Health Insurance (Amendment) Bill 2020: Second and Subsequent Stages

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

I am pleased to have this opportunity to address the House on the Second Stage of the Health Insurance (Amendment) Bill 2020. The Bill was published on 19 November and, as Deputies will be aware, successfully concluded its passage through the Seanad on 26 November. I welcome the support received in that House for the core principle of community rating, which is a long-established and well-supported Government policy for the health insurance market.

This is a short and technical Bill comprising six sections, all focused under specific issue of health insurance. This legislation is needed to revise the parameters of the risk equalisation scheme, which is a financial mechanism that supports our community-rated health insurance market.

It is widely acknowledged that the events of this year have been unprecedented. Covid-19 has also had a significant impact on the private health insurance market, particularly the claims experience of insurers this year. This has caused much uncertainty regarding market direction in the year ahead, which is an important additional factor considered in setting the risk equalisation rates for 2021. I will begin by briefly outlining the purpose of risk equalisation before providing an overview of the process undertaken to set the 2021 rates, and then outline the specific revises rates which will apply next year.

More than 45% of the population in Ireland holds private health insurance. Health insurance in Ireland is provided according to four principles, namely, open enrolment, lifetime cover, minimum benefit and community rating. Our community-rated health insurance market means that the cost of healthcare insurance is shared across all members of the market. In general, with certain exceptions, everyone can buy the same policy at the same price. Insurers cannot alter their prices based on an individual's current or potential health status. Older and sicker people pay much less for health insurance than they would in a risk-rated market and people who are less likely to need healthcare pay more than they would in a risk-rated market.

The health insurance Act requires all insurers to apply community rating. Older and sicker customers, however, are not shared equally across the Irish market. Some insurers have higher risk profiles than others given they have a much higher proportion of older members. The number of older customers insured is spread unevenly across individual health insurers. This is a key issue within Irish health insurance.

To support community rating and reduce the incentives for insurers to target or avoid particular groups of people, some form of risk equalisation is required. Risk equalisation is, essentially, a transfer mechanism whereby money flows from insurers with healthier members to insurers with sicker members. 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 was first 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, with all moneys held in the risk equalisation fund. 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 risk equalisation fund is managed by the Health Insurance Authority, HIA, the independent regulator of the health insurance market.

Amending legislation is required each year to update the amounts of credits paid to insurers under the scheme and the amount of stamp duties levied on health insurance contracts to fund the credit. As part of the process, the HIA carries out an annual analysis and evaluation of insurers' market data focused on the claims cost every insurer has paid over the preceding year. Based on this examination, the HIA determines the level of credit to be paid out from the fund and the stamp duties applicable to every contract for the following year. This evaluation also includes information on market conditions, which is particularly relevant in the current pandemic. The HIA consults with each of the insurers during the process to ensure the evaluation is thorough and informed. In recommending stamp duty rates and credits to apply to the health insurance market for 2021, the HIA has the added consideration that market claims for the first half of 2021 were distorted as a result of the pandemic and the longer-term impact and market profile and membership is yet to be determined.

This year's Bill seeks to amend the health insurance licence legislation to provide for: the amount of stamp duty levy to remain unchanged in respect of non-advanced contracts, that is, €52 per child and €157 per adult, and €150 per child and €449 per adult under advanced contracts; the level of hospital utilisation credit, HUC, to increase from €100 to €125 per night payable for overnight stays in hospital, while the level of the HUC for day case admissions is remaining at €75; and a marginal decrease in the risk equalisation credits payable in respect of those aged more than 65 years.

Stamp duty rates next year, which are charged on every health insurance policy, will remain unchanged from 2020 levels. It is considered, in view of the market uncertainty at this time, that the sustainability of the market can be aided by keeping stamp duty unchanged in the period ahead.

The hospital utilisation credit is a type of risk equalisation credit paid to an insurer each time a customer attends hospital for an overnight admission or day case. The credit acts as a proxy for health status since it is paid retrospectively and only when a customer needs treatment. Increasingly, the HUC for overnight stays is intended to improve the effectiveness of the risk equalisation scheme by compensating insurers for the increased risk in providing community-rated health insurance products. Age-related products are paid from the risk equalisation fund to insurers for customers over the age of 65. These vary in amount depending on age, gender and the level of cover. The Bill will provide for a marginal decrease in the quantity of some of the age-related risk equalisation credits payable next year. While this means insurers will receive lower credit for some older customers, this is balanced by the increase in the hospital utilisation credit, meaning they will receive more credits for the customers who are hospitalised during the year.

The HIA has recommended the rates for 2021 and the Minister for Health and the Minister for Finance have considered and accepted the recommendations on the basis that the rates will provide stability and some certainty to the market in these unprecedented times. The amendments in the Bill 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.

I will now outline the specifics of the Bill. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 will amend section 11C of the principal Act to provide for 1 April 2021 as the effective date for revised credits payable from the risk equalisation fund. Section 3 will amend Schedule 3 to the principal Act with effect from 1 April 2021 whereby the applicable hospital utilisation credits payable from the risk equalisation fund in respect of insured persons are revised.