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Dáil Éireann debate -
Tuesday, 19 May 2009

Vol. 682 No. 5

Health Insurance (Miscellaneous Provisions) Bill 2008: Second Stage.

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

I am pleased to address the House on the taking of Second Stage of this Bill. The principle upon which we meet health care costs as a society is that the young support the old, the healthy support the sick, and the better off support the less well off. These principles are most easily integrated and implemented in taxation-based funding of health care, the predominant means of health funding in our country, at just under 80% of total health spending. However, since voluntary health insurance has had a long history as an integral part of providing for the cost of health care in this country, successive Governments have sought to implement these principles in the realm of health insurance, particularly those principles of the young supporting the old and the healthy supporting the sick.

All insurance is a matter of pooling risk, and thus a sharing of the overall cost. Within an insurance pool, the price of an individual's policy can vary according to his or her claims experience and the risk of that person making future claims, as is the case with motor insurance. Therefore, while there remains risk pooling and cost sharing, the contribution of each person to the pool rises with his or her risk profile. When this risk rating is applied to health insurance pools, the inevitable result is that older people and sicker people have to pay substantially more for the same cover. In recognition of this, successive Governments and the Oireachtas have been committed since 1994 to maintaining the principle of community rating rather than risk rating of health insurance. The purpose always has been that the price of a policy should reflect the risks and costs of the entire pool of insured persons in the community, rather than the risks and costs on a person by person basis, or even the persons within each separate policy. Only in this way can solidarity and cost sharing be effectively implemented between the generations who hold insurance.

The Health Insurance Acts 1994 to 2007 provide the statutory basis for the regulation of the health insurance market in the interests of this common good. The pricing of risk across the community of insured persons clearly requires robust mechanisms to share costs when there are a number of companies in the market. The risk equalisation scheme, which was affirmed by the House in 2003 and approved of by the European Commission that same year, provided a mechanism for sharing the costs of providing necessary care among the insurers. While all political parties and most academics and professional bodies, including the Society of Actuaries, supported the risk equalisation scheme, that scheme and its supporting regulatory regime were challenged in the courts by BUPA Ireland. These challenges were rejected by the European Court of First Instance and by the High Court in Ireland. However, they ultimately succeeded when the Supreme Court found the risk equalisation scheme to be ultra vires in July 2008.

It is important for the House to note that the Supreme Court decision did not strike down the principles of community rating, open enrolment and lifetime cover, nor indeed the principle of risk equalisation. The court found the scheme to be ultra vires because the legislation did not provide for an explicit link between community rating and the specific mechanism provided in the 2003 regulations. The Chief Justice of the Supreme Court subsequently clarified that the decision which found the 2003 scheme to be ultra vires was not an obstacle to the Government bringing forward a new scheme. The Supreme Court decision focussed in particular on the issue of whether the legislation provided for risk equalisation applying across the entire market, given the definition of community rating contained in the 1994 Act. It concluded that the definition of community rating did not allow this interpretation and, therefore, that the scheme that equalised risk on the basis of community rating across the market was ultra vires.

Following this decision in July 2008, there was a need for a prompt response to ensure confidence in the market, and to ensure that market fragmentation due to the introduction of plans aimed at younger, healthier lives did not take place. Some interim scheme is required to ensure this does not take place, while a longer term solution is developed and put in place. I came to the conclusion that there was a need for an interim scheme in order to prevent a risk-rated market developing in a manner that would make it impossible to revert to an effective community rated market.

There was also a need to ensure the protection of older people, many of whom had been paying private health insurance for many years, and who were now — at the point where they needed such insurance most — facing the prospect of no longer being able to afford appropriate cover due to the real danger of re-pricing and the re-design of policies. Actuarial evidence indicates that it is from the age of 50 upwards that the cost of an insured person increases to above the market average, and increases by multiples of the market average by the time the insured person is 70 years of age. The additional cost risk to the insurance provider for older people is an actuarially measurable risk, clearly set out in the reports of the Health Insurance Authority, and action was required to ensure this risk was not translated into age specific products with associated differential prices.

It is also true that, although the most readily identifiable group with regard to measurable risk consists of those people of 50 years of age and older, the principle of community rating protects all persons suffering ill health, irrespective of age. This is because, under a community-rated system, prices for products are the same to all persons, irrespective of age and health status. However, the reality is that in the absence of an immediate mechanism to support intergenerational solidarity, there are incentives for insurers to design products that are attractive only to healthier lives, thereby undermining intergenerational solidarity and the common good protections. The market is then open to fragmentation and intergenerational solidarity is at risk of being weakened or eliminated.

In the aftermath of the July 2008 Supreme Court decision, there were very real indications in the private health insurance market that this risk rating fragmentation could occur. In the absence of an appropriate response, it would be in the interests of all insurers to focus on products that would be particularly attractive to healthier lives and to minimise features in their products that would be attractive to older people and people with ill health, in the knowledge that there was nothing in the regulatory framework that would counteract the advantages to be gained from pursuing this strategy. This would have conflicted with the common good principles of community rated health insurance and intergenerational solidarity that underlie the regulation of the private health insurance market, and there was a very real danger that private health insurance would cease to be affordable for older people and those with poorer health.

It is for this reason that I instructed officials from my Department to work with the Health Insurance Authority and legal and actuarial experts, as well as considering submissions from the market stakeholders, that is, the three health insurance providers in the Irish market; Hibernian AVIV A, Quinn Insurance and VHI, to develop an interim scheme which could be put in place promptly to stabilise the market while a longer term solution was developed. It is this interim scheme that is provided for in the Health Insurance (Miscellaneous Provisions) Bill 2008.

There are three main companies currently active in the private health insurance market in Ireland. There are three restricted membership undertakings operating for members of the Garda Síochána, prison officers and employees of the Electricity Supply Board. However, as these undertakings do not operate in the open market, they are not included in this scheme. In the case of both Quinn Healthcare and Hibernian AVIVA, health insurance is just one product in a range offered by their parent groups. VHI is currently involved only in the provision of private health insurance and related products.

Approximately 52% of the Irish population currently hold private health insurance. The value of the market is estimated currently to be in the region of €1.6 billion. The customer survey of the health insurance market published in May 2008 by the Health Insurance Authority showed the market share of VHI continuing to fall and that of Quinn Healthcare and Hibernian, formerly known as VIVAS, continuing to rise. At that point, VHI Healthcare's market share was 70%, down from 76% in 2005. Quinn Healthcare had around 20% of the market, up from 17% in 2005, while VIVAS Health, which entered the market in 2004, had a 6% share. The restricted membership undertakings constituted 4% of the market. More recent data indicate that the market share of VHI has fallen to 66%, while the share of Quinn Healthcare is now at 22% and Hibernian AVIVA has reached 9%. VHI continues to have, by some way, the highest number and proportion of members over 50 years of age. While Quinn Healthcare's customer profile is changing, that company and especially Hibernian AVIVA continue to have a significantly younger age profile than the overall market.

Current legislation allows for the introduction of lifetime community rating, which takes into account the age at which an individual commences private health insurance cover and provides for a community-rated loading to be applied to individuals based on their age when entering the market. This encourages younger people to continue to take out health insurance. I intend to bring forth regulations, as provided for under Section 7 A of the main Act, with the intention of commencing lifetime community rating by the end of this year.

I wish to outline the details of the interim scheme provided for in the Health Insurance (Miscellaneous Provisions) Bill 2008 and I will then go into more detail on the Bill itself. The interim scheme consists of two elements, namely, age related tax reliefs granted to individuals who hold private health insurance, and a levy charged on private health insurance companies to be used to finance the age-related tax reliefs. The details of the relief are as follows:

Age Band

Relief provided per insured

0-17

Nil

18-49

Nil

50-59

200

60-69

500

70-79

950

80 years and over

1,175

The existing tax relief at source of 20%, which will continue to apply, will relate to the gross premium paid net of the new credit being introduced.

Each private health insurance company will be required to pay an annual levy to the Revenue Commissioners. The levy will be remitted to the Exchequer and will form part of overall Exchequer funding. It will be charged on all adult insured lives at a level of €160. Apart from a reduction to one third of this amount, €53, for insured lives under age 18, to reflect the fact that insurance premiums for under 18s are on average one third of the adult premium, there will be no differentiation on the basis of age. The age-related private health insurance relief and the levy will be subject to annual review to take account of medical inflation and the impact of an aging population.

I take this opportunity to provide clarification on three points. First, the levy is being placed on the health insurance companies in respect of each insured life and not on individual subscribers. It is a matter for the companies whether to pass this levy on to their customers. Neither I nor my Department has any role to play in the settling of premia prices by any of the private health insurance companies, including the VHI. The levy is to be paid to the Revenue Commissioners on 30 September in each of the years 2009, 2010 and 2011.

Second, the additional tax relief under the scheme is being granted at source to the insurer as tax relief at source, TRS. it is granted on the basis that the insurer must charge the same net premium to all persons covered by a plan. Operation of the medical insurance relief outside the income tax system means that the relief is available to all persons, including those whose taxable income would be insufficient to avail of the tax relief. Under the TRS scheme, a person who pays no tax, will pay the same reduced premium as a taxpayer. This will be reflected in the fact that each person will pay the same net premium. Third, the tax relief being made available under the interim scheme is a fixed sum tax relief. The amount of relief given is fixed, irrespective of the plan held by the insured person and, accordingly, there will not be higher amounts of relief available for more expensive plans.

I should point out at this stage that the age-related tax relief and the levy will apply only to the commercial insurers operating in the market. As I stated earlier, they will not apply to the restricted membership undertakings, RMUs, for the ESB, Garda and prison officers. The option given to the restricted membership undertakings to choose to be included in the original risk equalisation scheme has been identified as a legal weakness in the regulatory framework. The members of RMUs are not fully part of the health insurance market and there would be an obvious anomaly in having the customers of the companies operating in the open market contributing towards payments which might be made towards the care costs of members of restricted schemes.

I would like now to deal with some of the specific measures in the Bill. The main objects of the Bill are to affirm that the purposes of the Health Insurance Acts include, inter alia, ensuring that access to health insurance cover is available to all consumers without differentiation in respect of age and health status; strengthening the legislative provisions to achieve this purpose; securing intergenerational solidarity and community rated health insurance and providing for the implementation of related measures to achieve these objects.

Section 3 provides that the principal objective of the Minister and the Health Insurance Authority, in performing their functions under the Act, is to ensure in the interests of the common good that access to health insurance cover is available to all, with no differentiation based on age and health status. Section 4 includes key definitions of terms such as “community rated health insurance contract” and “community rating”, which encompasses measures that support the achievement of the principal objective. In keeping with the change of emphasis with regard to community rating, namely, that this will be achieved at net premia, the term “net premium” is also defined.

Section 6 substitutes a new section for section of 7 of the Act, with changes aimed at ensuring that community rated health insurance contracts are made available without differentiation, irrespective of age or health status. Section 7(1 )(a) requires insurers to offer any particular contract for a period of not less than 31 days. Section 7(1)(b), instructs insurers to charge all persons the same net premium. Section 7 amends section 7A of the principal Act and provides for a reduction from 35 to 30 in the age at which late entry loadings can be applied. Section 8 provides that private health insurers are to submit new contracts to the Health Insurance Authority 20 working days in advance of their being offered for sale to potential customers. This section also provides for the authority to establish a register of health insurance contracts.

Section 9 inserts into the principal Act a new section to provide for the necessary data returns to be made to the Health Insurance Authority to allow monitoring of this scheme. This section also provides for the use of data returned. Section 10 amends section 12A of the principal Act. This amendment provides for the use of data returns made in the calculation of the age-related tax credit and the amount of the levy payable. Section 11 replaces section 13 of the principal Act which contained limited provisions around advertising and promotion of health insurance business. This new section includes provisions with an emphasis on enhancing the position of the consumer in relation to information and advertisements. It also provides that certain information should accompany advertisements where it is in the interests of policy holders or potential policy holders.

Section 12 amends section 14 of the principal Act. This amendment prevents the establishment of new restricted membership undertakings offering health insurance. Section 13 inserts a new part into the principal Act enabling the Health Insurance Authority to pursue enforcement of provisions where it is of the opinion that an insurer is contravening a provision or is likely to do so again. The section sets out a process whereby the authority may take a number of steps to have any contravention remedied, including making an application to the High Court seeking compliance. Provision is also made in this section for an insurer to make an application to the High Court to have an enforcement notice cancelled, confirmed or varied and for consideration by the Supreme Court on a question of law.

Section 14 provides for the amendment and substitution of section 21(1) of the principal Act which deals with the functions of the authority and enhances the functions and powers of the authority in line with the provisions of this Bill particularly in terms of the rights of consumers. Sections 15 to 21 amend the Taxes Consolidation Act 1997 to provide for a new age-related tax credit in respect of payment of private health insurance premiums due on or after 1 January 2009 and before 1 January 2012 in respect of persons aged 50 years and over. These sections relate directly to the tax relief elements of the interim scheme I outlined earlier. Section 22 inserts a new section 125A into the Stamp Duties Consolidation Act 1999 to provide for the collection of the annual levy on health insurance companies based on the number of lives covered by policies underwritten by them.

I will be bringing forward amendments on Committee Stage. These include drafting amendments, amendments to address the concerns of the Information Commissioner on the protection of personal information, amendments to the principal Act to facilitate the introduction of lifetime community rating and amendments to expand on the evaluation and analysis that the HIA is to undertake under section 9. I will also be bringing forward amendments having regard to concerns raised by the industry since publication of the Bill.

The terms of the scheme, as provided for in the Health Insurance (Miscellaneous Provisions) Bill 2008, were notified to the European Commission as a potential state aid in November 2008. Initial indications were that the Commission would give its decision on the notification in mid-February. I indicated at the time that I would not seek to move Second Stage of the Bill until the Commission had given its approval to the scheme. However the process of scrutinising the proposal has proven to be more protracted than originally thought. The Commission has sought a considerable amount of additional information on the operation of the scheme. All of the information sought has now been provided and I expect that the formal decision will be notified to us in early June. Given that this new scheme involves the same principles as the scheme approved by the Commission in 2003 and is designed to have a similar common good effect on the market I would hope that the Commission would come to the same conclusion. If the Commission's decision requires any changes to be made to the scheme I will bring forth appropriate amendments on Committee or Report Stage.

As the Bill deals with the regulatory framework for the provision of health insurance, I take this opportunity to signal a review of the minimum levels of benefits insurers are obliged to provide in the health insurance contracts offered by them. The current prescribed minimum levels of benefits have been largely unchanged since 1996. I will be asking the Health Insurance Authority to engage in a consultation process with a view to enhancing the minimum levels of cover that insurers will be obliged to provide.

The combination of measures in the Bill is designed to preserve and sustain the key elements of the regulatory framework for the health insurance market which have had the support of successive Governments. These need to be put in place while a more permanent replacement for the 2003 risk equalisation scheme is designed. Initial work has already commenced on the replacement scheme. While that continues over the next two to three years the Government must ensure that market segmentation through the development of niche products directed at attractive segments of the population does not undermine community-rated health insurance. There is also a requirement to ensure that the market operates in a more transparent manner and that the powers of the Health Insurance Authority allow it to effectively intervene in the market if circumstances demand such intervention.

I commend the Bill to the House.

I find the House a rather lonely spot. I call a quorum.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

Was Deputy Reilly hiding up the stairs?

Such is Deputy Woods's reputation that I shrank in fear up at the back.

I wish to comment on some of the issues the Minister raised in her contribution. She said:

The court found the [risk equalisation] scheme to be ultra vires because the legislation did not provide for an explicit link between community rating and the specific mechanism provided in the 2003 regulations. The Chief Justice subsequently clarified that the decision finding the 2003 scheme to be ultra vires was not an obstacle to the Government bringing forward a new scheme.

That certainly is the case. I wonder why the Government does not take the opportunity to introduce an entirely new scheme and appoint a regulator.

The Minister also stated:

However the reality of the situation is that in the absence of an immediate mechanism to support intergenerational solidarity there are incentives for insurers to design products that are attractive only to healthier lives undermining intergenerational solidarity and the common good protections. The market is then open to fragmentation and intergenerational solidarity is at risk of being weakened or eliminated.

That could be addressed by a strong regulator as is done in Holland.

The Minister continued:

There were very real indications in the private health insurance market that this risk rating fragmentation could occur. In the absence of an appropriate response, it would be in the interests of all insurers to focus on products that would be particularly attractive to healthier lives and to minimise features in their products that would be attractive to older people and people with ill health in the knowledge that there was nothing in the regulatory framework that would counteract the advantages to be gained from pursuing this strategy.

Is that not still the case? We have spoken on the matter before and I have tabled questions to the Minister on it. On 25 November in reply to a parliamentary question she said:

The effect of the measures on the premiums charged for particular policies by individual companies is a commercial decision for the companies themselves, as they set both policy benefits and pricing at the same time. However, they should not in themselves lead to an overall increase in the approximately €1.5 billion in private health insurance premiums paid, as the levy will yield approximately the same amount as the cost of the tax relief at source.

Yet we now know that is not the case. We now know that VHI increased its premiums by 23% and that Quinn Healthcare and Hibernian Aviva followed suit. Although not quite to the same level, they were forced to increase their premia to recoup the levy.

On 16 December 2008 in response to another question on the same issue the Minister said:

Anyone inclined to cancel their insurance now should consider carefully that they may have to pay a higher premium to re-enter the market at a later date. In introducing the measures announced on 19 November, the Government had to choose between allowing older people to be forced out of the market and trying to maintain the key principle of intergenerational solidarity whereby the young support the old.

I would like to particularly focus on the phrase "allowing older people to be forced out of the market". The reality is that many people have been forced out of the market. I have been in contact with the insurance companies which are recording many people not renewing their subscriptions and dropping from higher benefit categories to lower ones, for example from plans D and E to plans B and C. Some might say that is good or bad, but clearly in many cases it is a question of affordability. Clearly younger people in particular faced with paying their mortgages and faced with Government levies are finding themselves in serious difficulty. Many of them have lost their jobs or one member of the household has lost his or her job and they are looking at the increase in their insurance premium and letting it go.

The move has been counterproductive. It has not achieved what it set out to achieve. As I have already alluded to, it could have been achieved through the different mechanism of strong regulation, which has been sorely lacking particularly in our financial institutions.

The Bill allows the new levy to be applied retrospectively from January 2009. The levy applies a charge of €160 to all adults and €53 to all children.

All insurers have increased their premia by more than the average annual medical inflation rate of 10% to reflect the new levy, thereby making health insurance unaffordable and pushing families out of the market. The Government is still awaiting approval from the European Commission on the introduction of this levy. Hibernian Aviva Health and Quinn Healthcare claim they have increased their premia purely because the cost and retrospective nature of the levy automatically put VHI's competitors into a loss making position. VHI has increased premia by 23%, Quinn Healthcare by 16% and Hibernian Aviva by 22%. The latter has stated it intends to keep the moneys made from this increase in a separate account and will refund customers if the Commission does not approve the levy. Presumably that will also be done if the Minister in her wisdom decides to deal with the matter by regulation.

Although VHI is a net beneficiary of the levy in that it receives a substantial increase on tax relief at source on payments for those over 50 years of age, it nonetheless increased its prices by an average of 23% within two weeks of the levy's announcement. This is typical of the dominant player in the market. It was able to do so because it knew its competitors would have to increase their prices to cover the cost of the levy. VHI's competitors argue that in the absence of the levy, the company would probably have made the more usual annual increase of between 8% and 10% to reflect medical inflation. Hibernian Aviva Health argues that we are already seeing the effect of the lack of competitive pressure and that VHI lacks an incentive to lower premia or improve its efficiency.

The levy has unnecessarily increased the price of health insurance for all consumers at a time when other prices are falling. Many observers believe the levy is propping up VHI because it appears to be the sole beneficiary. The levy is clearly not benefitting consumers, VHI's competitors or health services. VHI remains unregulated as an insurer and enjoys significant privileges as a result. It was allowed an extension to the deadline for an insolvency ratio of 40%, which is uncompetitive, and it is not subject to the Financial Regulator's guidelines on asset management and investment funds. This may in part explain last year's fall of 20% in the company's solvency ratio. It was ordered to seek authorisation by 31 December 2008 but the deadline was extended to 31 March 2009. When it also missed the second deadline, the Minister was forced to sign an order to change the date to 1 September. This raises questions about the company's unfair competitive advantage given that it is not subject to the same scrutiny as other health insurers. The Minister will understand why people believe one rule applies to VHI and another to everybody else. It will be interesting to learn Europe's response to this issue.

Due to the crude nature of the levy, health insurers cannot trade into it. If they agree a contract and premium with a customer on 30 December 2008 they cannot adjust the price to cover the cost of the levy, which applies retrospectively from 1 January 2009 until the contract expires 12 months later. In some cases, the new renewal prices which reflect the levy will not come into effect until December 2009.

The Minister claimed that VHI premia would increase by 60% for old people. Given the existence of community rating, how could that happen?

It could because one could devise a product.

If the Minister is concerned about niche products, all she has to do is establish a real regulator who could rule on the content of standard packages and add-ons. Given that the HSE has put the arm on VHI for €50 million up-front for next year, perhaps this is a revenue gather exercise on the part of the Government as much as anything else.

She also claimed that the levy would not lead to an overall increase in health insurance premia but we know what actually happened. VHI's 23% increase will probably reap it €230 million net. She accused certain insurers of tailoring their plans to suit younger people. Insurers must provide minimum benefits under each plan, including cataracts and hip replacements. If she is genuinely concerned about the level of protection offered under minimum benefits, she would have revised the requirements rather than introduce a levy which increases the cost of health insurance. Many of these issues could have been addressed by a regulator at no cost to those who pay for insurance.

VHI is increasing the cost of its core plans, which generally include a larger cohort of older people, as opposed to its company plans, which include more younger people. Applying higher premia to older people is in breach of the principle of community rating and is contrary to what the Minister was supposedly trying to prevent. Perhaps she will investigate this issue and revert to the House on it. I would like to see the facts that would prove these allegations wrong.

Community rating is provided for in section 5 of the Health Insurance (Amendment) Act 2001. Insurers are required to charge the same rate for the a product regardless of a customer's age, sex, health status or sexual orientation. The Bill before us does not improve the definition of community rating but merely amends it to reflect the tax credit and the Minister's health insurance levy. This legislative change is unnecessary to strengthen the definition of community rating or reinforce inter-generational solidarity. That has been upheld by the courts and I do not think any Member of this House would undermine community rating.

The Government needs to clarify whether the levy is being ring-fenced for health purposes rather than accruing to the Exchequer.

Some people believe it could cost the Exchequer.

We simply want to know whether the Exchequer will be fortunate enough to find itself in a positive balance for once.

I assure the Deputy that it is not a revenue raising measure.

We would like to see it ring-fenced for health services.

The Minister is propping up the VHI's dominant market share. Her actions are anti-competitive and anti-consumer and reflect an ideology which was not associated with her in the past.

It is feared that the levy will make private health insurance unaffordable and will result in a contraction of the market by at least 10%, or 200,000 people. In a contracting economy with rapidly increasing unemployment, it stands to reason that the contraction may be even larger as people prioritise what is most important to them. Family premia are due to rise by an average of 20% on typical plans, which will result in a relative increase of more than 32% on cheaper family plans. Families on the cheapest plans tend to be the most price sensitive in the market, in particular under current economic pressures. It is projected that in excess of 200,000 persons in this lower end of the market will exit the market and be left with no option but to revert to the public health system, which is creaking under the strain of poor management with 500 beds removed from the system last year, 600 beds to be removed this year and not a sign of a single one of the 1,000 co-located hospital beds. This week a HSE report highlights a 49% increase in delayed discharges between 2007 and 2009 from 514 a week to 757 a week so far this year. The net effect is similar to taking St. James's Hospital out of the system for a year and this is why, particularly in the Dublin area, many people lie on trolleys for 24, 48 and 72 hours at a time and longer.

The Minister is shaking her head and she can dispute the INO's figures while I can dispute her figures from the HSE. However, the INO's figures are comparable week on week and a few weeks ago the number lying on trolleys hit 398. A sick lady was referred from my surgery to a Dublin hospital at 9.30 a.m. last Tuesday. She was left sitting on a chair between then and 4 p.m. on Wednesday at which point she was transferred to a trolley, on which she lay for another 24 hours. This is no way to run a health service following ten years of a boom. The Minister can spin all she wants and use all the figures she likes. She can allude to the NTPF, which states 2.6 months is the average wait for a patient from the time the fund takes on the patient, which totally ignores the minimum three months patients must wait before they are taken on in the first place. Many patients must wait six months and, therefore, they must wait up to nine months or longer. In addition, patients must wait for up to two years for a colonoscopy in Tallaght hospital.

That is not true.

Others must wait six or seven years to see a consultant to get on a waiting list. People are not fools and while the Minister can fool some of the people all of the time, she cannot fool all of the people all of the time. That is why people have woken up to the fact that under the Government the future will remain extremely bleak economically and in our health service and education system.

I refer again to the levy having a disproportionate impact on families and students. A number of players in the market currently operate tiered discount pricing for children and students, for example, the fourth child free or child pricing for students as set out in the Health Insurance (Amendment) Act 2007 for 18 to 20 year olds. However, the levy is calculated at a flat rate of €53 per child, regardless of the cost of the premium. Even though a child may be free, therefore, he or she will incur a tax of €53. In addition, the levy does not differentiate between students and adults, although students are on discounted premia, as set out in the Health Insurance (Amendment) Act 2007. All students will incur an additional cost of €160 each. The Government has increased the registration fee and the Minister wants to whack the parents of students who have insurance with another charge of €160. People are hurting and they will hurt all the more because of this unwise move.

The levy will also significantly increase the cost of employee benefits to companies. A number of large multinational companies, particularly from the US, provide private health insurance as part of their standard employee benefit package, which should be encouraged. The levy will further increase the costs for such packages, thereby increasing the cost for companies to trade in Ireland at a time they face severe economic challenges. They have not been helped either by several local authorities increasing rates just to rub the salt in.

Doctors have increased their fees.

I do know any doctor who has increased fees. As far as I know, they have all decreased them.

The Deputy knows quite a few who have increased fees.

The Minister is travelling in the right circles. I must tag on to her some time.

I will not have any professional gain from it. I do not have a surgery.

An 8% reduction in GMS income of €250,000 for a surgery comprising two or three doctors, two or three nurses, three or four secretaries and a practice manager equates to the loss of €20,000 or the salary of a staff member. Service will be reduced.

Does the Deputy oppose the reduction? The reduction only applies to professional fees and not to gross income.

It does not apply to grants or allowances.

In other words, 40% is discounted, which is the input cost. I hope the Deputy is not too worried about how much he will lose.

That will reassure doctors.

It will apply to 8% of the remainder. I hope the Deputy will support that.

Yes, everybody needs to put his or her shoulder to the wheel and I am glad this will not affect grants and allowances for the retention of nurses and secretaries because that would be detrimental.

I refer to the problems faced by US and other multinationals. It is important for them to offer a quality health insurance benefit to remain competitive on benefits as well as to attract high calibre staff. In addition, small and medium-sized enterprises that also purchase health insurance for their employees will be faced with significantly increased charges to provide this benefit. The levy amounts to an increase of €12,800 for a company with 100 employees and this cost will clearly be considerably higher for larger companies. The levy will cost a medium-sized enterprise employing 50 staff an additional €6,400 annually at a time every company is seeking to cut costs and struggling to survive and we are trying to protect jobs. The Government's mantra is "Jobs, Jobs, Jobs", but its policies involve taxes on jobs and further costs for employers, which makes it difficult for them to retain jobs let alone create more.

The market competition implications of this move are significant. The levy is anti-competitive and it is a means to prop up the State dominant player. VHI remains super dominant in the health insurance market. The Minister stated the company's market share has reduced to 66%, down from 70% according to the most recent figures I have. The VHI's declared profits last year were €112 million without having received any risk equalisation funds. I have been accused of opposing risk equalisation. I have not opposed the concept but the timing and the quantum have always been of considerable concern, particularly at a time the VHI generates such large profits and holds such a dominant position in the market. There are questions about why it was necessary to introduce this levy and with such speed when there was no instability in the market. It was anticipatory.

Community rating, which all parties fully support and which has been prescribed in legislation, prevents companies from charging a higher premia to older members. If market segmentation was viewed as a danger in the market, it could have been prevented through the amendment of the supervisory powers of the regulator and increasing the levels of minimum benefit required in regulation. This is what happens in Holland. The regulator regulates and monitors the market. He or she is directly responsible to the Minister and the parliament.

I am also bothered that the levy is not ring-fenced and, therefore, the VHI can use the proceeds for any purpose it chooses, particularly in expanding business. We must remember that the VHI remains unregulated and does not require funding to reach solvency. It is said to be seeking to expand its commercial mandate into other business lines and jurisdictions, and needs funding to accomplish this. The VHI will receive in excess of €30 million from the levy in year one, yet it can use that money to compete in primary care in its joint activities with the SwiftCare clinics. In addition, it can use the money to buy private hospitals and enter the life insurance and pension markets.

I know the Deputy was against SwiftCare up in north Dublin, but the patients choose where to go.

Is it encouraging competition to give a major State player the right to enter into all other areas of activity with the advantage of a State guarantee? Even within that context, it is not properly regulated and does not have to play by the rules under which other insurers must operate. This is grossly uncompetitive in my view.

We do not have a GMS list.

We could end up with a situation, not just with our banks, but where the VHI could decide to become expansionist — it clearly intends to be — and go on a little adventure which could cost us €100 million and, whack, the taxpayer is caught again to bail it out because money, which was supposedly put aside for health, was used in a misadventure elsewhere. I do not believe the taxpayer or the health service is getting proper protection. This money should at least be ring-fenced for health.

There are grave concerns about the impact the levy will have on consumers, businesses and the wider market. According to research conducted by the regulator, price still remains the primary reason for switching on the market. With the introduction of this levy, there will be a harmonisation of pricing thus reducing consumer choices and bringing about a stagnation of market share and a reduction of competition in the market. That would seem to be the case.

The VHI has lost 40,000 young members this year to date.

To its competitors.

I do not know if they have gone to its competitors.

They have, yes.

There might be a little bit of movement there but, by and large, the number in the market is shrinking. The levy will create an even larger barrier to entry for any new players. Unlike the previous risk equalisation, there are no exemptions to allow smaller, new players to establish themselves. With such barriers to entry and harmonisation of pricing, there will be less scope to compete in this market, resulting in the delivery of less choice and less innovation. Ultimately, it will result in poorer value to private health insurance customers. The Minister and I know that with fewer players there is less likelihood of competition and less choice of product. In the past, the VHI operated in a manner that controlled demand by limiting supply. The entry of the two new players into the market has gone some way to reduce that method of operation, but we need more insurers in the market.

Fine Gael's "Fair Care" document is based on the Dutch model. Under that system, they have 20 different insurers in a market for 16 million people, which is highly regulated. With that sort of regulation in place, they have managed to insist on a standard package which accounts for all of people's care, except for long-term care. Through a risk equalisation fund, they have managed to make the elderly, chronically ill and diabetics more attractive to insurers who have gone after that market. There is no reason we should not be doing that.

I would not commend this Bill to the House. I oppose it vehemently and believe it is ill advised. It is anti-competitive and is driving families out of the insurance market. It will put more pressure on our already pressurised health service. On all counts it is destined to be a disaster. We will regret the measure and, in fact, many people who have had to give up their private health insurance are already regretting it. In a new paradigm with a new Fair Care deal, if Fine Gael is in power after the next election, which I hope will not be too far away, everybody will be insured and everybody will have timely access to hospital. They will also have a free GP-care package and medication.

Everything will be free?

The Deputy's time has now expired.

I think we should send in the Department of Finance.

I wish to answer the Minister, in fairness. We are spending €16 billion on health through the HSE and the Department of Health and Children, and the Minister has told us that €4 billion is being spent through insurance and private fees. That is €20 billion for 4.2 million people, which is nearly €5,000 per head. In Holland they are paying €60 billion for 16 million people, which is short of €4,000 a head. They have number one for quality and number two for value for money.

How much do they pay their doctors and staff?

With proper political leadership and real management, as opposed to administration, there is no reason we could not do the same thing.

I honestly think it would be a good thing for the debate if the Deputy's proposals were costed in the Department of Finance in the usual way.

I wish to begin where Deputy Reilly finished. It is vital that we get the regulation of health insurance right, including the underpinning of community rating. It will be one of the main building blocks of a fair and equitable health system for the future. All the evidence, including opinion polls and what we are hearing on the doorsteps, suggests that the current Government will be out of office pretty soon. The most likely replacement will be a Labour-Fine Gael Government and that opportunity will come sooner rather than later. If that is the case, and I think it will be, we will be introducing a fair and equitable one-tier health system based on universal health insurance. That has been the Labour Party's policy since 2002 and it is the policy of the Fine Gael Party as enunciated in its recent document. We will have a one-tier, universal health insurance system under the next Government. Even the Minister has decided to establish a group to examine the matter, even though she is not planning to have it report for quite some time. By then, however, the new Government will presumably be in office.

Even in Holland people can take out extra insurance and go to other places. That does not only apply here.

I am not necessarily talking about the Dutch model because there are elements of what Labour and Fine Gael are proposing which are not necessarily exactly in line with that. However, we both subscribe to the core universal, single-tier model based on all the population being insured, with the State subsidising those who cannot afford to pay, and those who can afford to pay paying most of their costs.

I wish to go back to the cost issue, which was being debated a second ago. When Labour published its policy document in 2002, we estimated that a fair and equitable one-tier system based on universal health insurance could be implemented by raising spending on health from €5 billion to €7 billion. Even allowing for inflation, the current bill of approximately €16 billion in public money and €4 billion in private money is way ahead of what we proposed at that time. We did cost it and got some experts to examine the figures. The Adelaide Society has costed what it calls a Rolls Royce model at not a hugely significant extra cost to what is being spent at the moment. It can be done, so one must question what we have been doing for the past ten or 12 years and particularly since 2002 when our scheme was costed. We are now up to €16 billion in health spending, yet there is very little improvement to show for it. In fact, there is widespread public dissatisfaction with the health service. Despite the Minister declaring that accident and emergency was a national crisis a couple of years ago, accident and emergency departments are as packed as ever. The Minister has an aspiration to transfer more activity to primary care but it is just an aspiration and has not happened. Yesterday, members of the Joint Committee on Health and Children went to see a lovely model in Mitchelstown, but there are very few of those up and running around the country. In fact, the transfer to primary care has not happened to any great extent. Unfortunately, the Minister's own privatisation agenda has made the two-tier system even more unbalanced than it was when the Labour Party published its proposals back in 2002. It is imperative that reform comes as soon as possible because it is clear that spending more money in a bad system cannot be allowed to continue, especially in the current economic climate where we have swingeing cuts throughout the health services. For that reason the legislation we are discussing today and the legislation the Minister plans to introduce subsequently to reform the original scheme are very important; we must ensure that we properly regulate the private health insurance market in the context of what I believe will be changes for the better in the health service in the very near future.

One of the ways that needs to be done is to ensure that the Health Insurance Authority does its job well, that we have proper regulation of the market and that we get this right. With regard to the Bill, the Supreme Court judgment stated that the Minister had misinterpreted the Act when designing the scheme and that was why it was ultra vires and void. Rather than introducing this very cumbersome mechanism with a levy and so on it would have been better to simply change the original Act to accommodate a scheme that by and large people were happy with prior to the judgment of the Supreme Court.

I know that this was meant to be temporary and that it was meant to be introduced a couple of months ago because we expected the EU Commission to make a decision in mid-February, which it still has not done. Was it not possible to introduce what would be the eventual scheme rather than having this very cumbersome interim scheme? People have many doubts about it. To quote from the Bills digest document that we received from the Library:

Although the Supreme Court struck down the Risk Equalisation Scheme of 2003, the Chief Justice stated in subsequent proceedings related to the judgment that this would not prohibit the Minister proceeding with risk equalisation in any statutory form she wished.

It was not necessary to introduce the type of scheme we have before us today.

We have been trying to do this since 1996; since a member of Deputy O'Sullivan's party introduced the original Bill. That is the reality.

Deputy O'Sullivan without interruption.

We have not succeeded in transferring money in that period.

It still irks people to see the way we are doing it, with money being directly transferred from certain companies to others. There is also much distrust about not ring-fencing the levy and not making it clear that the levy goes back into the system.

We all know about black holes in the health budget and about money that was assigned for implementing the vision for change plan, palliative care and Traveller's health that went elsewhere in the HSE. There is already distrust about saying that money will be used in a certain way but that in actual fact——

This comes off the premium the individuals pay. This is not money that goes——

Through the Chair, Minister.

I beg your pardon.

Perhaps the Minister can clarify it at the end. However, if she could give us a clear declaration, which has been called for by both of us who have spoken, that the levy will be used within the health insurance market, it would go some way towards providing assurances in that regard.

I want to refer to the number of people who have private health insurance, which is 52% at present. We are going through a process of economic change and with people finding it harder and harder to afford private health insurance it is inevitable that some will drop it because they will not have the money to pay for it. I welcome the fact that with the new consultants' contract we have public-only consultants. Last week, the Committee of Public Accounts heard that there is a difficulty with the estimated €50 million whereby these public consultants admit patients with private health insurance but there is no mechanism for charging that money to the private health insurers. I would welcome the Minister's comments on that because it is an issue of concern to the public purse.

The Minister also told us, in the context of the consultants' contract, that there will be a one-tier waiting list for certain procedures, including diagnostics and colonoscopies. I welcome this very much because the Labour Party wants a one-tier system for everybody. Will this mean that fewer people will feel the need to have private health insurance? There is always the dilemma that if one makes the public system better — and we must make the public system better — people will wonder why they have private health insurance.

We have a messy hybrid system with all sorts of perverse incentives; in primary care one is incentivised not to go to the doctor because one must pay if one does not have a medical card and in the hospital system the incentives are the opposite. It is such a mixed system that it is a mess in comparison to most other countries which have straightforward systems, whether it be the NHS in Britain, the system in Holland that is the preferred option for Fine Gael, or systems of social health insurance in countries such as France or Canada. I know there is a mix of public and private in all countries but we seem to have the most messy mix of any country.

The most dysfunctional.

The Deputies must not have been in the UK recently.

Some people are——

Far away fields are always greener.

Some people feel that the UK system has much going for it.

It has longer waiting lists.

Through the Chair please.

In any case, the point I am making is that at some stage we will have to say that the current system does not work. I would like the Minister to comment on the consultants' contract and public-only consultants because they are measures she introduced. I welcome many elements of what she is doing but would it make more sense to have a one-tier system where everybody is treated fairly whether that be through multiple insurers or a social insurance fund?

Much of the division of the system was meant to be based on co-located hospitals and many elements of the consultants' contract were designed to facilitate the co-location system; private patients would be admitted to the private hospital and public patients would be admitted by public-only consultants to the public hospital. The Labour Party abhors this because it is apartheid in health. It appears that those co-located hospitals will not go ahead — and I hope they will not — and that we will have a system with different types of consultants operating in the same hospital with different rules for different types of patients. The entire system is very confused. Will the Minister comment on whether she thinks fewer people will take out private health insurance? Will fewer people be able to afford it?

Will the Minister explain further what she stated in her speech on reviewing the minimum level of benefits? It is important that we know what exactly she means by that. Will it have an implication on the cost of private health insurance? I do not know whether the Minister will review it up, down or sideways.

Deputy Reilly referred to the significant increases in costs that occurred around the time the legislation was published at the end of 2008, particularly for the VHI. It has meant that many people cannot afford private health insurance.

The Minister also said she intends to ensure that the full cost of private patients in public beds is repaid and that the rules providing that in public hospitals 20% of beds are for private patients and 80% for public patients will be implemented through the clinical directors. That is the right thing to do. Private patients in beds they should not occupy should not be subsidised by the public system. However, the fact that 55% of the population has private health insurance suggests that this will be difficult. Many questions regarding the issue of health insurance that will arise in the next few years will affect the cost of insurance for members of the public and ultimately will change how the money available in the system is spent.

Another issue is the mechanism and the concerns of smaller insurers. One of the concerns is that the levy is unfair because it is applied across the board. Colin Morgan of Quinn Healthcare stated in an article in the Sunday Business Post:

Our main concern relates to the €160 levy per member. This levy is due per member irrespective of the level of cover a member has (ie a 50 per cent levy on lower plans and only 8 per cent on high level plans). This ultimately means that less well-off people on lower plans are subsidising those better off who can afford premium plans. This is totally unfair.

It appears to be unfair to impose this levy across the system, irrespective of the plan a person has. I share Deputy Reilly's concerns about students. The Minister said she will propose amendments to the legislation so perhaps she would indicate if she will address these issues in those amendments.

The Minister referred to other schemes and said it will not cover the smaller, controlled schemes for specific people. She mentioned the schemes for the Garda, prison officers and ESB employees. How does the Supreme Court decision affect those schemes or does it affect them? Can community rating still be implemented through risk equalisation within those schemes? Perhaps the Minister would clarify that because we must ensure that those schemes are fair to their members. In that context, when the Labour Party proposed its universal health insurance system it envisaged that it would encourage mutual or non-profit insurers to come into the market; for example, the trade union movement could provide an insurance scheme for its members. It would be somewhat similar to the schemes available for certain workers. Ideally, in providing for competition in the market, we would prefer that it would not simply allow private companies to cream off their portion of the money but that it would encourage, in terms of the insurance market and the providers of health care, non-profit organisations for the mutual benefit of the people who subscribe to them.

How would the Minister envisage that working in the context of this legislation and the legislation she is working on for the long term? It is preferable to having a raft of private insurers all trying to make a profit because, unless it is extremely well regulated, there is a danger that it will result in higher costs. The American market is a fine example of that. The health service in the United States is very costly and the private system is not appropriately regulated. Practitioners end up ordering all kinds of unnecessary tests. As it is such a free unregulated market it is very costly, not effective and not inclusive of many members of the American public. Apparently it is about to be reformed by the current President.

Where is he looking to?

He is probably looking to Berlin rather than to Boston.

It is actually Holland.

I am not sure if he is looking to Bismarck or Bevin.

There are greatly increased costs in Berlin. All fee per item schemes are subject to high costs.

Deputy O'Sullivan to continue without interruption.

The interruptions in this debate are quite interesting. We are managing to interact about our different proposals, although I accept the Chair must do his job.

My overall concern with the legislation is that it is not well designed and is very cumbersome. Using a levy system to implement community rating and risk equalisation is not ideal and even the Minister admits it is an interim measure to fill a gap following the decision of the Supreme Court. Obviously, it will affect people who have health insurance and there is a concern that it will cause increases in premia, which will cause particular hardship for the unfortunate people who are being hit by practically everything at present, including the levies introduced in the budget. People who are above the income guidelines to qualify for medical cards find it very difficult to pay for private health insurance but feel they must have it because of the difficulty in accessing the public system. Patients are being told every day by general practitioners that if they pay for a treatment privately, they will get it in a week but otherwise they will have to wait for months on the waiting list. Despite the National Treatment Purchase Fund's comments about waiting lists, much of the waiting time is about getting a referral from the general practitioner.

Notice taken that 20 Members were not present; House counted and 20 Members being present,

My concern is that this is a cumbersome mechanism and that it may well turn out to have flaws. The Minister acknowledged this by her undertaking to bring forward amendments on Committee Stage. It would be preferable to introduce legislation to amend the original Act to take cognisance of the decision of the Supreme Court.

In the context of what I predict will be the imminent introduction of a system of universal health insurance, providing a one-tier health system that is fair, equitable and efficient——

Deputy Reilly is of the view that it will take five years to introduce such a system.

I predict it can be done sooner. Deputy Reilly and I do not agree on everything. We are substantially in agreement on this issue but not on all of the detail. In the context of the establishment of a one-tier health system, it is important that we get the regulation of health insurance right. There must be tight and effective regulation as we enter what I hope will be a bright new dawn for the health service.

I welcome the Minister's comments on this legislation. The explanatory memorandum refers to the common good in regard to the health insurance market. In particular, I am struck by the phrase "intergenerational solidarity between all insured persons" and the acknowledgment of the importance of community rated health insurance. There has been widespread concern that older people might face a substantial hike in their health insurance costs upon renewal next year. The Bill takes steps to deal with that issue. As the Minister explained, it provides for a levy on every individual who pays health insurance as well as for a refund according to age. The effect of these provisions is such that younger people will pay more in levy than they receive in refund while the opposite will be true for older people. This represents a good attempt by the Minister to deal with this issue, notwithstanding her indication that she intends to introduce amendments on Committee Stage.

The Bill seeks to ensure a degree of subsidisation for older people who avail of health insurance in the wake of the Supreme Court decision last July whereby the risk equalisation scheme was ruled illegal. That decision obliges us to ensure a means of providing subsidy for those who would find it difficult to pay high premia. Health insurance plans can be tailored for older and younger people at totally different prices. The analogy that was made in regard to motor insurance companies is a good one. As we all know, young people pay far more than older, more experienced drivers for car insurance. In the context of health insurance, the concern has been that the opposite would be the case, with older people facing far higher premia than younger people. This legislation will allow health insurance companies to focus on the quality of cover they provide and the provision of additional services to consumers rather than the risk selection which would cause major difficulties for older customers.

We are all concerned that there should not be an intolerable expense for people in ensuring they are covered for any operations they may require, such as hip replacements, cardiac procedures or cataract removal. Such procedures are more likely to be required by older people. The various insurance companies can now offer different types of plans. For example, young people may be interested in benefits relating to sports injuries. Unlike older people, they are generally not concerned with hip replacements and cardiac care.

The Bill sets out the various levies and subsidies applicable to those under 50, over 50 and over 80 years of age. These are interim measures, applicable for three years, to stabilise the market. The community rating levies applicable to insurance companies have been set at €160 for each adult and €53 for each child insured. The Bill provides an incentive for people to take out insurance earlier in life via the inclusion of lifetime community rating provisions. For the longer term, the Government is working on a new risk equalisation scheme that will meet all the legal requirements.

In various professions and sectors, group schemes are offered to entice people to take out health insurance. In my former life as a teacher, I was aware of the operation of such schemes through the teachers' unions, the INTO, TUI and ASTI. There was encouragement for members to enter the private health insurance market via the special group rates available to those who applied through these types of group schemes. People have long been aware of the tax relief available to them, although not everyone has been able to avail of it. In this debate on health insurance legislation it is good to note that many people took out health insurance at a relatively young age. In that context, the proposal regarding lifetime community rating is welcome.

On the topic of older people, I raise again the decision to move to Dublin the processing of medical card applications for those aged over 70 years. Given the increase in the number of people employed to deal with rising unemployment and the consequent increase in the number of people seeking social welfare benefits, one would also expect the number of people working in the Department's medical card section, whether in Galway, Cork, Dublin or elsewhere, to increase. I am disappointed, therefore, that staffing levels in the medical card section in Dublin have not increased. I hope action will be taken to address the problems encountered by those seeking to contact a member of staff in the section by telephone.

People want to discuss medical cards and medical cover with officials who work in their locality. This is difficult when it is necessary to deal with an office in Dublin and the number of staff dealing with medical cards appears to have declined. I am aware of a proposal, albeit one which may not materialise, to reduce the number of such staff from 300 to 100. If that is the case, people will find it very difficult to determine the status of their application for a medical card.

People are not clear about how the appeals system for medical cards works. The mechanism for dealing with appeals was always clear in Galway. I am able to follow a paper trail from the community welfare officer through to my local office in Galway city and, from there, through to the appeals office in Ballinasloe. This is no longer true in the case of those aged over 70 years who apply for medical cards because the personal service available to people in the regions is to be withdrawn. I make this point in passing because it is important to provide a good service and a proper office which people can contact.

I am interested in what effect the measures in the Bill will have on health insurance prices, an issue raised by Deputy O'Sullivan. I hope the Minister will address this issue in her reply. Prices must be affordable, particularly for those aged 50 years or more. A major issue has arisen regarding how the health insurance companies will price their insurance plans. I have cited examples of niche markets these companies may create, whether by offering sports medicine or maternity services for younger people or cardiac care and hip operations for an older market. A question also arises regarding additional tax relief for older customers, particularly in the case of people who do not pay tax. I understand that in such circumstances the companies will benefit from the tax break rather than it being passed on to older people.

People will shop around for health insurance. The imposition of restrictions or waiting times on those who seek to switch policy should be addressed. I hope individuals have an opportunity to switch policy. In this respect, it is important that health insurance customers are informed that they wait for a set period before being able to move to a higher plan.

My experience of dealing primarily with the VHI is that the company's services are good and it responds well to its customers. Competition in the market means the various companies offer a good range of services. Many of them have indicated that they are not being given an opportunity to market their different policies. I hope the position in this regard will improve.

During my investigation into this matter, I noted interesting variations in the cost of claims between age groups. For example, claim costs for people aged more than 60 years are twice as high as those aged in their 30s, while claim costs for those aged 80 years or more are four times as high as the average for 40 year olds. Without action by the Minister, costs could double and for this reason, I applaud the Minister's decision to introduce this legislation.

I hope companies will inform us about their activities because consumers are keen to ascertain what changes in insurance policies will be introduced and when they will take effect. I do not know how much notice is given concerning changes to terms and conditions but a number of days' notice should be given before the date for renewal. This is an important issue.

Tax relief is granted to health insurance companies for all policies at the standard rate of 20%. I hope the position will not change and people will continue to benefit from tax relief. As matters stand, health insurance policy holders are not required to submit a receipt but must simply notify the Revenue Commissioners that they are a members of a particular insurance company.

I welcome the Minister's contribution and this timely legislation. The Minister indicated she will introduce further changes where necessary and noted the role of the European Commission in this matter. I look forward to her contribution and the introduction of amendments on Committee Stage.

The Health Insurance (Miscellaneous Provisions) Bill, which will apply retrospectively from 1 January 2009, places a levy of €160 on all adults and €53 on all children. To reflect these new levies all health insurers have increased their premiums over and above the annual rate of medical inflation, which has averaged 10% in recent years. As a result, health insurance is becoming unaffordable with families being pushed out of the market. Many policy holders can no longer afford the cost of their policy. There will be a dropping-off of subscribers to the various health insurance providers because of loss of employment and other financial difficulties due to the reduction in income arising from the various levies. The increases of 23% by VHI, 16% by Quinn Healthcare and 22% by Hibernian Aviva Health will further impact on the opportunity for people to continue with their health insurance and there will be a considerable drop-off in the number of people who can be covered by insurance. That is a concern for people because of the lack of confidence in the public health service. Many who had what they saw as the protection of private health insurance will now not have such available to them, and these increases are partly, though of course not solely, the cause of this.

I understand the Government is still awaiting approval from the European Commission on the introduction of the levy. I understand the permission has not yet been received, but perhaps the Minister will confirm when she expects such permission from the European Commission to come through.

The insurance companies have been forced to raise their premiums. Hibernian Aviva Health and Quinn Healthcare have stated they have increased their premiums purely to cover the costs of the levy as the cost and retrospective nature of the levy would automatically make competitors to VHI loss-making. Although VHI is the net beneficiary of the levy, the company increased its prices by an average of 23% within two weeks of the levy being announced. This is typical of the dominant player. It is typical of the attitude of the VHI over the years to its dominance of the market. VHI was able to do this because the company knew its competitors would have to increase their prices to cover the cost of the levy. VHI's competitors argue that without the levy being announced VHI would not have increased its prices by 23%. I refer to my figure for the annual usual increase of between 8% and 10%. Competitors such as Hibernian Aviva Health argue that it is already seeing the effect of there being no competitive pressure to engage in price restrictions but there is no incentive for VHI to lower premiums or become more efficient, quite the opposite.

The only beneficiary of this levy is VHI, the organisation. This does not benefit any of the other stakeholders, including VHI members who incurred the significant price increases already stated immediately following the levy's introduction, yet VHI remains unregulated as an insurer and enjoys privilege as a result.

Also, VHI is not subject to the Financial Regulator's guidelines on assessment management which might go some way towards explaining why its solvency ratio fell by 20% last year due to the investment losses. VHI was ordered to seek authorisation by 31 December 2008 but this deadline was extended to 31 March 2009. I understand VHI also missed this deadline and that the Minister has put out that date until 1 September. This raises the question of the unfair competitive advantage of VHI, which has not been subject to the minimum solvency requirements or the same scrutiny as the other health insurers. The Minister is one of those so keen on competition in all aspects of the economy. This, surely, is an area in which we must ensure there is competition allowing the customers, those who are insured, to get the best value for money. Competition will create that and the dominant player should have equal status with the other players.

Due to the crude nature of the levy introduced, health insurers cannot trade into it. If they agreed a contract and premium with a customer on 30 March 2008, they cannot adjust the price to cover the cost of the levy, which applies retrospectively to 1 January 2009, until the contract expires 12 months later. It will be December 2009 before new renewal prices come into effect for some policies.

The Minister claimed that VHI premiums were to increase by 60% for older persons. This could not happen under community rating. She claimed that the levy would not lead to an overall increase in the approximately €1.5 billion in private health insurance premiums. The VHI premium, as I stated already, increased by 23% and will earn the company an additional €230 million. Quinn Healthcare has passed on the levy, which has increased prices by 16% for that organisation. The Minister claimed that certain insurers are guilty of tailoring their plans to suit younger people. I put it to her that under each plan insurers must provide minimum benefits that include minimum cover, including cataracts or hip replacements. If the Minister was genuinely concerned about the level of protection offered under minimum benefits, she would have revised these as opposed to introducing a levy which increases the cost of health insurance.

VHI is charging this increase to persons on its core plans that generally include greater numbers of older people, not its company plans which generally include more younger people. High prices are being applied to older persons which is in breach of the principle of community rating and is contrary to what the Minister is supposedly trying to do, namely, prevent high premiums for older persons.

Community rating is already provided for in legislation, set out in section 5 of the Health Insurance (Amendment) Act 2001. This means that one must charge the same rate for the same service regardless of age, sex, health status, sexual orientation, etc. The Bill does not improve the definition of community rating, but only amends or redrafts it to reflect the tax credit and the Minister's insurance levy. The legislative change is not necessary to strengthen the definition of community rating or to reinforce integration solidarity.

It is not clear whether the health insurance levy is ring-fenced for health insurance or whether it will be used to make money for the Exchequer. The Government needs to provide clarity on this.

The reality is the Minister is propping up VHI's dominance and VHI's market share, which is still anti-competitive and anti-customer. The levy will make private health insurance unaffordable, as I stated already, and will result in a contraction of the market by an estimated 10% or 200,000 persons. Family premiums are due to rise on average by 20% on typical plans. For cheaper family plans this will result in a relative premium increase of over 32%. Families on the cheapest plans tend to be those that are most price sensitive in the market, in particular under current economic pressures. It is projected that in excess of 200,000 persons at this lower end of the market will exit the market and will be left with no option but to revert to the public system.

This levy has a disproportionate impact on families and students within the market. A number of players in the market currently operate tiered discounting pricing for children and students, however the levy is calculated at a flat rate of €53 per child regardless of the cost of the premium. Therefore, even though a child may be free, he or she will incur a tax of €53. In addition, the levy does not differentiate between students and adults, although the former are on discount premiums, as set out in the Insurance Act. Such students will incur an additional charge of €160.

The levy will significantly increase the cost of employee benefits for companies. A number of large multinationals provide private health insurance as part of their standard employee benefits package. This levy will further increase the cost of trading at a time when companies are facing severe economic challenges. To remain competitive on benefits and to attract a high calibre of staff, it is important that they be able to give a quality health insurance benefit. Small and medium-sized enterprises that purchase health insurance for their employees will face significantly increased charges to provide that benefit to their workers.

The levy amounts to an increase of €12,800 for a company with 100 employees and will clearly be considerably higher for larger companies. For small to medium-sized enterprises of 50 employees, the impact will be €6,400. If companies can no longer afford to offer health insurance to employees, it will further contribute to market shrinkage and increase the projected drop-off of 200,000 people at the lower end of the market.

The levy is anti-competitive and means to prop up the State's dominant player. The VHI remains super dominant in the health insurance market with in excess of 70% of market share. In 2008, it declared profits of €112 million without ever having received any risk equalisation funds. Why was it necessary to introduce the levy with such speed when there was no instability in the market? Market segmentation and community rating prevent any company from charging higher premiums to older members. If the former was viewed as a danger in the market, it could have been prevented by an amendment of the supervisory powers of the regulator and an increase in the levels of minimum benefit required under regulation.

The levy is not ring-fenced. As such, the VHI can use the levy's proceeds for any purpose it may choose, for example, expanding its business. The VHI remains unregulated, but requires funding to reach solvency as required under regulation and so that Ireland might avoid charges of infringement by the European Commission. The VHI has stated that it is seeking to expand its commercial mandate into other business lines and jurisdictions. It needs funding to accomplish this. It will receive in excess of €30 million from the levy in the first year, which will only contribute to its profit margins.

There are grave concerns about the levy's impact on consumers, businesses and the wider market. According to research conducted by the regulator, price remains the primary reason for switching. With the introduction of the levy, there will be a harmonisation of pricing, which will reduce customers' choices, a stagnation of market shares and a reduction in competition. The levy will also create an even larger barrier to entry by new players. Unlike the previous risk equalisation measure, there will be no exceptions to allow small, new players to establish themselves. In other countries, dozens of players in the health insurance market create healthy competition. This proposal will prevent companies from examining the Irish market with a view to creating further competition and, therefore, better value for those seeking health insurance. With such barriers to entry and given the harmonisation of pricing, there will be less scope to compete in the market, resulting in the delivery of less choice innovation and poorer value to private health insurance customers.

The previous Fine Gael contributor, Deputy Reilly, mentioned our party's policy, which was complimented by Deputy Jan O'Sullivan. I congratulate Deputy Reilly on his work in this area. It is a comprehensive and detailed plan. If and when we are in government, our policy will significantly change the delivery of health——

It would be good were Fine Gael to get it costed. We could have a good debate on it.

The Minister has not read our document. She should do so. It is on the Fine Gael website. She would see——

I have read it. Fine Gael will pay the consultants more money.

The other point that we have included——

Fine Gael should send the policy to the Department of Finance to have it costed, as is tradition.

It is significant that psychiatric services be included in all areas of proposed changes to the health service.

Under our proposals, psychiatric services will have the same status and will be dealt with in the same way as the general health services. The reforms will broaden primary care and set performance targets for hospitals.

The plan borrows from Northern Ireland by proposing a special delivery unit to ensure that hospital waiting lists are sharply cut. I am sure that the Minister is aware of the Northern health system's success in reducing waiting lists. In year three of our plan, we will introduce a system whereby money will follow the patient. He or she will be seen as a source of income rather than as a cost to hospitals. It will incentivise hospitals to attract patients. At the same time, we will abolish——

President Obama is trying to change that in America.

——the National Treatment Purchase Fund, NTPF, because it will then be unnecessary. This is the first area of costings and savings that I can mention.

Fine Gael wants to get rid of the NTPF.

Good riddance.

This bothers and upsets the Minister. She is not prepared to listen to me. In year five——

It has a 94% satisfaction rating among patients, but Fine Gael wants to get rid of it.

It will not be necessary under our system. She should have confidence in our ability to deliver a health service.

I do not believe that there would be unlimited treatments for everyone free of charge. That does not occur anywhere.

Can we have order, please?

She should have confidence that a health service can be delivered. The Minister is saying that the current system cannot be reformed.

No, I did not say that.

By interrupting me, she is saying that the health system cannot be comprehensively reformed. What Deputy Reilly, Fine Gael and I are presenting to the Minister is a total reformation of the health service to bring it out of the quagmire in which it finds itself and to restore confidence to those who work within it.

I am just inviting Fine Gael to get its policy costed.

We would have a health service that is as efficient as those of many of our European colleagues.

Year five will see the introduction of universal health insurance, with mandatory health insurance chosen from a range of providers. This will be overseen by a universal health insurance commission, which we will establish early in the lifetime of a Fine Gael-led Government. Under universal health insurance, everyone will receive free general practitioner care, with premiums either paid for or subsidised by the State. The cost will be no higher than current private health insurance premiums, with the State paying the total insurance cost of children and those with medical cards. Some 75%——

Will everyone be able to go to every hospital under Fine Gael's plan?

Yes, but every hospital will compete.

Have it costed.

Debate adjourned.
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