Health Insurance (Amendment) Bill 2013: Second Stage

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

I welcome the opportunity to address the House on Second Stage of the Health Insurance (Amendment) Bill 2013. I would like Deputies to note that when the Bill was scheduled, the new rules with regard to the process of pre-legislative scrutiny had not yet been established. Of course, I will take the appropriate action in respect of any new legislation I bring before the House.

With regard to the issue raised by Deputy Kelleher, 18 December is the last day on which the Dáil will sit prior to the Christmas recess. The House will not be reconvened until January and what is proposed needs to be done now in order to give insurers proper notice in order that they might regulate their products for the beginning of the new year. What the Deputy is seeking to do would just not be workable.

Last week I announced changes to the risk equalisation credits and stamp duties that will apply in the private health insurance market from 1 March next. The Bill before the House will provide the legislative basis for those rates to apply. My reason for announcing the rates last week, prior to their applicable date, was to provide as much advance notification as possible to the commercial insurers to allow them to trade the new rates into their business strategies for the year ahead in a planned manner and allow them sufficient time to consider and review any actions necessary to avoid simply levying the full impact onto consumers directly.

The revised risk equalisation credits are the latest measure to be introduced as part of an ongoing strategy to keep health insurance as affordable as possible for everyone. Community rating, reflecting the principle of intergenerational solidarity, is a fundamental cornerstone of the Irish health insurance market. Under community rating, everybody is charged the same premium for particular health insurance plans, irrespective of age, gender and the current or likely future state of their health. Intergenerational solidarity between younger and older people also requires solidarity between healthy and less healthy people. As a result, younger and healthier people effectively subsidise older and less healthy people on the understanding that they themselves will be subsidised by future generations when they reach old age or become less healthy. To achieve this, we need risk equalisation to act as a critical support to our system of community rating.

The aim of risk equalisation is to take the market as a whole and distribute fairly the differences that arise in insurers' costs due to the varying health status of the entire insured population. Risk equalisation aims to make health insurance more affordable for older people by supporting community-rated premiums. In general, younger people pay more and older people pay less than that which would normally apply in a risk-rated system. Only through the use of risk equalisation can solidarity and cost-sharing be effectively implemented between the generations that hold private health insurance. The benefits of our system of community rating can best be seen as supporting the market as a whole and ensuring that, through the provision of risk equalisation credits, older customers can be helped and supported in purchasing health insurance at an affordable price.

The number of people who currently hold private health insurance is 2.05 million, or 44.9% of the population. The number of people insured has been in decline since a peak of almost 2.3 million at the end of 2008. However, even in the current difficult economic circumstances, the vast majority of consumers are retaining some level of health insurance cover. There are four commercial insurers operating in the private health insurance market here. There is, however, a clear disparity in the membership profiles, and thus the associated costs, of the various commercial insurers. Community-rated health insurance systems across the world use risk equalisation as a mechanism to distribute fairly some of the differences that arise in insurers' costs due to the differing health status of their customers. A company with a worse-than-average risk profile - and therefore higher claims costs - will be a net beneficiary from the risk equalisation scheme, while a company with a greater proportion of younger and healthier customers will be a net contributor to the scheme. The latter will, of course, benefit considerably from having much lower claims costs.

Risk equalisation creates a level playing field in the market through a system of credits, based on age, gender and the level of cover held by persons. The scheme is funded by a stamp duty payable by health insurers in respect of every health insurance policy written. Ultimately, the Bill before the House seeks to strengthen and maintain stability in the private health insurance market. It is important to note that compensation is set at particular levels in order not to encourage inefficiencies. Insurers should then compete for market share by providing better services rather than competing for younger lives. This is the type of competition that is good for the economy and the consumer. The risk equalisation scheme is self-funding - that is, the cost of credits is met by the stamp duties raised. In effect, the price of a health insurance premium payable by an older person is discounted by the appropriate credit for his or her age. This means he or she actually pays the same price for the same product as a younger, healthier member.

The maintenance of a healthy and functioning private health insurance market is an essential step in facilitating the transition to a market-based universal health insurance system. In addition to the support the revised credits will provide to the current health insurance market, the revised rates also serve an important function in helping to maintain the private health insurance market in the lead-in to universal health insurance. Work is under way in respect of the key building blocks that will pave the way for the introduction of the latter. I wish to take the opportunity to update Members on progress in some of the key areas in this regard.

As well as ongoing efforts to protect community-rated health insurance for all through enhanced risk equalisation within the private health insurance market, other major areas of progress include the strengthening of primary care services to enable the delivery of universal GP care without fees for the entire population - the Government has announced, as part of budget 2014, that it will commence the roll-out of a universal GP service by providing all children aged five and under with access to free GP services; the work of the special delivery unit in tackling waiting times and inefficiencies in hospitals and allowing front-line staff to deliver the excellent services they have been trained and want to deliver; the reorganisation of public hospitals into more efficient and accountable hospital groups that will deliver improved outcomes for patients - this was informed by two expert reports entitled "The Establishment of Hospital Groups as a Transition to Independent Hospital Trusts" and "Securing the Future of Smaller Hospitals: A Framework for Development", which were both published on 14 May 2013; and the publication of a money-follows-the-patient policy in February 2013 to provide for a fairer and more transparent means of funding health care. Preparations for the roll-out of the latter policy are ongoing and include a shadow funding exercise, which is under way, and detailed plans for the commencement of phased implementation of the new system in January 2014. These plans are in the process of being finalised.

Debate adjourned.