I move: "That the Bill be now read a Second Time."
I am pleased to have this opportunity to address the House on Second Stage of the Health Insurance (Amendment) Bill 2018. The Bill was published on 14 November and, as Deputies will be aware, concluded its passage through the Seanad last week. I welcome the support received in that House for the core principle of community rating, which is long-established and well-supported Government policy for the health insurance market.
This is a short and technical Bill comprising eight sections, all focused on the specific issue of health insurance. The amendments outlined in the Bill will ensure the ongoing sustainability of the private health insurance market and seek to keep health insurance policies at an affordable price for all citizens, whether young or old, sick or healthy.
Health insurance in Ireland is provided according to four principles, namely, open enrolment, lifetime cover, minimum benefit and community rating. Open enrolment means that insurers in Ireland cannot refuse to provide cover to someone who might be a risky customer, and there are maximum waiting periods for pre-existing conditions. Lifetime cover means that once a person has health insurance, the insurer cannot stop cover or refuse to renew the person's insurance, except in limited circumstances such as fraud. Minimum benefit means that all insurance contracts must abide by regulations to make sure that everyone who holds health insurance has a minimum level of cover. Perhaps the most important principle of health insurance in Ireland, and the principle that is the central focus of the Bill each year, is community rating. This has the greatest effect on affordability of health insurance for those who are most likely to need health insurance coverage. Community rating means that health insurers cannot alter their prices based on an individual's current or potential health status. Instead, insurers set the price for each product according to their overall expected claims costs. This helps to keep health insurance affordable for older and sicker people who might otherwise be priced out of the market. Community rating is supported by providing cross-subsidies between insurers with different risk profiles. It is essentially a financial transfer mechanism whereby money flows from insurers with healthier members to insurers with sicker members. This is called risk equalisation and without it an insurer with older and sicker members would be required to charge far higher premiums than competitors to cover claims costs. Risk equalisation seeks to level the playing field and encourage insurers to compete on what services they can provide to their customers rather than simply trying to attract younger people who are less likely to make health insurance claims.
The risk equalisation scheme was introduced in Ireland in 2013. Under the scheme, credits are paid to all insurers for their older and sicker members. These credits are funded directly by stamp duty levies on all health insurance contracts written. In effect, the scheme redistributes funds between insurers to meet some of the additional costs of insuring older and sicker members. None of the stamp duties on each health insurance contract goes to the Exchequer. Instead, they are all redistributed to compensate for the additional cost of insuring older and less healthy people.
In 2017, the risk equalisation fund redistributed approximately €650 million of premiums out of a total of €2.5 billion in premiums paid. The scheme is carefully monitored to ensure that none of the insurers is overcompensated, a scenario that would contravene the scheme's approval under European Union state aid regulations. In this way, the cost of insurance is shared between all insured people and we can ensure that sicker and older people retain access to affordable private health insurance.
Legislation is needed each year to update the amounts of credits paid to insurers under the scheme and the amounts of stamp duty levied on health insurance contracts to fund the credits. As part of the process, the independent market regulator, the Health Insurance Authority, carries out an annual evaluation of the market focused on the claims costs that every insurer has paid over the year. Based on that analysis, the authority recommends the level of credits that should apply the next year. The rates for next year recommended by the authority have been considered and accepted by my colleague, the Minister for Health, Deputy Harris.
This year's Bill will provide for a general decrease in the credits across genders and age groups and there will be no change in the stamp duty levy on contracts. Maintaining the stamp duty levies at existing levels should ensure that health insurers do not increase premiums and that contracts remain at an affordable price for all our citizens.
In addition to the technical amendments, this year's Bill provides for several amendments to the Acts governing the Health Insurance Authority and the VHI. In short, it is proposed to expand the membership of the Health Insurance Authority board; broaden the composition of the VHI board; and enable the VHI to sell international healthcare plans directly. I will outline each of these proposed changes in turn.
The Health Insurance Authority was established in 2001 with provision for five board members to be appointed. Since then the health insurance market has become more complex with insurers adopting innovative marketing and product propositions to expand their client base and improve their risk profile. Further significant changes can be expected as the Sláintecare programme is implemented. The role of private health insurance in our health system could change significantly and the regulator must be able to react to this changing role and advise the Minister for Health appropriately. Public sector governance obligations have also become more prescriptive. The 2016 code of practice for the governance of State bodies placed far greater emphasis on the accountability of State boards. For the objective and effective discharge of its functions, it is desirable that the authority includes a broad mix of skills and experience. Expanding the membership of the board will ensure it can deliver on strategy and address any challenges.
The Bill also contains two amendments to the Voluntary Health Insurance Acts, which provide the governing legislation for the VHI.
The first VHI-related amendment deals with board composition. Currently, the VHI board is restricted to having only two persons who are health service providers on the board. The amendment will remove this restriction. It includes a new provision to the effect that the Minister will give due consideration to the mix of skills present on the VHI board when making appointments, thus ensuring the highest standards of governance.
The second amendment to the Voluntary Health Insurance Acts deals with one specific area of VHI's business activities. This amendment will permit VHI to sell international healthcare plans directly, not only as an agent, as it is allowed to do currently. Moreover, the amendment will remove the requirement for the VHI to seek ministerial approval before selling these plans. This development is consistent with VHI's current status as an insurer authorised by the Central Bank. VHI is competing in a highly competitive and regulated marketplace and this amendment will remove the impediment to VHI's ability to compete with its competitors and thereby allow the company to avail of potentially significant business opportunities.
I will now outline the specific sections of the Bill. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 amends section 11C of the principal Act to provide for 1 April 2019 as the effective date for revised credits payable from the risk equalisation fund. Section 3 amends Schedule 1 to the principal Act to provide for the expansion of the membership of the board of the Health Insurance Authority from five to seven and to provide for an increase in the quorum from three to four. Section 4 replaces table 2 in Schedule 4 to the principal Act with effect from 1 April 2019 such that the applicable risk equalisation credits payable from the risk equalisation fund in respect of certain classes of insured persons are revised. Section 5 amends section 4 of the Voluntary Health Insurance (Amendment) Act 1996 to provide for a change in the composition of the VHI board. This amendment will remove the existing restriction on the number of healthcare providers on the VHI board. It includes a new provision to the effect that the Minister will give due consideration to the mix of skills present on the VHI board when making appointments, thus ensuring the highest standards of governance.
Section 6 amends section 1 of the Voluntary Health Insurance (Amendment) Act 1998 to amend the VHI’s current function as solely an agent for the provision of international healthcare plans and to permit it to sell international plans directly without using an intermediary. The amendment will also remove the requirement for the VHI to seek ministerial approval before selling these plans.
Section 7 amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty for rates for from 1 April 2018 to 31 March 2019 and from 1 April 2019 onwards.
Section 8 provides for the Short Title, commencement, collective citation and construction of the Bill.
This Bill allows us to maintain our support for the core principle of community rating, which is a long established and well supported Government policy for the health insurance market, and the amendments to the legislation governing the Health Insurance Authority and the VHI will allow these organisations to plan for future developments in this ever-changing and complex environment.
I commend this Bill to the House.