Joint Committee on Health and Children debate

Health Insurance Levy: Discussion

Chairman

We will now discuss the matter of health insurance. I welcome representatives of the health insurance providers and I apologise to them for the delay. We did not expect to spend so long discussing an EU policy directive on tobacco. I hope they understand it was an important issue and we had to seek clarification on it. I welcome Mr. John O’Dwyer and Mr. Declan Moran from VHI, Mr. Dónal Clancy and Mr. Christian Jaggy from Laya Healthcare, Mr. John Armstrong and Mr. Brian Dunne from Aviva Health Insurance Ireland, and Mr Jim Dowdall and Ms Teresa Kelly Oroz from GloHealth. We are discussing the issue of private health insurance, an issue that concerns not just the minds of the committee but the members of the witnesses' companies. It is an important issue, as discussed in October, and we will keep it on our agenda as we move towards universal health insurance.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable. I invite Mr. O'Dwyer to make his opening remarks.

Mr. John O'Dwyer

From the perspective of VHI, we would like to cover a few topics to remind the committee of our private medical insurance market and some of the rules in it. We would like to talk about the importance of risk sharing and to examine the key issues facing the market. We will make some suggestions on how to make progress.

Some 2.1 million people in the country have health insurance, amounting to 47% of our population. Some 390,000 customers are aged over 60 years. The core principle by which we all compete is community-rated premiums, which means the same price for the same product in the case of a 20-year-old or a 60-year-old. There is no risk selection and the sick and vulnerable have the same access to care. There is a risk-sharing system, primarily to protect the elderly and the sick. The key objective of all the rules is to ensure there is no incentive to compete on risk selection.

We have community rated health insurance, meaning we charge someone who is 30 years of age the same price as a 70-year-old. This is different to property insurance or motor insurance, where there is risk rating. In community rating, we must have a risk-sharing system. It is worth pointing out that the health care costs of different age groups, whether healthy or sick, are different. An average 35-year-old costs approximately €700 per year in health care costs, while the average 75-year-old costs nearly €4,000. In the case of a sick 75-year-old, the figure can be multiples of that and can easily amount to €40,000 or €50,000. Without risk sharing, sick and older customers will not be able to afford health insurance when they need it most. All international markets with community rating have a risk-sharing system, including Australia, Israel, and our neighbours the Netherlands, Germany and Switzerland.

We welcome that the Dáil has put a permanent risk equalisation system in place and we are pleased that, for the first time, health status has been introduced. In the case of two 40-year-olds, the one with an illness such as diabetes costs much more money. It is a positive step that we now have health status.

While we are happy there is a permanent system of risk equalisation, we see areas for improvement. The effectiveness of risk equalisation needs to be improved. We estimate it is 55% effective, and it should move to closer to the Netherlands and other markets, for which the equivalent figures are more than 90%. There is great room to improve health status and how it is measured. It can be more sophisticated. There is an opportunity to have one standard level of cover. While we understand some of the motivation behind the current system of advanced and non-advanced cover, the solution is to have one standard level of cover with appropriate, fully effective risk equalisation.

Our risk sharing system is cost-neutral, with levies charged on each health insurance product and credits for companies that have elderly or sick people. Rather than going into a central pot, the money from the levies goes to companies that have sick or vulnerable people.

Our presentation gives an example of why we would like the effectiveness of the risk equalisation scheme to improve. If we examine the claims costs in the case of a 35-year-old after risk equalisation is applied and compare it to a 75-year-old, there is a difference of €1,000. A company with a 35-year-old, as opposed to a 75-year-old, is €1,000 better off. This incentivises cherry-picking in the market and we believe it is the key reason there are hundreds of products in the marketplace. We would like to see the gap significantly closed.

Looking at the challenges facing the market, the greatest challenge is affordability. The single greatest challenge facing us down the road is an increase in public hospital charges. The proposed increase, which we understand to be approximately €250 million over a couple of years, will add significant amounts to premiums if the charge goes ahead at that level, no matter what we do in respect of cost containment. I hope I speak for the industry on this point.

We would like to see no risk selection. We ask the committee members to note our key point, which is that we are looking for a simple and clearly understood standard product in the marketplace to cover people in the event of being sick. The product should have risk equalisation of greater than 90% effectiveness supporting it. Everything above that product can be risk-rated.

This is not dissimilar to what happens in Holland. Universal health care will take a number of years to introduce in its full form, but we can take many steps towards it with a standard product and also with the introduction of lifetime community rating. We need to encourage young people into the market, but we also need to acknowledge that a person coming in at 30 years of age should be given some credit, as opposed to someone coming in at 55 years of age when they are more likely to need health insurance. The concept of lifetime community rating should be introduced soon. We could also look to make sure it is affordable for young people. We could look for limited discounts for the under 30s.

Whatever actions are taken and whatever the rules of the game are, all our actions should be directed towards supporting the long-term objectives of universal health insurance which we, in VHI, clearly support.

Mr. Dónal Clancy

I thank the Chairman and the joint committee for giving me the opportunity to be here. I offer apologies on behalf of Dr. David Muiry who was here the last day but cannot attend today. We are joined by super sub Mr. Christian Jaggy from Elips Insurance who is equally versed in the international scene.

The last day we specifically wanted to get the consultation process on the health insurance Bill going. Arising from the consultation that occurred before Christmas, some changes were made which proved the importance of consultation to us. We did not get as many changes as we would have liked, but we must acknowledge there were changes and that it is imperative such consultation moves forward in the manner of co-operation among the industry and the entire market. Laya Healthcare should be involved, as we have mentioned many times. We are not involved in the universal health insurance implementation group which should integrated with the insurance market, as well as with the other parties.

Our primary concern is the sustainability of the market. This is not unlike the conversation we had the last day and we will not go over all of the points we made on universal health care and the arguments Mr. O'Dwyer made about effectiveness. We naturally disagree with the figures he produced to show an effectiveness rating of 50%, as do others in the market. Our position is that consumers must be able to afford cover. In the main, what consumers can afford is not considered. We must have an open and frank discussion on how long the building blocks can continue to rise. We have the recession, the levy and stealth taxes being introduced in the form of public hospital bed designations. On top of this, with young and healthy people leaving the market, there will be more claims because consumers are ageing. All this means is the price spiral will commence again.

There must be an incentive, a matter we discussed the last day, to get young and healthy people to stay in the market. We agree that lifetime community rating is an important feature. However, we have to incentivise people to enter the health insurance market and stay in it. Very simply, if one joins at 25 years of age, one should maintain the rates for the rest of one's time in the market. The same goes for somebody who joins at 55 years of age. It is as simple as that. Someone joining at 55 years of age is on the same rate, irrespective of the fact that he or she is heading down the road that is more high risk.

In regard to the levy, the fundamental issue is, as I said, the building blocks, on which we are reaching a tipping point. I have articulated in the slides presented that we are talking about a figure of circa €60 million. I am talking about our customers specifically; I am making it personal because our members are being asked to pay an additional €60 million this year. That is the net impact. The age related tax relief and the levy mean a €60 million increase for our members which represents a figure of circa 20% year-on-year.

In addition, I agree with having a health status or, as it is called, the hospital bed utilisation charge. However, it is flawed in the manner in which it is being implemented. This hospital bed utilisation charge could incentivise inefficiencies in that it is judged by the length of stay for a procedure. Across the board, it is recognised as not being satisfactory and needs to be rectified quickly because it should be judged on what the status is, not by how long one stays in a hospital bed. Those who least can afford health insurance, those on lower plans, and children pay and will continue to pay the same levy as those staying in hotel-like accommodation.

On the concept of having advanced and non-advanced products, although admirable, the definition has made it such that, for example, all Laya Healthcare plans which provide essential cover fall into the advanced bracket; therefore, there is no benefit whatsoever. That has put us in a position where we are looking at a levy which was set on the basis that 15% of products would be non-advanced, while 85% would be advanced. However, because of the way it has transpired, 100% are deemed to be advanced. Therefore, it is our contention that the levy rate, as set, is incorrect and seriously flawed.

There are some technicalities in regard to the levy which I have outlined on the slides, but there is time to rectify them. Simply put, if I was to downgrade, as many of our members have done, in the same year because I could not afford my current plan, I would have to pay the levy again, given the way the legislation is drafted. That is a mistake and should be rectified in the Finance Bill. There are many nuances around it, corporates, etc., and we have suggested changes which would rectify it the position. One should pay one levy per year, not two or three, or, as it is written, potentially four.

The biggest threat which has yet to be faced by our group or any other is posed by the proposed additional public hospital bed charge. This is definitely the latest threat to affordability for our customers and will directly result in what we understand will be between a 20% and 40% increase. This is the way it is set out. It will build and add to the levy expenses being incurred, the effects of the recession, the cost of claims and everything we have mentioned. It will be the straw that will break the camel's back. It will put another 40% on top of what is in place. The way it is articulated and the way I understand it is that in three years time €250 million will have been added to the pot and it will be game over.

What we are saying is the current market will become a fraction of its size, customer rates will go up, as I have highlighted, and the effect on the Exchequer will be the reverse of the expectation. What will happen is that more people will move into the public system and that the revenues currently extracted from the private sector in the public system will be eroded. As time passes, there will be a clear divide and we will end up being in a solely risk rated market.

There is a price spiral which has not stopped since we last spoke. Lifetime community rating or some equivalent needs to be put in place to ensure the young and healthy will be incentivised to stay in the market. The levy is set too high, with the ratio set, but it can be adjusted. We have to look at the additional implications for consumers of the Finance Bill, as drafted. Risk equalisation, as set, needs to be fair and, while not particularly wanting to redraft everything, the levy needs to be a proportion of what it is now. It needs to be based on a core set of standard benefits. Those on lower plans and children are cross-subsidising those on the higher hotel-type plans. That is the system as we see it.

I genuinely believe we do not understand the impact of what is being said about public hospital bed designation. I honestly think this is a game changer. The system will break down if this happens in the manner proposed.

Chairman

I call Mr. Brian Dunne, who is chairman of Aviva Health.

Mr. Brian Dunne

I thank the Chairman and members of the joint committee for inviting us to make a presentation. I apologise to the committee on behalf of our managing director, Ms Alison Burns, who could not be here today.

The committee has asked us to address the topic of health insurance and related matters. I will start by considering the health insurance levies, as other speakers have done. I will then set out our views on key issues for the future of the health insurance market in Ireland. Our views are probably shared by the other companies. I will focus on the affordability of health insurance, the management of costs within the system and the proposal, as outlined in the budget, to increase substantially the charge for health insurance companies using public hospital beds.

Aviva Health is committed to the introduction of a robust risk equalisation system to support the public policy objective of community rating and, more generally, inter-generational solidarity in the health insurance market. The updated levy and credit system, as introduced in legislation passed by the Oireachtas in December 2012, is a further significant step in the development of a robust risk equalisation system. The issue concerns the quantum. The levies equate to a high proportion - more than 40% in some cases - of the overall insurance premiums of customers on entry level plans.

There was some consultation with insurers about last year's legislation. We actively participated in the consultation in a constructive manner. While some of our concerns were taken on board, the updated system has a number of shortcomings. An emerging issue is the categorisation of products available on the market as "non-advanced" or "advanced". The Health Insurance Authority was asked to categorise each product according to the level of benefits provided in a private hospital. If these benefits are in excess of 66%, the product is categorised as "advanced" and, therefore, subject to a higher levy. Anything below that figure is considered "non-advanced" and subject to a lower levy.

On 31 December last the Health Insurance Authority notified all health insurers about the categorisation of their products. To our surprise, all of Aviva Health's products were classified as "advanced". The primary reason for this is that outpatient diagnostic treatments in private hospitals are taken into account in arriving at the categorisation. One of the consequences of this is that insurers, including Aviva Health, will have to reduce some benefits on entry level plans to ensure they are classified as non-advanced products and thereby attract a lower levy. We will continue to work with the Department of Health, the Health Insurance Authority and our competitor insurers through the Health Insurance Consultative Forum to overcome the shortcomings inherent in the new system for the benefit of all consumers.

When we made a presentation at this forum in October last year, we provided some numbers on the changing age profile of the industry membership between 2008 and 2011. For the benefit of members, we have included these numbers again in Annex 1 of the documentation we have furnished to the committee. The numbers are telling in so far as they show that the age profile of the insured population is rising and that younger people are opting out. While no numbers have yet been published for 2012, we do not believe this pattern has changed. As a result of the continued and increasing pressures on budgets in all Irish households, including escalating health insurance premiums, this trend is continuing in 2013. All stakeholders, including insurers and the Department of Health, have a shared responsibility to make the market sustainable. We cannot achieve sustainability if we do not have an appropriate regulatory environment, with all insurers subject to the same rules, or if we are unable to manage costs to make health insurance more affordable for everyone.

Aviva Health recognises that in addition to the quantum of levies, the management of costs by insurers is key to affordability. For health insurers, this means, individually and collectively, controlling administration and claims costs. Administration costs should account for a relatively small proportion of overall costs. The cost of claims is a bigger issue. Aviva Health has introduced a number of cost control initiatives. We engage in robust negotiations with all of our private providers, including consultants. With the advice of our own medical council, we have developed protocols for medical treatments. We encourage early intervention and treatment in the community. We have made significant savings through our claims investigation unit which reviews and monitors the billings of providers. These initiatives are a source of advantage to us.

There are ways in which insurers can work together, with the support of the Department of Health, to manage claims costs and, therefore, maintain the sustainability of the market. The development of industry standard clinical pathways would ensure quality health care was provided for customers in the most efficient manner. For example, guidelines on the appropriate setting for treatments - inpatient, day patient or at home - should be agreed. There should also be criteria for the payment of certain procedures and the appropriate length of stay if inpatient treatment is required. If medical practitioners and the industry work together, they can ensure the treatments provided are usual, customary and reasonable.

Under current rules, insurers are not permitted to negotiate with public hospitals. This is a barrier to an efficient market and reduced premiums for all consumers. Insurers should be able to negotiate contracts with public hospitals. The proposed new public hospital group structure may facilitate this and it should be introduced as a matter of urgency. The industry also needs to encourage the use of primary care as an alternative to hospitalisation. This includes promoting and covering treatments in the home or in a primary care setting. We should adopt payment reforms across the market, with the State and health insurers working together. As part of this, we need to counter fraudulent claims. None of these measures will yield dramatic and immediate savings, but they must be part of a long-term project to help to keep the market sustainable.

We want to impress on the committee the implications of substantial increases in the charge for privately insured patients occupying a public bed. This is a matter of the utmost concern for us, as it should be for all consumers and public representatives. It is inevitable that any move to redesignate bed charges will drive up premiums substantially because insurers simply cannot bear the cost while remaining in business. In fact, it could well have substantial implications for the sustainability of the market as a whole. This proposal raises fundamental questions for the health insurance industry and the health system in general. Why should patients who have private health insurance and pay their taxes lose their universal entitlement to public health care funded by the State? How can we expect the industry to retain its customers in the light of the scale of price increases that would result from this change? If the market shrinks as we predict it will, how will the State fund the increased demands on the public system? Will the public finances be better or worse on a net basis after the increase? As young and healthy people continue to leave the market, how can we expect those who remain to bear the ever-increasing burden of premiums and levies?

Bed redesignation represents a major shift in health policy. The questions I have asked must be answered before further steps are taken towards its implementation. I thank the committee for giving us an opportunity to present our views on important matters that are defining the shape of the health insurance market in Ireland. We look forward to participating in this discussion and answering questions.

Chairman

I call Mr. Jim Dowdall, who is the CEO of GloHealth.

Mr. Jim Dowdall

I thank the Chairman and the members of the joint committee for giving us an opportunity to discuss the growing affordability crisis in the health insurance market. I welcome the committee's decision to revisit this subject and hope it will persevere with this issue until we see the reform needed to ensure health insurance is affordable.

The problem of not seeing the warning signs at an earlier stage has been identified as having contributed to the economic collapse of recent years. Similarly, we are now seeing strong warning signs that the health insurance market which serves over 2 million customers is fast approaching tipping point, at which it will become unsustainable. Every month growing numbers of health insurance customers are being forced to give up their cover and fall back on the public health system which is already over-burdened. Critically, most of those who are leaving the market are younger and healthier citizens, the exact people we need to retain if we are to protect the viability of community rating.

The position has been made worse by the mishandling of the establishment of a new levy scheme, with two tiers of levy. This scheme is supposed to protect those customers on the lower level plans. The Minister could not have been clearer when he spoke in the Oireachtas in November. He said he would not make health insurance customers with lower levels of cover pay a higher levy.

However, when the Bill was enacted in December, it transpired that none of the plans in the market qualified as a lower level plan. On the basis of this decision alone, an individual paying €500 for a lower level plan will now pay the same levy as someone who can afford to pay €4,000 for a higher level plan. This is inequitable and wrong. The Department's response to this reneging on a commitment given in the Oireachtas is to shrug its collective shoulders and suggest, in the style of Marie Antoinette, that clarity has been provided and that customers will just have to pay more. According to it, an insurer could tweak a few plans to bring them into the lower tier of levy. Unfortunately, what it considers to be nothing more than tweaking will amount to the removal of significant benefits from those insured under lower level plans. For example, where previously a health insurer would have paid the full cost of an MRI scan, customers will have to pay a significant proportion of this cost. There are many other similar examples. If insurers are forced to reduce benefits to move plans into a lower category, the value of such plans will be reduced and those who purchase them will correctly think again before renewing. For this reason, one can expect many more people to drop out of the market, rather than accept a lower level of cover.

I challenge some of the points often made by those who defend the current regime. Only yesterday the Minister stated the health insurance levy had no overall impact on costs in the market. As the sole shareholder of VHI and sole beneficiary of the health insurance levy, he would say that. Let us be honest, the levy is not cost neutral to the three insurers which are subsidising VHI. By the end of next month the health insurance levy will have more than doubled to €350 for an adult since it was introduced only four years ago. In that period the cost of health insurance has spiralled and we do not need to look far to find the main driver of the price increases. The Department of Health's plan, if unchecked, will result in a family of four paying €940 in levy charges alone from the end of March. Let us be honest in this respect also, the levy is a transfer from the customers of the commercial and regulated private health insurers to VHI. By the Minister's own admission, the cost base of VHI remains unacceptably high, as many examples highlighted recently in the media have shown. Where is the urgency or incentive for VHI to cut its costs and become more efficient when it has a ready-made subsidy available from its competitors?

It is also claimed that the increased cost of health insurance relates to the cost of new medical treatments. I have been involved in the health insurance market for more than a decade and in my experience customers always want and deserve the latest innovations, best treatment and most modern procedures. This desire on the part of customers has not developed in the past three years and is not the primary cause of price increases. What has developed in recent years is a levy system that provides a very expensive prop for the protected and privileged position of the dominant player in the market.

I ask the committee to focus on one simple issue. Younger, healthier policyholders are critical to ensuring the community rated market is sustainable. Retaining and attracting these customers is the only protection that ensures health insurance remains affordable for everyone, but we are losing this battle. The question to be addressed, therefore, is whether the health insurance levy is part of the problem or part of the solution. I am convinced the evidence shows that it is a major part of the problem. I urge the committee to continue its work on this topic by turning over stones and challenging those responsible who confidently state, "Problem? What problem?" They are either oblivious to or, even more worrying, do not care about the impact these costs have on consumers. At a time when people are experiencing serious financial pressures, increasing a self-defeating tax subsidy is counter-productive and plainly wrong.

Before the affordability issue worsens at the end of March, I ask the committee to request that the Minister postpone the intended levy increase as it is simply not appropriate in the current economic environment. The Department of Health must be forced to move from its current approach of protecting VHI from its competitors at all costs, regardless of the serious impact it has on consumers. A priority must be for the Minister and the Department to focus on addressing internal efficiency in VHI, an issue raised by the Minister recently when he stated he was less than satisfied with the company's progress in addressing its cost base. The saving to VHI from greater efficiency could be greater than the levy subsidy received from its competitors. This matter must be addressed before any increase in the health insurance levy is considered.

As the timeframe to intervene is short, I urge the committee to engage immediately with a view to protecting all health insurance customers and ensuring the objective of universal health insurance remains achievable on the back of a viable health insurance market. I thank the Chairman and members for their time.

Chairman

I thank all the delegates for their presentations.

Deputy Billy Kelleher

This must be the first time the Chairman has been pleased there are only four insurers in the marketplace, as it would be difficult to direct our questions if there were more delegates present.

Chairman

When asking questions, I ask members to identify the company they are addressing.

Deputy Billy Kelleher

I welcome all the delegates. The issue before us has been discussed for some time at this committee, in the Dáil and general public discourse. There is no point in pretending the health insurance industry is not in crisis. Families are being put to the pin of their collar as they try to retain private health insurance. I have opposed, sometimes as a lonely voice, certain Government policies on health insurance, including imposing a full cost charge for private patients in public beds. This and other policies are escalating the price of health insurance.

As the dominant player in the market and the company which sets the trends and impacts on the other health insurers and broader health insurance market, I will first put questions to VHI. The Milliman review of VHI was not especially complimentary. It noted, for example, inefficiencies in administration and other areas where VHI's cost base needs to be reduced. I find disturbing the charges the health providers levy on health insurance companies. The average length of stay for procedures is also a concern, particularly given advances in technology and medicine. Surely average stays should be diminishing rapidly, but this does not appear to be the case. I refer to a highly disturbing, if isolated case, which raises a fundamental issue. It was highlighted in a report by Susan Mitchell in the Sunday Business Post of 17 February. She noted that in the case of one Dublin man who had spent the night in a private hospital in Dublin for a procedure on his eye, VHI had paid more than €4,300 for the hospital charge which did not include pathology test fees or the payment to the surgeon. These were detailed separately and amounted to an additional €1,400 on the bill seen by the newspaper. I have no reason to question the integrity of the eminent journalist in question and assume, therefore, that her report is factual. Moreover, I understand the report was not contradicted by VHI.

I have doubts about the proposal to move to a universal health insurance model, although it appears to be supported by most of the delegates. If we are to do so, VHI and the Minister for Health should be trying to create a dynamic health insurance market that is competitive, robust and expanding, as opposed to contracting. If we are to move from a position in which the number of people with private health cover is declining and adopt a universal health insurance model, a large gap must be closed. This can only be done in one of two ways, either by direct subvention by taxpayers for individuals who will have to take out universal health insurance or a massive increase in premium cover rates. VHI has a major obligation to try to reduce costs, as does the Minister, given that the State is a major shareholder in the company.

If memory serves, VHI has a workforce of approximately 900, a significant number of people. Administration costs must be reduced and the company must also try to force down the charges levied by health providers. It does not appear to take a robust or aggressive approach to driving down costs. I am sure Mr. Dwyer will have a different view on the matter, but there appears to be some evidence to support my view, including the findings of the Milliman review and others that have observed VHI's interaction with health providers.

On the full cost charge for private patients in public beds, most people are entitled to universal health care by virtue of their citizenship and status as taxpayers. If we continue to charge the full cost of private beds in public hospitals, we will further drive up the cost of private health care.

We are going to force more people out of the market, as is evident, and more people into the public hospital system. It is straightforward arithmetic. We are heading into it without observing the impact it will have in the short and medium term in the rush to seek the Holy Grail of universal health insurance. I do not believe the policymakers, the Minister and the Department have examined the issue in detail to see the crippling impact it will have on people who are already struggling and trying to fund private health insurance, which is a noble aspiration in the sense that they want to remove the burden on the State in providing their health care. They are willing to pay for themselves and they are utterly overwhelmed by the increased charges that are a direct result of policy decisions, not marketplace decisions, in terms of charging private patients in public beds. Clearly, that is an issue that has to be revisited very soon.

With regard to the advanced and the non-advanced policies, I had assumed there were 47 policies that had been pointed out as being non-advanced. When we debated the issue in the House, it was highlighted as part of the legislation that non-advanced policies would not attract the higher levy rate. We now find there is no non-advanced plan in the State. Were the insurers pretending they were selling non-advanced plans all along, or was there a policy change at some stage between the legislation being published and the legislation being passed? This is critical. This is about fairness and supporting people who are at the threshold of having to let go of private health insurance because they cannot afford it. This policy change will have a direct impact on people's ability to take out and retain private health insurance.

In its discussions with the Department, the health insurers said there was engagement. A White Paper on universal health insurance is coming down the tracks. In terms of broader discussion on the sustainability of the health insurance market per se, how much open discussion takes place with the health insurers on trying to bring about a platform for a sustainable health insurance model prior to the move to universal health insurance? I am aware there was discussion in some areas on the advanced and non-advanced plans but that obviously fell flat in view of the published legislation.

The incentivisation of younger people was debated at length at the committee and raised in the House on numerous occasions. Nobody has yet told me how we can go about incentivising young people to take out and remain in health insurance. Everybody says it is an aspiration and that it should be done to maintain and support health insurance and the viability of the market. What is the best way to proceed within the confines of the policy under which insurers must operate with regard to risk equalisation, the levy and so on? Is there a mechanism available to the insurers to attract young people into the insurance market or are their hands tied because of the policy decisions and the legislation under which they must work?

In terms of the requirement to be regulated under the Central Bank, there is a large shortfall in the VHI's solvency funds. From where is the funding expected to come? Will it come through a direct subvention from the taxpayer, through increased premiums or through greater efficiencies?

Deputy Denis Naughten

I thank the witnesses who are appearing before the committee. We have a serious problem within the health insurance industry where 200 people per day are giving up on their health insurance. If the new levy goes ahead, as currently structured, far more families will leave the health insurance system. Most of my questions are for Mr. John O'Dwyer but I have some for the other insurers also.

Chairman

Just ask questions, please.

Deputy Denis Naughten

I shall keep to questions. In his presentation, Mr. John O'Dwyer said risk equalisation was about 55% effective whereas the Department of Health was recently quoted as saying it was about 70% to 80% effective. Why is there a difference between his interpretation and that of the Department? Who is right? That has a significant impact on the overall cost of health insurance for families. He also said in his evidence that he does not agree with the two levy approach. Perhaps he would elaborate and explain why he does not agree with it. The reason we as legislators introduced the two levy approach was to try to put a safety net in place for young families who are carrying massive mortgages and massive child care bills while their household income is reducing on an annual basis. They cannot afford to stay in the system unless there is a two levy approach.

May I ask each of the insurers the actual financial impact if the Government goes ahead with its plan to have the full hospital charge passed on to insurers? What does that mean in real terms for families who are struggling?

Mr. John O'Dwyer made the point at our last hearing and also in the media that the VHI would be more profitable if it lost customers, which is bizarre, but I know where he is coming from. What efforts has the VHI made to encourage its members to take up equivalent policies with some of the other insurers? The Health Insurance Authority has made the point that people over the age of 60 years are buying policies from the VHI when they could get better value for the same coverage with some of the other insurers. Is any effort being made to encourage them to move to other insurers? Mr. O'Dwyer has also said he does not agree with the splitting of VHI. Given the huge age profile, would it not make sense to split VHI or hand over a cohort over the age of 60 to the other insurers to balance out the market?

In recent years staff numbers have increased at a time when the number of policyholders has decreased by about 30%. Will Mr. O'Dwyer please explain that? The average salary within VHI is about €52,000 while for other insurers it is about €12,000 less. Naturally, most are administration and call centre staff and I do not believe they are in receipt of that level of pay. Who is getting that level of pay in VHI? How many staff are on more than €100,000, because the public who are paying the policies cannot afford to continue to pay at that rate?

In respect of VHI accounts, it was pointed out recently that there is a liability of €28 million for providing subsidised health insurance for life for staff recruited prior to 2002. How many staff are involved? Is it just staff members? Are spouses covered? Are children covered and, if so, up to what age? Mr. O'Dwyer has made the point in his interviews that the VHI will continue to provide that cover as long as it can afford to do that. Does he believe, given the cost of insurance, that the company can continue to afford to pay while young families foot the bill for that perk? Between 2010 and 2011, the VHI has lost 3% of those over 60 years of age who had policies with the company. What impact has that had on overall claims cost?

Does that feed into the 5.6% figure relating to the reduction in claims costs or is it over and above it?

Turning to the issue of health status, as I stated when the legislation came before the House, I have huge concerns over the health status index as it is currently structured because it is based on bed occupancy. It is bad to see that in legislation and I have massive concerns about it. What efforts are being made within each insurer's organisation to ensure we can move as soon as possible from bed occupancy as an evaluation of health status? What sort of timeline is envisaged on that?

Deputy Kelleher mentioned the Milliman report. One of the issues highlighted in the report was length of stay. Some of the figures on that may be out of date, but in some examples the report showed that the length of stay for procedures under the VHI is five times that of some efficiently operated systems elsewhere. Where is the incentive for any insurer to try to get a person out of hospital as quickly as possible when it is written into law that the hospital will be paid more based on the length of stay of a patient in hospital? For example, a middle-aged Aviva patient is currently in University Hospital Galway, costing the insurer between €800 and €1,000 per day. That woman must remain in hospital for another three weeks because she is unable to get a piece of equipment which costs €4,000 that would allow her go home in two days time. The insurer, Aviva, has refused to pay the €4,000 and is prepared to allow that patient remain in hospital for the next three weeks, at a net minimum cost of €13,000. I believe the legislation we passed in the House a few months ago incentivises this practice, and this is unacceptable.

Mr. Clancy made the point that if someone moves mid-year from one policy to another, that person will have to pay the levy a second time. Will the other three insurers comment on whether that is also their understanding of the legislation? He also made the point that people at the lower end of the market will end up subsidising gold-plated health policies at the upper end of the market. I ask for the other insurers to comment on that also. In my view, that is unacceptable and cannot be allowed to happen no matter what system we have in place.

Deputy Catherine Byrne

Deputy Naughten has asked two questions that I was going to ask. Everybody is looking around for a better choice in all areas, and whether it is looking for a television package or an electricity supplier, people are shopping around. People make a choice when they buy private insurance, and they buy it for a number of reasons. Some of them have the money to buy in, but they also want a fast track to getting a procedure done or getting into hospital. The fact that many young people have no jobs and many others have been left suffering huge mortgage stress has led to them reconsidering their priorities. Many of them feel they would rather pay their mortgage than pay for health insurance. I do not have private health insurance and would find it difficult to pay it because I would need to cover five people.

Mr. John O'Dwyer

With regard to cost containment and length of stay, Milliman identified close to €25 million, which we are actively working on, representing 2% of our overall claims costs. However, the Milliman report also said that some of the cost savings the VHI has implemented have not been seen anywhere else in the world. Sometimes we can be selective in our reporting of the issue. The VHI is obsessed with driving down costs. As I said to the Chairman, we are not perfect but in the last couple of years we have driven down costs by €200 million. Consultants' costs, for example, are back to 2004 levels. Maybe they should be lower but to drive them down to 2004 rates is good progress. We often talk about the average consultant cost but a couple of years ago, the average consultant was getting approximately €83,000 from VHI. Today, that is down to just over €60,000. These are clear examples for the Deputies of the VHI driving down its costs. We have a clear programme over the next few years to drive down costs by a further €100 million or more. However, like some of our competitors here, we are scared by the implications of this potential cost in the public hospitals of €250 million. This is, as Mr Dónal Clancy has said, a game-changer and will really hurt our business going forward.

I wish to address a few other issues. Reference was made to our staff and our administration costs. VHI administration costs are 6.3% and would stand up anywhere in the world. We are in the top decile. If I could put it in sporting terms, we are in the Champion's League regarding administration costs. Am I saying there is no room for improvement? No, I am not because there certainly is but the issue is not the administration costs but the claims costs in terms of keeping health insurance affordable. This is where we need to focus.

Regarding the question of salaries, in our core health insurance business our staff numbers have come down slightly. We have tried to look after our customers as they expect and have introduced a new home care facility in recent years. Where a customer has been in hospital, we can treat him or her at home with our own doctors and nurses. We have recruited specialist medical personnel, who are not cheap, to make sure we can take people out of hospital and treat them in the comfort of their own homes. We tick two boxes here. We delight the customer and we also reduce our costs. We also have SwiftCare clinics in a number of centres in Dublin and Cork. We have also been innovative in recent years in setting up screening centres in Dublin and Cork. The chronic illnesses of heart disease, cardiovascular disease and type 2 diabetes are a real problem in our society and we have screened up to 13,000 customers, free of charge, for these conditions. We are looking to be preventative in this regard by making sure people take the appropriate action to minimise potential future costs. This is where the VHI makes its investments and this is what our customers want. These are the sorts of initiatives that will keep our customers well and out of hospital.

On the question of young people, we believe there must be a system of lifetime community rating. We cannot continue with a situation where a 30 year old and a 55 year old joining at the same time are treated in the same way. We have inter-generational solidarity. The rules of the game have been set, not by the VHI, but by society, and it has been decided that community rating is the way forward. We do not have risk rating as is the case in motor and home insurance. I have worked in countries where risk rating operates and when people get sick they are risk rated again and their premiums become so exorbitant that they cannot afford health insurance any longer. We have decided in Ireland to apply different rules and that is why we have a risk-sharing system. I do not mind, from a competitive point of view, if the legislators decide to create a risk-rated market - so be it - but as a taxpayer I believe the Government has made the correct decision because we need to protect all of the people in our society. The way to do this is to have a community rating and risk-sharing mechanism. I am not saying that either is perfect and I mentioned a number of problem areas in my presentation. Deputy Naughten mentioned the issue of health status and I fully concur with his comments. However, I am extremely pleased that the concept is introduced because it is standard in other countries where a risk-sharing mechanism is in place. We have discussed this with all of the insurers and there is consensus that this has to change. However, let us take the positive out of this. For the first time, health status is legislated for and we believe there is much room for improvement in this particular area.

Deputy Kelleher asked about solvency and the VHI currently meets the minimum solvency requirement. To get authorised, we will need more capital and we are looking at every possible avenue for securing that, in particular from reinsurance. We are exploring all options.

Mr. Dónal Clancy

I would like to pick up on a number of points raised by Mr. O'Dwyer. We would be in agreement with much of what he said but on the issue of efficiencies, the VHI is the market maker and the main game player, whether we like it or not. The Milliman group came in and produced its report, which must be taken at face value. If it needs to be rebutted publicly, in terms of certain details, let us do that. I would also point out that at Laya Healthcare, we provide 100% cover for essential care, including orthopaedics. If we were to reduce that to 80%, I am sure we would have a big reduction in our claims too. However, this must be about providing value for our customers. If a person goes into hospital and is told that he or she has to pay 20% or 30% of the cost of the procedure, or in the case of non-advanced products, 34% of the cost, that can be an exorbitant amount in many cases. If we were to introduce a policy of reducing the cover that we give, I am sure we would also generate additional savings.

Like VHI, we believe that community rating is a good policy. I have worked in other health insurance markets and would totally support the idea of community rating. I also believe that Ireland should be proud of the way it has introduced community rating across the board. I agree that lifetime cover needs to be introduced and believe that risk rating needs to take place on a standard product, and this comes back to Deputy Naughten's point about gold plating. There is a fundamental social issue at play right now whereby we have people who are barely hanging on by their fingertips subsidising those who can afford hotel-type accommodation in the best facilities in the country. There is a difference between providing essential cover that is equal and done on a standard basis and providing additional cover for services for those who want and can afford them. It should not be done-----

Chairman

Mr. Clancy has just mentioned hotel-type cover. What would he change in that regard?

Mr. Dónal Clancy

The risk equalisation system in this market should start by saying that there is a standard, core set of benefits to which everyone is entitled. After that, if a person wants additional services, they can be risk-rated and the customer must pay for them. That can differ from facility to facility or by geography. A person may want cover for a particularly active life, for travel abroad and so forth, while another person may never move outside the parish. These are all elements that can be added in, but fundamentally, the core standard set of benefits should provide the essential cover that a person needs as a citizen and must be community-rated across the board. If we are going to arrive at a meaningful universal health insurance system, we must have this in place. We must be in a position to say there is a standard product, that is where the future lies and the entire market will operate on that basis and that is the basis on which subsidies in the fund should cross over. We must protect the elderly and the sick but we must do so on an equalised basis on a standard product, and not on the range of products that are available right now. As Mr. Dowdall pointed out, there are people who are barely hanging on and who will be paying €350 from 1 April, compared with €150 only two or three years ago. That is a substantial difference. At the same time, there are people on the high-value options, paying between €3,000 and €4,000 for cover. While we welcome such customers because they are going into the pool, they are paying the same levy as everyone else.

The subsidisation across those products, even within our plans, is the same as it is throughout the market. It is simply not right. It is an inequity and it should not be there. The roadmap of the future of universal health care and reaching the needs of everyone is set out and this gives us a good option of having a standard core set of benefits.

Reference was made to the levy as it is set now and the way it has jumped. The intention was to have an advanced and a non-advanced level, as Deputy Kelleher suggested, with apportioning of the products. Unfortunately, it is set at a level which deems no one to be in that category and no one will qualify either because no one can afford 66% coverage of private facilities. With the majority of operations, the average person will be stretched to cover the balance of 34%. That is a fundamental issue. The point has been highlighted here already but private cover in a public hospital at the moment is €1,046, semi-private cover is €933 and day-case cover is €753. We can discuss efficiencies and so on but many procedures are carried out in the wrong settings in public hospitals. People are being charged for day-case procedures - that is, €753 for procedures that take place in public hospitals - but such procedures should be carried out not in a consultant's surgery but in a general practitioner surgery.

Chairman

In fairness, the Minister is trying to address that.

Mr. Dónal Clancy

That is the way it is. That is the reality. On top of having the wrong location and setting, we are saying we will extend it to people who get no additional service in a public bed. That is where the whole thing falls down.

Chairman

If we do all that and change the model in the way you are advocating, then what happens to the hospital?

Mr. Dónal Clancy

At the moment, if those procedures were taken out of hospitals, it would free up many resources in hospitals and this could help us to move towards treating the public in the right location and setting. By the way, that gives the best outcome medically. The evidence shows that if a patient is treated in the right location and setting, he will get the best outcome. A hospital is not a healthy place to be. We know that. That is the reality.

Mr. Jim Dowdall

It is really refreshing to hear hard questions being asked by the committee. These are above all the questions that we need to focus on. We need to maintain that focus in future because there are serious issues in the health insurance industry at the moment that are significantly affecting all health insurance consumers and, by extension, people who depend on the public health system. We see a significant number of people falling out of the health insurance market and into an overburdened public health system.

Deputy Naughten specifically asked about the hospital bed utilisation charge and what efforts are being made to move away from it. GloHealth had full cover for day case procedures and treatment in our plans. The irony is that under the new health insurance levy there are two tiers and we can no longer provide full cover for day-case procedures on the lower tier. We have to strip it back to 66%. Let us consider the type of people who are forced to buy lower level plans: they are people who cannot afford a higher level of cover. Therefore, we are penalising those people more. They will have a lower level of cover and a significant shortfall in the cost of procedures that are being carried out. We should find a way to encourage and facilitate insurers to provide full day-case cover on lower level plans.

Deputy Naughten asked about the gold-plated subsidy and whether it was the case that people on lower level plans were subsidising people on higher level plans. That is absolutely the case. Let us consider the numbers. From the end of March people on lower level plans will pay 53% of the cost of health insurance towards the scale of the levy. That is vast and absolutely not acceptable. Their costs are going up by 10% at the end of March simply to facilitate the increase in the health insurance levy. The Minister could change this. This relates to the 330,000 people referred to by the Department and the Minister who are on lower level plans. This could be corrected and the scale of increase does not need to be passed through to them.

There was some debate about the costs from health insurers and their ability to negotiate on costs. Some 40% of the premium cost of a typical health insurance plan is now due to the health insurance levy, and up to 40% of our claims typically relate to the public health system. We have no ability to negotiate in either of these areas. We have no ability to intervene or negotiate on the most significant part of the costs health insurers pick up, and that needs to change.

With regard to some of the comments of our colleagues in the VHI and other insurers, I agree absolutely that the model needs to change. Deputy Kelleher made some remarks in this regard as well. He asked about discussions with the Department and broader discussions, and asked how open the conversations are. My view is that there is a need to develop this area and make it more meaningful. For example, GloHealth asked at the most recent health insurance forum meeting for a detailed analysis to be carried out on the affordability challenge. What will happen to the market when the increased charges come through for the levy and the public hospital costs? This call was supported by all the other insurers, but unfortunately the Health Insurance Authority did not agree that the analysis needed to be carried out.

Chairman

What was the authority's reason for refusing that request?

Mr. Jim Dowdall

There was no reason. The view was simply that it is generally linked to unemployment levels. It is not that simple. There is absolutely vast pressure on the consumer purse today and we need to examine price elasticity and the implications of these increased charges coming through. We also need to consider the implications of devaluing the health insurance product. If someone paying for private health insurance is in the public health system in a public bed next to someone who is not paying anything, it will devalue the proposition provided by health insurers. Unfortunately, we got no acceptance that there was a need to do this analysis.

Chairman

In the same vein, you said earlier - I trust I am quoting you correctly - that we are at the tipping point of unsustainability. Did you make that point to the HIA in the forum?

Mr. Jim Dowdall

Absolutely. We have made that point on numerous occasions. I think there is a disconnect between the understanding of the HIA and the Department of Health with regard to the serious implications for consumers of private health insurance and the affordability crisis that each of the insurers has referred to today. I believe there is a necessity for the analysis to be done as a matter of urgency.

Deputy Kelleher raised another question about incentivising young people to come into the market.

We discussed this at the previous committee meeting. There has been discussion for ten years about lifetime community rating as a trigger to encourage younger people to come into the market. A sub-group of the consultation forum on health insurance will examine this issue. I think there is a necessity to impose a deadline on the Department of Health to complete this study within six months and to devise an implementation plan. This would result in a positive injection into the market. My concern is that this will drag on for another ten years before any progress or momentum is achieved.

When it comes to encouraging young people to come into the market, GloHealth does not charge for children under three years of age. We want to encourage younger families to either remain in the market or enter the market. That group is the critical requirement in order to maintain a community-rated environment.

Senator Colm Burke

I apologise for leaving the meeting. I had a meeting with the Department of Health about an issue that has been ongoing for the past three and a half years and has not progressed.

Chairman

I ask the Senator to deal with the matter in hand, which is private health insurance.

Senator Colm Burke

I understand the Chairman's frustration. I have a question about hospital costs and costs in general. This matter may have been dealt with earlier. Ireland is now the second most expensive country in the world for health care costs or the cost of health care per head of population. I refer to the costs being paid by insurers to the private hospital sector and the public hospital sector-----

Chairman

To whom is this question addressed?

Senator Colm Burke

It is a general question. What is the percentage cost difference between the two sectors for private patients in public hospitals? The second issue is the number of bed days. What is the average length of stay in a private hospital compared to a private bed in a public hospital? What is the cost difference? I have consistently raised the issue of whether there is sufficient competition in the provision of health care to members of the public.

Senator John Crown

I have a brief question and another more provocative question. Is is considered to be in breach in the principle of community rating to charge a differential rate based on whether a person currently smokes? It strikes me that it should not be, in the sense that everyone has the right at every age to be a smoker or a non-smoker so there is no breach of community rating in doing that. It would be a very powerful incentive to people to stop smoking and in the interests of equity it would be a much fairer policy. It can be argued that people cannot instantly choose to be obese or not obese because it requires a bit of work; nor can one choose to be young or old, or to have the right or wrong gene pool. However, one can choose whether to smoke or to be a non-smoker. That should be admissible, in my view.

I sometimes pinch myself when I hear the conversations about moving to a money-follows-the-patient model and universal health insurance. I do not think people understand what is involved. This is a colossal and vast change. I suspect the smart people in the insurance companies, especially those with international affiliates, will be able to tap into expertise from other places where this kind of model works. In the view of the witnesses, do the skill sets exist on the other side of the table? Do the hospitals, the Department of Health and the HSE - if it continues to exist - actually have the skills to be able to deal with a very different funding environment? I do not think they do.

Deputy Ciara Conway

I interjected when Mr. Clancy was speaking about how patients are being inappropriately treated. I am concerned that day procedures are carried out at huge expense because public beds are being used mainly by private patients at a cost to the individual patient. Why is this the case? Why are people being treated in inappropriate places? Is it a question of culture or the practice among doctors? Is it what people want? All the evidence shows that the more we can look after people in the community and nearer to their homes, the better their rehabilitation and their outcomes. This has been the finding of many studies. I am interested to know what the problem is and what can we do to address it.

Deputy Billy Kelleher

I ask for more clarification on some issues, to which Senator Burke referred. The per diem charge in public hospitals is a major concern. In my view the grouping of hospitals would provide an incentive to ensure that the per diem charge remains forevermore. We should be under no illusions; it is a money-generating measure. The policy decision is not based on anything more than its being a method of raising funds to subsidise the hole in the public purse. Until such time as we accept that this is a fact of life and deal with it, we will be talking in circles.

Intergenerational solidarity - the young subsidising the old and the healthy subsidising the sick - is a policy decision which society has accepted. However, we never bought into the concept that poor, struggling families should subsidise rich, well-funded Rolls Royce premiums. This committee needs to deal with that issue. The Health Insurance Authority must also be aware of this fact.

Chairman

That body will be here later.

Deputy Billy Kelleher

Senator Colm Burke referred to lengths of stay. In the context of Ireland's level of efficiency, an international report compiled a number of years ago showed that this country was lower than average in the context of lengths of stay. Lengths of stay for VHI customers are, on average, six days. In private hospitals, the length of stay is five days. In public hospitals, it is just over seven days. The Senator inquired as to which model is more cost-effective. There are per diem rates in respect of private patients in public hospitals. If a person who has had a hip replacement is released from a public hospital within a few days, it can, in comparison to the position with a private hospital, benefit the insurer. We do not have any negotiating power in the context of certainty. As stated earlier, we have a fixed-price package in respect of private hospitals. We pay a certain amount of money and it is clear there is no confusion. In the context of public hospitals, we do not enjoy that certainty.

Senator Colm Burke

What is the percentage difference with regard to what insurers are obliged to pay in respect of private patients in public hospitals and patients in private hospitals?

Mr. John O'Dwyer

It all depends. Day rates in private hospitals are generally lower than those in public hospitals. However, the severity of a person's illness can often be greater in a public hospital. It is not an easy question to answer.

Senator Colm Burke

What would be the comparable cost with regard to hip replacement procedures? Has an analysis ever been carried out in respect of, for example, 100 cases dealt with in private hospitals and 100 dealt with in public hospitals in the context of which worked out cheaper and the percentage difference involved?

Mr. Declan Moran

In the context of hip replacement, there is a prosthesis cost involved on the private side. Quite often, this would make the procedure as expensive as that carried out in a public hospital. In public hospitals, one pays a flat charge and one does not pay for the prosthesis. It is much cheaper to have a procedure which does not involve a prosthesis in a private hospital. There is no definitive answer in this regard. It depends on the procedure involved and the additional costs that will be incurred. As a result of the fact that we pay package procedure prices in private hospitals, one generally finds that turnaround tends to be faster, admissions tend to be quicker, they ensure the correct person is being treated and so on.

We have more influence in respect of the settings. This goes back to Deputy Conway's question with regard to impediments to making things happen. In the private system, because we have a contract, we can explicitly state that we will only pay for a particular procedure if it happens on a side room basis. If it is done on a day care or inpatient basis, we will only pay the side room rate regardless. That is not the position when it comes to public hospitals. We would, however, absolutely like it to be the position. I suspect that once the contracts to which I refer are put in place, insurers gain influence and can drive behaviours in private hospitals. If we could do the same in public hospitals, we would also be able to drive behaviours there and not just to be benefit of ourselves but also to that of the public hospital system.

Chairman

Mr. Clancy stated earlier that Laya Healthcare is not involved in the universal health insurance implementation group. Is there any particular reason for this?

Mr. Dónal Clancy

We have highlighted on many occasions that we are not involved with the group and that we do not know why that is the case.

Professor Crown stated that smoking should be a risk factor. It is not allowed to be included in the various risk factors at present and it would be very constructive if it were included. I agree with Mr. O'Dwyer that there might be implementation issues but we could work around those.

Public versus private is a difficult ask. I concur with much of what Mr. Moran said. Unfortunately, on the public side we are not in a position where we can outline how the protocols should be followed. It is true to say that if one has a particular illness involved or if one wants to obtain the best outcome in respect of a critical or chronic case, then a public hospital is the place one wants to be. There is a balance in this regard. However, there is an adverse incentive here. Incentive drives behaviour and much of what we are discussing here comes down to incentive. It has been clearly articulated to us on many occasions that certain hospitals perform certain procedures in a particular way. Much of this is due to the way the market behaves, both in the hospitals and among the insurers. We accept this and we should not do so, particularly when it comes to our members paying, as I have already indicated, for procedures on a day case basis when such procedures should only be performed in a consultant's surgery. Much of it comes down to convenience and habit but most of it is as a result of the fact that the incentive is there to do it. We have to pay the €700 or whatever is the amount.

Chairman

What has been the response from consultants when they have been informed that they should perform certain procedures elsewhere?

Mr. Dónal Clancy

It varies. Consultants receive the same amount of money regardless of whether they perform the procedures in their surgeries or in their rooms. The hospital obtains the additional benefit of the day case rate. In some cases it results from the fact that a surgeon will have his rooms in the hospital out of which he normally operates. In such circumstances, he or she will state that the charge applies because he or she is obtaining consumables from the hospital involved. I do not believe this is correct and we do challenge it. In some instances, people have put their hands up in respect of this matter. However, there are particular institutions which state that if we do not facilitate their particular way of operating, they will not do business with us. That is extremely difficult for insurers to deal with, particularly if they are not game players. Progress is being made but it remains a problem. Perhaps Mr. Jaggy might provide examples of what happens elsewhere in the context of the public-private mix.

Mr. Christian Jaggy

I can provide an international view from Switzerland but clearly all the experts at this table will find the solution for Ireland. With regard to the problem Mr. Clancy mentioned, in Switzerland consultants can use operating theatres in hospitals. They then receive a lump sum payment and half of this must be paid to the hospital which provided the facility. What happens in Switzerland could be used to provide the type of incentives to which Mr. Clancy referred. From what I have heard at this meeting, it seems that in Ireland there is a cultural achievement of private medical insurance. That is something which the population of Ireland wants. Price increases have been triggered by certain stakeholders in the market here and this has had consequences for health insurers.

They need to increase the price, thereby destroying their currently healthy age structure. One is really in a fragile set of circumstances if one imposes additional charges by means of the levy approach or by way of the public hospital bed. That is just the short-term view.

With regard to the mid-term view, one should consider having a core set of benefits allowing for risk equalisation. That is in place in Switzerland. There could also be additional cover, perhaps based more on private insurance. This has also been implemented in Switzerland, leading every year to a price increase of 4% to 7%. One does not achieve the perfect position with that system either but one has a certain control.

The members know all the answers to the questions I have heard but I do not know whether they have the data required for analysis. Information is supplied by the hospitals to the insurers on a manual basis. Therefore, one does not get the codes of diagnosis or the treatment. Therefore, how can one have a benchmark to know which hospital is providing the service in the most cost-effective way? If this information is not obtained, one should implement control measures in order to measure who is providing the service in the best way, thereby putting economic incentives in place. That is my perspective on what I observe internationally. Those present know all the answers at the table and that is why I would also wish to have the insurers in consultation.

Mr. Dónal Clancy

Let me return to the discussion on effectiveness that Mr. John O'Dwyer mentioned, including the difference between 55% and 80%, for example. There may be a flaw in suggesting the price is a ten-year-old or 15-year-old price. This is arrived at – people better than me can say this – by examining equalised benefit. Basically, there is a set of procedures, be they right or wrong, in respect of which equalisation must occur. Fundamentally, one needs a standard product that everybody around the table is moving towards. It is on that basis that we establish the effectiveness, or otherwise.

Mr. John O'Dwyer

I want to be very clear about what we are talking about regarding effectiveness and non-effectiveness. I gave an example in our presentation of where a company is €1,000 better off if it has a 35-year-old on its books as opposed to a person in the older age cohort to which I referred. When the incentive in this regard does not exist, we will stop talking about effectiveness. However, we must not allow that huge gap to continue to exist. That is our issue.

Mr. John Armstrong

There are a couple of questions left, namely, those on the mid-year moves in terms of the double levy and the advanced and non-advanced plans. The issue Deputy Naughten raised on the Finance Bill has emerged in recent days. We have already started talking to the Department about it. I subscribe very much to what Mr. Clancy said. It is one of the unforeseen consequences of moving and the changes we made. I urge the members of the committee to examine this carefully as the Finance Bill moves through the Oireachtas. We have been engaging with the Department on it. We will need to continue doing so. It is a technical change but it will have quite significant implications.

With regard to the advanced and non-advanced plans, there is obviously much discussion. Having a standard plan, which we proposed originally, could largely get around the problem. The difficulty in wanting to have an advanced-plan and non-advanced plan structure is that it involves a move to making choices and to choices having to be made. Obviously, the interpretation of the legislation was regrettable from our side in terms of the advanced aspect. It raises issues associated with the procedure in respect of lower-level plans. We have been considering moving to a standard plan. We would advocate it.

Let me address a couple of points that Senator Crown raised. His first question was a quick one but it raised quite profound issues over incentives we want to build into the system. Having the stopping of smoking as a public policy objective needs to be considered carefully. We have tools within the regulations to create incentives, and the incentive in question is a good one that we may want to act upon. I would certainly be keen on examining the modification of community rating to allow for it.

There is a range of issues associated with universal health insurance. The process will be very complicated. I have worked in a number of countries and noted they all have quite serious issues with the implementation of universal health insurance. Many of the issues we have addressed today will need to be solved in some way in terms of bringing in effective universal health insurance. They will need to be considered.

The experiences of the VHI regarding public and private beds are similar. This raises the issue of the inability of insurers to negotiate contracts with public facilities. It hampers their ability to create the right incentives in connection with shorter lengths of stay, trying to discharge patients earlier and getting people into day-care services, etc. The ability of insurers to negotiate contracts individually, perhaps as part of the new groups, would be an important and significant step in that regard.

Mr. Jim Dowdall

There are consistent answers to the questions from the insurers. I will just pick up on a couple of specific ones. Mr. Dónal Clancy referred to an additional levy if someone downgrades. Deputy Naughten's point in this regard is correct.

Let me pick up on a couple of Senator Crown's questions. I totally agree with all the insurers that there should be an opportunity for us to encourage people to adopt healthy lifestyles. That is not facilitated at present. It would be in breach of regulation if we in any way tried to do so. Again, that is an example. There are opportunities to do what is proposed. With the Department of Health, we should be tasked to produce implementation programmes in this area.

Senator Crown asked about money following the patient and the significant challenge this presents. I completely agree with him in this regard. Our experience of implementing considerable reform in the Department is not one from which we can take great comfort. This will be a very significant challenge.

Universal health insurance has been targeted for 2016. The scale of the challenge is quite significant. If we examine the recent levy scheme that was amended, we will note it failed and was a mistake. What was committed to in November and what transpired in December and January was wrong. If we get the first step wrong, we must question our confidence in getting it right as we move forward.

Let me address a couple of points made by Deputy Kelleher. If I understood him correctly, he referred to the Rolls-Royce subsidy in respect of the move from non-advanced to advanced plans. He is absolutely correct. There is a significant subsidy going from those people who can least afford health insurance to those people who can afford it. That is an error; it is not what was intended.

The Department of Health or Health Insurance Authority will tell one that insurers can just introduce more plans that can be non-advanced. What they may not state is the fact that one must strip benefits from the new plans being implemented. It is a question of stripping benefits from plans that people can least afford, which is absolutely wrong. Insurers may tell one it is difficult, as with lifetime community rating or measures on some sorts of smoking activities. Everything is difficult; we just need to be determined to make what we desire happen. We can do that.

Let me pick up on what our colleague from the VHI, Mr. John O'Dwyer, said. I understand from his presentation that the VHI would prefer not to have two tiers of levy. That is understandable because the VHI benefits from having everybody on a higher levy as it results in very significant increases in the associated age-related tax credit. This has to be about more than the VHI. That may be the reason the Department of Health has implemented the change in question and why the legislation is not as originally intended. We need to call that because hundreds of thousands of health insurance customers will suffer at the end of next March because we have implemented a measure that was not intended, the beneficiary of which will be the VHI.

Chairman

We have had a very good discussion. We have been here since 9.30 a.m. and still have another hearing. I thank all the health insurance providers for attending and apologise for the late start. I thank the members of staff and those in the public gallery. I acknowledge the presence of Ms Brighid Smyth and sympathise with her on behalf of the committee on the death of her father, who was a great GAA person and gentleman. He worked in Croke Park and played hurling for Clare. On behalf of members, I sympathise with Brighid and her family.

I congratulate Deputy Naughten on the birth of his new baby. We have moved from death to birth.

Sitting suspended at 1.20 p.m. and resumed at 1.30 p.m.

Chairman

I again apologise to the witnesses for the delay in commencing. We had a very busy morning in the holding of our hearings and I again thank them for their patience and apologise for delaying them. I welcome to the meeting officials from the Department of Health, Dr. Fergal Lynch, Mr. Dermot Ryan, Ms Roisin Cahillane and Mr. Eddie O'Reilly. I also welcome to the meeting Mr. Liam Sloyan and Mr. Jim Joyce, chairman, of the Health Insurance Authority. Before we commence, I remind witnesses they are protected by absolute privilege in respect of the evidence they are to give this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable. Members of the committee are reminded of the long-standing parliamentary practice and rulings of the Chair to the effect that members should not comment on, criticise or make charges against a person or persons outside the House or an official either by name or in such a way as to make him or her identifiable. I now invite Dr. Fergal Lynch to make his opening remarks.

Dr. Fergal Lynch

I thank the Chairman for the opportunity to make a presentation to the joint committee. I am accompanied by Mr. Dermot Ryan, principal officer in the Department's private health insurance unit, as well as by Mr. Eddie O'Reilly and Ms Roisin Cahillane from the private health insurance unit. While I had a prepared statement, it may be more helpful were I to seek to answer a number of the points made earlier this morning, rather than reading a statement.

Chairman

Yes, that would be great. We have a copy of Dr. Lynch's script anyway, which can be read. It will be in the minutes anyway.

Dr. Fergal Lynch

That might be more helpful and needless to say, I will be happy to deal with any subsequent questions. One of the first major issues raised this morning has been in respect of advanced and non-advanced levels of cover, as well as concerns regarding both the existence of advanced versus non-advanced levels of cover and how it is being introduced, the number of plans that will arise and so on. It may be helpful were I to provide a little bit of background to this. In operating the scheme, we are very concerned to ensure that those who buy the most basic plans with lower levels of cover do not effectively subsidise customers who decide to buy plans that offer higher levels of benefit. A disadvantage of retaining a single level of stamp duty is that those on the lower plans would have paid a disproportionate amount of their premium in stamp duty relative to those on higher plans. I am anxious to answer in particular the concerns raised earlier by Deputies Kelleher and Naughten regarding a subsidy in the opposite direction or in other words, from lower value to higher value. In fact, the intention is the opposite, that is, to ensure that the subsidy travels in the opposite direction. The last thing we would want is a subsidy going in the wrong direction. This is the very reason we proposed this year introducing an advanced and non-advanced plan. I think it is important to make this point and I can go into further detail on it later on if that is of assistance.

As I stated, this split was introduced for this very purpose. As for concerns about subsidisation in the wrong direction, I can make a number of points. First, in examining this scheme the European Commission has been very concerned to make sure we do not overcompensate anyone, including a particular insurer, and that we are not unfair to different groups. There is an approach in risk equalisation called top-slicing, which my colleague Mr. Sloyan in the Health Insurance Authority will be able to explain perhaps more clearly than will I. Essentially, however, it means we do not use risk equalisation to attempt to subsidise absolutely everyone right across the board. We take a view on how high or to what level of subsidies this should extend. There already are specific examples in the market, particularly in respect of the VHI, which would itself state that its high cost plans, such as what used to be called plan E and plan D, are pitched at a rate that subsidises the lower level plan. Consequently, I am anxious the joint committee would be clear that there is no intention, and as far as I am aware no actuality, of the subsidy travelling in the wrong direction.

The second area that it may be helpful for me to cover pertains to the hospital bed utilisation charge. Deputy Naughten in particular was concerned about introducing a negative incentive for insurers to find it more financially attractive to take people for a longer period of time. We absolutely agree this is the wrong thing to do and that is the reason, when introducing the H-book as we call it, that is, the hospital bed utilisation credit, we pitched it at a very low level indeed. It simply is €75 per day, which would not meet anywhere near the full cost of treating a patient. Therefore, we do not believe that a charge pitched at such a level creates the sort of incentive raised by Deputies Naughten and Kelleher. However, our ultimate intention is to move to a much more sophisticated version of taking account of different elements of risk. Specifically, we would like to take account of different forms of health status, such as chronic diseases. We think this would be a far more appropriate measure than a €75 payments in respect of the hospital bed utilisation charge. That was simply a starting point and it is important to emphasise that.

A number of members, as well as the insurers themselves, referred to the standard plan and the importance of a standard plan in the Irish market. We absolutely agree and not only did we agree but it is fair to say the Department led on this issue, in terms of driving the initiative to try to put this in place because the consultative forum on health insurance will be meeting in a sub-committee form as early as next week to start the work on this matter. I believe the Department made the first suggestion that this would be put in place. We entirely agree with the insurers that it would be much more appropriate to risk equalise with respect to an agreed standard plan than to attempt to risk equalise right across the board. We are working on this and I wish to put on record my thanks to the consultative forum for its assistance in this matter and in other matters, specifically the Health Insurance (Amendment) Act 2012. It was of significant assistance in helping both the Department and the Oireachtas to develop that legislation. Certainly, we intend to move in that direction in respect of the standard plan as soon as we can.

A number of members and a number of the insurers also spoke about the lifetime community rating and the case for it. Again, we certainly are very open to that, obviously subject to the Minister's final decision. We are conscious, however, that as we move to universal health insurance, where insurance will be compulsory, the issue of lifetime community rating will no longer arise. Lifetime community rating effectively arises only in circumstances in which one has a choice as to whether one joins health insurance. If everyone is insured, one then does not need lifetime community rating. I would however observe that we are open to the argument that at the very least, it would send a certain signal in advance of universal health insurance. We are very open to considering this and it is another element the consultative forum will examine in the coming weeks. Consequently, we would hope to be able to make recommendations to the Minister in that regard. As I stated, the ultimate pathway is towards universal health insurance where one then would not need a lifetime community rating approach of that kind.

A number of members and the insurers raised concerns about the per diem charge in public hospitals and the reason insurers cannot be allowed to negotiate on that basis. At present, that is the current scheme and is the manner in which the funding of hospital services is in part organised. No one would regard this as being ideal. We are particularly conscious, for example, that we do not take account in this charge of the difference between complex and less complex cases. The payment is the same for a particular type of hospital, be it a regional hospital or a county hospital, as they used to be called, and so on. That is not the ideal situation. Last week, we published proposals in respect of money following the patient, which essentially are based on moving to a case-based charge. In other words, charges would then be based not on a per diem or daily charge but specifically by reference to the type of treatment and procedure being given and the case being treated overall and therefore, charges could be differentiated as a result of that. Our intention is to start with public patients in public hospitals and then to move to private patients in public hospitals. I stress that all of this should be in place before universal health insurance. Consequently, the Department is committed, and more importantly, the Minister is committed to moving to this type of approach and away from a per diem charge.

As for the effectiveness of the risk equalisation scheme, a number of Deputies and a number of the insurers raised concerns about this. There is no perfect way to calculate the precise effectiveness of a risk equalisation scheme and certainly, there has been a deal of publicity about our view of how effective is the risk equalisation scheme relative to the VHI. The simple explanation is that it is based on widely differing assumptions used by the VHI relative to the Department. For example, we use costs based across the entire market, whereas the VHI uses its own costs.

VHI used more pessimistic assumptions than we would have regarded as reasonable. We are working with VHI to get a better understanding of the differences between our respective calculations because there is no mathematically perfect formula and it is possible for us to move closer together. The proof of the pudding will be in the eating and the extent of transfers from the risk equalisation fund to VHI and other insurers will become clearer overtime.

Risk equalisation is a market measure and is not specifically designed for VHI. There is a perception that it is specifically aimed at assisting VHI because it has older customers. VHI is a net beneficiary at the moment because it happens to have older customers but if in future years another insurer has a preponderance of older customers it in turn will become a beneficiary. It is unfortunate that comments were made that implied the Department has a particular wish to protect VHI. The Department is concerned with the sustainability of the private health insurance industry as a whole. We have no concern or wish to support one health insurer over another and we are scrupulously honest and fair in our dealings with all insurers.

In regard to universal health insurance, a number of insurers pointed out that they are not represented on the universal health insurance implementation group, which I chair. When the Minister established the group he decided to appoint individuals on the basis of their expertise in specific areas. It is true to say that the group includes people with backgrounds in and an understanding of health insurance. The Minister is open to looking at the membership of the group over time and he has made this clear from the very beginning. In my view, however, the consultative forum on health insurance is the best vehicle to consult insurers on these issues. In a previous meeting I gave a reasonably detailed presentation on universal health insurance and what we have done so far. It is our intention to continue to consult insurers universal health insurance matters affecting them. I hope I have provided a reasonable summary of the Department's current position. I am more than happy to answer further questions.

Mr. Jim Joyce

I welcome the opportunity to address the committee. My colleague, Mr. Sloyan, will make the presentation on behalf of the Health Insurance Authority but I wish to comment briefly on our role in respect of risk equalisation. It is universally recognised that risk equalisation is essential to community rating in the market. The system contains two elements, namely, levies on health insurers and credits for high risk subscribers. These are calculated so as to be fully offsetting and, therefore, financially neutral for the market as a whole. In general older people pay less and younger people pay more as a result of risk equalisation. This is what we mean by community rating.

In commenting on the risk equalisation system we must be careful to take the levies and credits together. An insurer with higher than average risk profile can be expected to favour higher levies and credits, while the insurer with lower than average risk profile can be expected to favour lower levies and credits. The authority endeavours to set the risk equalisation system at a level that is appropriate to the market and we are not biased one way or the other. I agree with Dr. Lynch that transfers occur but it is better to think about them as transfers between subscribers rather then between companies. The beneficiary of the transfer is the older customer rather than the VHI and the levy is subsidised by the younger customer rather than the company paying it. Risk equalisation in itself has no effect on overall market premiums. The determinant of overall levels of premiums is the insurer's cost of providing a service and the greatest element of this is the cost of claims.

Mr. Liam Sloyan

I will begin by outlining the authority's key functions. We regulate compliance with the health insurance legislation that sets out the rules and supports for the community rated market. We provide consumer information on rights and options in the market and the range of available products. We also have a role in monitoring the market and advising the Minister for Health. Our key functions in the area of risk equalisation include advising on the levels of credit and levies, administering payment system on the risk equalisation fund and avoiding overcompensation, which is a key element of EU rules and domestic legislation.

Credits are payable in respect of people from the age of 60 upwards and they increase rather rapidly with age. A credit of €425 is payable in respect of a male aged 64 years, whereas the credits of more than €3,300 is payable in respect of a male aged over 80 years. Recent legislation provides for a new development with the hospital bed utilisation payment, which is equivalent to €75 per night in a hospital. These credits are funded by four levels of stamp duty, for adult, child, advanced cover and non-advanced cover, respectively. The stamp duty for non-advanced plans is approximately 85% of the level for advanced credits and levies.

Other speakers have emphasised the necessity of risk equalisation in a community rated market. Every community rated market operates a risk equalisation system because, while insurers are required to charge everybody the same premiums, their costs vary significantly. The average claim cost for a male over the age of 30, based on the product with the most popular level of cover in the market in 2013, is projected to be €5,000. That compares to the average claim cost of €1,100 for such a product. Without risk equalisation the incentive for the insurer is to insure younger and healthier people while avoiding older and less healthy people. Where insurers have older and less healthy people on their books the incentive is to sell them a different product in order to charge more. The risk equalisation system protects the right of older people to purchase health insurance at a reasonable rate. Risk equalisation also supports competition. Without it competition is distorted in a community rated market because insurers with the worst risk profile are at a significant disadvantage.

The structure of the risk equalisation system is set out in the Health Insurance Acts, as recently amended. The system provides for a risk equalisation fund paid for by stamp duty payable by all insurers and credits are paid out in respect of insured people, particularly older people and those who spend time in hospital. The credits also vary by gender and level of cover and the levy is calculated so that the credits distributed equal the levy collected. In this way the system is neutral to the market as a whole. Under the legislation the determination of credits and levies starts with the HIA analysing the market and advising the Minister. In addition to its analysis, the authority's advice on credits is based on the criteria of supporting community rating, avoiding over compensation, market sustainability and the need to support competition. The levy is calculated based on the amount necessary to fund the credits. The Minister then proposes credits and levies to the Oireachtas for enactment. Credits are provided for in health insurance legislation while the levy is included in the Finance Bill.

The market impacts of risk equalisation are beneficial for consumers. It supports competition by reducing the disadvantage faced by insurers with older and less healthy profiles. Without risk equalisation the main way an insurer would make money is by managing its risk profile. Risk equalisation forces insurers to find ways of making money that bring greater benefits to consumers, such as cost control.

It also supports community rating, first, by reducing the net claims costs for products that insure older and less healthy people and also, it must be acknowledged, by increasing the net costs for products to insure younger and healthier people. While the impact of different products and different insurers varies, the overall impact on the market is neutral.

The next slide might be useful in the discussion about effectiveness and top slicing. This chart sets out the claims costs for the most popular level of cover in the market. These are the products on which the credits and the levy for the advanced contracts are based. They are not based on what might be considered the luxury level of cover; they are based on the level of cover that approximately 75% of the market has. The green line on this chart reflects the market average cost for that level of cover, the blue line is the raw claims data and the red line is the claims adjusted for the risk equalisation system. For those aged under 60, the risk equalisation system lifts the cost from the blue to the red line and, for ages above 60, it reduces the cost from the blue to the red line. A single figure for the percentage of effectiveness is difficult to talk about here because the reduction is much greater for a male in his 80s with the gap between the green and blue lines reducing by 87%. It reduces by smaller percentages for other ages. It also affects different products sold by different insurers by different percentages.

We have mentioned more than once in the presentation that all the levy taken from the market is paid back into the market and, therefore, the effect on the overall market cost is neutral. That gives rise to the question of what is driving premium increases. I thought it would be useful to set out in the final table what has happened to average premia and average claims paid in the market over the past five years. These are averages and, therefore, obviously the cost of some products has increased by much more and others by less, but the average claims cost has increased by 67% while the average premium paid has increased by 56%. The full increase in average premium over the past five years is explained by the increase in the average claims cost. Something that should not go unnoted is the analysis of how claims have been increasing over that period. In 2008 and, particularly, in 2009, there was a high level of inflation. Some control was exerted on that in 2010 and 2011 but, in those years, ageing alone accounted for approximately a 3% impact. However, 2012 gives rise to further concern in this area. We are back up to a high level of claims cost inflation there.

Deputy Billy Kelleher

I welcome the witnesses. Dr. Lynch, in his opening remarks, said:

The Government's priority is to ensure a sustainable market for private health insurance, in which those who wish to purchase cover can buy it at an affordable price. In addition to meeting the needs of today, the private health insurance market is also seen as a key building block on which to move to universal health insurance in the years ahead.

Clearly, many of the policy decisions that have been made in recent times are contrary to this stated policy of making health insurance affordable. The market is shrinking and there are huge difficulties for people because of the downturn, as they have less disposable income, but policy decisions have contributed, and will continue to contribute, to increased health insurance costs for families. I refer to the recent legislation that was passed which was meant to differentiate between advanced and non-advanced plans. The Health Insurance Authority conducted a survey, which pointed out that 47 plans would qualify as non-advanced. Following the enactment of the legislation, non-advanced plan is available in the insurance market. What do the officials expect people who are under huge pressure and can barely afford private health insurance as it is to do, given that health insurers told the committee earlier that the only way they can introduce non-advanced plans that will attract a lower levy will be to strip benefits out of their current plans? The policy agreed by the Department, Government, HIA and so on is to ask those who can least afford it to put their hands in their pockets to pay for some of the benefits that have been stripped from plans. This is bizarre if this is true. Otherwise the health insurers are making it up but, one way or the other, this is a major problem.

From the opening statements in the Dáil on the risk equalisation Bill, we were led to believe there would be advanced plans. We subsequently found out no such plan is available to anybody in the State from any insurer because of the criteria that are being used. I am concerned about that for a number of reasons. First, the stated policy seemed to disappear during the passage of the Bill without a rational explanation and, second, when people are forced to reduce their health cover because they cannot afford the rates, the health insurers will strip out benefits providing approximately 66% coverage for the non-advanced plan, which means the subscribers will have to pay the difference out of their own pockets, for example, when going for a scan which, traditionally, would have been covered by the lower cost plans. It is utterly bizarre and I would like Dr. Lynch to explain this because nobody has explained how the policy changed in the meantime.

Some health insurers have said this will substantially benefit the VHI because of the age related tax credits. I accept they are for the benefit of subscribers and not the company but the Department has a vested interest in making sure the company is minded and put in cotton wool because there is a huge hole in its balance sheet which will have to be filled in the context of capital requirements under the EU policy on central bank licensing and governance. Clearly, the Department has to look on the VHI with a slightly jaundiced view in comparison with the other insurers to make sure the company is protected. Some of the changes in non-advanced care were undertaken primarily for that reason.

On the issue of lifetime community rating and our move to UHI, I do not doubt the Minister's commitment, given it is his stated policy and that of the Government and the Department, but the timeframe is the issue. If this drifts in the interim, huge swathes of people will leave the market and others will not take out health insurance policies. That is contrary to the policy of encouraging as many as possible to take up private health insurance. Lifetime community rating should be examined urgently because if UHI drifts for a year or two, the market will have shrunk further and younger people will be less encouraged to enter the market.

I refer to per diem and the hospital designation of beds. The insurers informed us earlier that this will have a catastrophic effect on the viability and sustainability of the heath insurance market. If an individual has paid taxes and he attends an accident and emergency department, he is entitled to treatment. If this designation happens, he will pay on the double through his taxes and his health insurance premium. The health insurer will be forced to cough up, which effectively means the subscriber again.

In response to the other issues that were raised, we will move to lifetime community rating as quickly as we can. On availability of data for moving to chronic diseases and improving our health status measure, we already have a good deal of data that we do not use to the fullest extent, particularly from the hospital inpatient inquiry, HIPE, data, and casemix data can be used for that purpose. As we move increasingly in the risk equalisation space we will require more sophisticated data. Some of them are available, some not and need to be built over time.

Chairman

Thank you. Mr. Sloyan, have you any further remarks? Do you have any thoughts on the study on the impact of the further increases in the health levy?

Mr. Liam Sloyan

There is a requirement to submit a formal annual legislative report on risk equalisation to the Minister. We follow it throughout the year as well and will continue to do so.

Deputy Denis Naughten

I want to return to the question I asked. Dr. Lynch might answer it. My understanding is, and he can correct me if I am wrong, that there was a change in the definition of a non-advanced policy from the time that the HIA made its assessment to the enactment of the legislation. Is that the case and if so, why did that change?

Dr. Fergal Lynch

There were a series of discussions in the consultative forum and we talked about what would be the best and clearest definition. We examined several alternatives and suggested some. The main concern was to identify as quickly and clearly as possible the difference between an advanced and a non-advanced product. We suggested several approaches and settled on one. If the Deputy is asking whether we changed over time, we put forward several different definitions for advanced and non-advanced and settled on one which was published in the Bill. There was an appropriate gap between the time the Bill was published, debated and enacted. There was a difference over time in that definition but that definition was very clearly stated and once it was published in the Bill, it was not changed.

Chairman

I thank the witnesses most sincerely for their patience this afternoon and I apologise again for the delay. I thank each and every one of you for being here. I thank the members of the committee and those in the Public Gallery.

The joint committee adjourned at 2.30 p.m. until 9.30 a.m. on Thursday, 28 February 2013.

Joint Committee on Health and Children debate - Thursday, 21 Feb 2013

Health Insurance Levy: Discussion

Mr. John O'Dwyer

Mr. Dónal Clancy

Mr. Brian Dunne

Mr. Jim Dowdall

Mr. Dónal Clancy

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. Declan Moran

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. Declan Moran

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. Dónal Clancy

Mr. Dónal Clancy

Mr. Dónal Clancy

Mr. Dónal Clancy

Mr. Dónal Clancy

Mr. Brian Dunne

Mr. Brian Dunne

Mr. Brian Dunne

Mr. Jim Dowdall

Mr. Jim Dowdall

Mr. Jim Dowdall

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. Declan Moran

Mr. John O'Dwyer

Mr. John O'Dwyer

Mr. Declan Moran

Mr. Dónal Clancy

Mr. Dónal Clancy

Mr. Christian Jaggy

Mr. Dónal Clancy

Mr. John O'Dwyer

Mr. John Armstrong

Mr. Jim Dowdall

Dr. Fergal Lynch

Dr. Fergal Lynch

Mr. Jim Joyce

Mr. Liam Sloyan

Dr. Fergal Lynch

Dr. Fergal Lynch

Mr. Liam Sloyan

Mr. Dermot Ryan

Mr. Dermot Ryan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Liam Sloyan

Mr. Jim Joyce

Mr. Jim Joyce

Joint Committee on Health and Children debate -
Thursday, 21 Feb 2013