. I would appreciate clarification of the point by the Minister as it is my belief that the respective players have a responsibility in this regard.

While I support this Bill, the House should be clear that Sinn Féin does not support the private health insurance model as a means of financing the health service. I take this opportunity to make a number of points regarding the health service and the drift towards private health care and the American model. Sinn Féin advocates the radical overhaul of health care and health insurance and is committed to the creation of a national health service with free provision for all. We oppose the Government's pursuit of policies which advocate private health care as these will eventually lead to the privatisation of the health service. As a party committed to the creation of a national health service, Sinn Féin opposes the range of State incentives and supports which have made private health insurance an attractive option for those who can afford it.

As far back as 1982, the commission on taxation recommended the abolition of available reliefs and in 1989 the commission on health funding recommended the abolition of tax relief on a phased basis to monitor the effect of such a measure on the demand for private health insurance. The commission questioned the availability of tax relief on the grounds of equity and effectiveness. The National Economic and Social Forum report on equity of access to hospital care, which I have quoted from in this House before and shall again, states that the Irish State subsidises parallel private care to an unusual degree. The report describes how delivery of publicly and privately funded care is interconnected to a considerably greater degree than in other health care systems. There is no tax relief for private voluntary health insurance in Denmark, Belgium, Finland, France, Sweden or Britain. Sinn Féin calls for the removal of tax incentives for private medical care and for the ring-fencing of savings from this initiative for use in the health sector.

Health care in this State is provided according to a two-tier system in which the private sector is subsidised by the taxpayer. In 2001, the estimated net cost to the State of an in-patient bed in a major teaching hospital designated for the private sector was €319 per day. The estimated cost at other acute hospitals was €219 per day. The private sector is allocated 20% of the beds in public hospitals, but contributes only 11% of money required to run these establishments. Therein lies a major deficit. The two-tier system gives consultants an incentive to occupy as many beds as poss ible with private patients, forcing taxpayers to spend €165 million annually to subsidise their hospitalisation. Consultants piggy-back on the system taxpayers provide. It is immoral apart from anything else. Consultants are paid from the public purse to treat public patients while they profit from the thriving private health industry. They are permitted to work unlimited private hours in public hospitals using medical resources and public offices funded by the taxpayer for personal, private business profit. When the argument is made that public funding of the health care system is unsustainable, it should be considered in the context of the burden the private system places on public resources.

The VHI was formed in 1957 to provide insurance against hospitalisation costs for the 15% of the population who were not eligible for public hospital services. It was not intended to replace the State as a health care provider, yet by 1999 42% of the population was covered by private health insurance. There has been a shift in the VHI's role as a complement to the public health system to the point where it has become an alternative. This shift has clearly failed to improve access to health care and there is little evidence to suggest that increased competition in the private health insurance market will change that. I contend it will not and recommend a national health service model to the Minister.

Dr. Devins

I wish to share time with Deputy Nolan.

An Leas-Cheann Comhairle

Is that agreed? Agreed.

Dr. Devins

I welcome this opportunity to speak to the Health Bill. The Health Insurance Acts of 1994 and 2001 set out the provisions for the regulation of the voluntary private health insurance market in Ireland. More than 40 years ago, the State established the VHI which was the only insurance body serving the private health insurance market until the entry of BUPA some years ago. This development was welcome as competition is of benefit to consumers. The VHI continues to provide a fine service and many patients have reason to be thankful for its assistance, but competition is essential to keep providers on their toes.

The insurance sector has seen sizeable rises in costs over the past few years. All Members will be aware of the enormous increases in car and liability insurance premia which have put the viability of certain industries at risk. Insurance companies are in the business of making money and if a section of their market is perceived as high risk, they increase premia, rightly or wrongly. Motor insurers have wrongly decided that young people pose a greater risk of claims and increased to exorbitant levels the premia they charge young drivers. Many young drivers cannot afford the high costs involved.

We all recognise that the motor car is now an essential component of life for many people and especially for those in rural Ireland. Many parts of rural Ireland do not have a public transport service and so the use of a car is essential for travelling to work and for socialising. The insurance companies in this case have got it wrong because they are charging such high premia to all young people. It is true that a small proportion of young people cause an excessive amount of claims but the vast majority of young drivers are excellent and careful drivers. It is wrong to tar all of them with the same brush and force many young people off the roads, through no fault of their own. I suggest that we examine this at a later stage.

The health insurance market is run by a completely different principle. Recognising the importance of health insurance, the State introduced the principle of community rating when the VHI was created. This is totally different from all other types of insurance which are based on the level of premia paid by the subscriber equating with the potential risk involved. As human beings grow older, it is a fact of life that the dangers or risks associated with their health increase. If health insurance was based on the same principles that apply to other types of insurance, then as we grow older the premia paid would increase and after a certain age it would be impossible to acquire health insurance. When the VHI was established, the principle of community rating was used. I wish to pay tribute to the late Chief Justice, Mr. Tom O'Higgins, who was the Minister for Health when the VHI was established. He died recently after a distinguished life of public service both in the Oireachtas and in the Judiciary.

Community rating means that all adults pay the same rate, irrespective of age. Young people, by and large, enjoy good health and so the risk of claims in this age group is low. Careful management by the insurance bodies, be it the VHI, BUPA or whoever, should ensure that the risk of claims is spread over all members of the various insurance companies. In this way medical insurance costs can be kept as low as possible. However, over the past number of years there have been substantial increases in medical insurance premia. This is a reflection of the high rise in medical inflation which has occurred as newer investigative methods, treatments and drugs become available.

Medical insurance costs have another built-in cost which is the fixed cost of administration. I notice from the published accounts of the VHI that its administrative costs account for about 9% of its overall budget. This compares very favourably with the cost base of other insurance companies operating in other markets. The VHI is to be congratulated for keeping such a tight rein on operating costs. I cannot comment on BUPA's costs as its cost base in this country is incorporated into its UK accounts and does not appear to be available separately for this country. Perhaps BUPA Ireland could examine this practice for the future and consider publishing its accounts for Ireland separately. It would appear from statements made by the chairman of the UK parent company that the Irish operation is viewed as one of the most profitable operations in a very large world-wide company.

For community rating to operate effectively and transparently in an open market, risk equalisation is essential. What that means in effect is that any company engaged in health insurance with a high percentage of low risk subscribers, and therefore liable to make a greater amount of profit, should contribute some of that profit to a fund that can be distributed to companies with a high number of high risk subscribers.

The VHI has been in operation for over 40 years and it has a large number of subscribers, many of whom are now approaching middle to old age. The risk of these people needing access to their health insurance is much higher than any company which might have a higher number of low risk subscribers such as young people. In this regard, the risks of all companies are shared equally with the result that health insurance premia are kept to the lowest level possible which is good news for subscribers.

This Bill allows for the establishment of the Health Insurance Authority which will act as the regulator of the voluntary health insurance market, especially for the operation of a risk equalisation scheme between insurers. The Health Insurance Authority will manage and administer risk equalisation schemes. The operation of the scheme will be devised by actuaries according to a very complicated formula but it is my understanding the essence will be a transfer of funds from companies that have high profits to companies with low profits or which are just breaking even. In other words, the risks of looking after all age groups are shared equally between the health insurance companies so that no single company can cherry pick a low risk group at the expense of other subscribers. There may be other insurance companies who may wish to enter the Irish health insurance market and I believe it is important that they should be aware of the exact conditions that operate here.

I welcome the provision to allow new entrants to the market a period in which to develop their insurance portfolio without contribution to the risk equalisation fund, but once they have become established, it is important that they enter the fund and contribute if that is required. In this way the fundamental principle of community rating is protected. Health insurance premia must be kept at the lowest possible level for all subscribers, irrespective of their age. It is a principle that has served this country well and one that must be maintained. I commend the Bill to the House.

Mr. Nolan

I welcome the opportunity to contribute to this Second Stage debate and I commend the Minister for introducing the Bill to the House. I note that Second Stage is to be completed later this evening and I hope the Bill will have a speedy passage through the House.

Ireland has a unique history of private health insurance. The part played by VHI over the years has not been properly appreciated. It was only when BUPA came into the Irish market that many individuals and families realised the extent of the work done by VHI. Competition is good for the insurance market. I am pleased that the Government at the time did not allow the new arrival to cherry pick and insure only the young and healthy members of the population. We have good, strong voluntary health insurance now and I want to see that continue.

This legislation will establish a new health insurance authority and I ask the Minister to give the authority a wide brief so that it can examine all aspects of the health insurance industry. I do not envy the Minister in his task of tackling the difficult problems in the health service at the moment. The cost of providing health care to the public is rising and as people live longer the costs increase even more. Medical procedures are advancing but the equipment involved in these procedures is very expensive. The share price of pharmaceutical companies is increasing each week, based on the profits from the production of medicines. They spend more every year on the testing of new or improved medicines.

The role of the medical profession is also changing. In fairness to its members and their families, the fear of litigation causes the profession to protect its own interests. I ask the Minister to examine this area in consultation with his Cabinet colleagues.

Debate adjourned.