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 Bill. This is a short and technical Bill comprising six 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 and equal price for all citizens, young or old, sick or healthy.
Health insurance in Ireland is provided according to four principles: open enrolment, lifetime cover, minimum benefit and community rating. Open enrolment means insurers in Ireland cannot refuse to provide cover to someone who might be a risky customer for them, and there are maximum waiting periods for pre-existing conditions. Lifetime cover means that once a person has health insurance, an insurer cannot stop cover or refuse to renew his or her insurance, except in limited circumstances, such as fraud. Minimum benefit means all insurance contracts must abide by regulations issued by the Minister for Health to make sure that everyone who holds health insurance has a minimum level of cover. Community rating means that health insurers cannot alter their prices based on an individual's current or potential health status.
Perhaps the most important principle of health insurance and the principle that is the central focus of this legislation 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. Instead of risk-rating consumers, 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. Without it an insurer with older and sicker members would be required to charge much higher premiums than its competitors to cover its claims costs. The risk equalisation scheme seeks to level the playing field for consumers, affording them a greater choice of insurer. Risk equalisation also aims to encourage insurers to compete on what services they can provide to their customers rather than simply trying to attract younger and healthier people who are less likely to make health insurance claims.
The risk equalisation scheme was first introduced 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, with all moneys held in the Risk Equalisation Fund, REF. 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 health insurance contracts goes to the Exchequer. They are all redistributed from the fund to compensate for the additional cost of insuring older and less healthy people. The REF managed by the Health Insurance Authority, HIA, the independent regulator of the health insurance market.
In 2018 the fund redistributed approximately €732 million in premiums, out of a total of €2.85 billion in premiums paid. In 2017, the fund redistributed approximately €670 million of premiums, out of a total of about €2.5 billion in premiums paid. This reflects an increase in the number holding private health insurance from 2.17 million people in 2017 to 2.22 million people in 2018.
Legislation is needed each year to update the number 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 HIA 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 Ministers for Health and Finance have considered and accepted the recent recommendations made by the authority for the stamp duties and credits next year.
This year's Bill seeks to amend the Health Insurance Acts to provide for a general decrease in the risk equalisation credits payable in respect of those aged over 65; a decrease in the stamp duties on non-advanced contracts and a slight increase on advanced contracts; and an increase in the level of hospital utilisation credit for day-case admissions. This credit is a proxy for health status and provides support in respect of less healthy people.
These changes are in line with the policy objective of the scheme to support community rating in the health insurance market in order that older and less healthy people can access health insurance at the same price as younger and healthier people.
Advanced contracts are held by more than 90% of the insured population and provide for greater coverage than those who have non-advanced policies. This Bill seeks to increase the stamp duty payable on advanced contracts by up to €5, representing a 1% increase in stamp duty, and comes after two years of no change. This is necessary to support more affordable policies for older and less healthy people. It is important to note that these stamp duties fund credits. The levies do not increase costs across the market. The scheme is Exchequer neutral in that it is neither a cost nor a benefit to the State. The stamp duty and credits make our community-rated health insurance system work because risk is shared across all the community of insured people and it ensures that older people and people with illnesses can access affordable health insurance just as younger, healthier people can.
I will outline the specific sections of the legislation. 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 2020 as the effective date for revised credits payable from the REF.
Section 3 amends Schedule 3 of the principal Act with effect from 1 April 2020, whereby the applicable hospital utilisation credits payable from the REF in respect of insured persons are revised.
Section 4 replaces table 2 in Schedule 4 to the principal Act with effect from 1 April 2020, whereby the applicable risk equalisation credits payable from the REF in respect of certain classes of insured persons are revised.
Section 5 amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates for 1 January 2020 to 31 March 2020, and for 1 April 2020 onwards.
Section 6 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. I commend the Bill to the House.