Health Insurance (Amendment) Bill 2012: Committee Stage

Section 1 agreed to.

Amendment No. 1, in the name of Senator Sean D. Barrett, is out of order and not relevant to the subject matter of the Bill. Amendment No. 2, also in the name of Senator Sean D. Barrett, is out of order for the same reason. Amendment No. 3 is out of order as it is consequential on amendment No. 2 which is not relevant to the subject matter of the Bill. Amendments Nos. 4, 5 and 20 are related and to be discussed together.

Amendments Nos. 1 to 3, inclusive, not moved.

I move amendment No. 4:

In page 3, before section 2, to insert the following new section:

The Central Bank of Ireland shall conduct an annual actuarial analysis of the health insurance market in Ireland with respect to the solvency positions of the various market participants operating within the State.

My objective is to ensure the best possible choice of health insurers is made available when the universal health insurance scheme comes into effect. I am concerned that we are starting off on a bad footing, however. Several Ministers and the Department as a whole have approached this area incorrectly, with the result that subscription income has increased by 23% and 200,000 people have been lost from the system. I believe that monopolies are bad but the overriding concern of successive Ministers for Health has been to defend VHI at every available opportunity. It stands in breach of the European Court of Justice and it is €4 million down on costs because of a Supreme Court case. Outstanding damages owed to BUPA have not yet been settled and the costs on the European case have also to be paid.

Lawmakers should operate within the law. As recently as last February the Department was supposed to be in negotiations with the Central Bank and Europe on these matters. A White Paper written in 1999 promised to resolve the conflict between the Minister's ownership of a health insurance company and the responsibility to regulate the market. We are still discussing that conflict. Some of these negotiations remind me of the west Clare railway. The problem is that operating in this way is worth approximately €45 million per year to VHI. The Oireachtas Library and Research Service has indicated the scheme which the Minister proposes will be worth even more. It currently costs €1 million per week if VHI is not properly regulated and it will be the sole beneficiary of a scheme that could be worth two or three times that amount. We have to allow for the possibility that some of the success of the competing firms, until the Department moved against them, was because they were able to sell health insurance more cheaply to young and old people alike.

This is a badly regulated insurance company and that is why I seek to transfer responsibility for regulating it away from the Health Insurance Authority to the Central Bank, which is what we were told to do by the European Court of Justice in September 2012. We issued a statement in February to the effect that we would obey the ruling but another year has passed without action. In the meantime the market is totally distorted, hugely expensive and people are giving up health insurance, thereby frustrating the objective I share with the Minister of increasing the number of people with health insurance. The Department of Health has received the Milliman report, which identified all the inefficiencies that monopolies exhibit. We must move to a different model and stop losing court cases in Europe and the Supreme Court by defending the company. The VHI was the Department's monopoly company for 50 years until it was reluctantly forced by the EU to allow competition. It has never really accepted the need for competition and it continually tries to change the rules to disadvantage the other companies. When CIE was up to the same thing with the Department of Transport, Mr. Justice Bryan McMahon stated in a High Court ruling:

The Department, because of the privileged position of the notice party as an exempt body [CIE], should have been hypersensitive to the competing interest of the private licence operators in applying the guidelines. In dealing with the notice party first, the Department was not only ignoring its own guidelines, but was doing so where the person being favoured was already an exempt body and already had an advantage over the applicant. To ignore the guidelines in such circumstances doubly disadvantaged the applicant.

That is what the Department of Health has been doing and it is also what the Supreme Court and the European Court of Justice told us.

I accept the ruling of the Chair that we cannot discuss amendments Nos. 1, 2 and 3 but we are being asked, as lawmakers, to condone breaches of the law. It is not good enough that despite publishing a White Paper in 1999 which promised to regularise the VHI situation, we are still in discussions with the Central Bank. This will not attract new insurers. In economics the bad guys are the incumbents because they are always seeking regulatory capture, which VHI has managed to do in respect of the Department of Health. New entrants give the market its dynamic but, as the Supreme Court has noted, they face serious discrimination in the health insurance model. By pretending to ignore a ruling of the European Court of Justice, the Minister is damaging the entire sector.

The Supreme Court judgment noted "there was a prima facie interference with the property rights of BUPA as guaranteed by the Constitution which the State was bound to justify" and that where a scheme has "potentially serious implications for legal rights, including constitutional rights, of persons or corporations, one must expect that the intended ambit or application of such provisions will be expressed in the legislation with reasonable clarity."

Ignoring this issue will not make it go away. The previous High Court judgment found, "This scheme involves some elements of anti-competitive behaviour in that the pricing structure of the market is interfered with and entry is less attractive." This is what we are being asked to sweep under the carpet. Everybody who has examined the issue independently has urged the Department to divest itself of owning an insurance company. This was expressed by the McCarthy review of State companies.

This is a financial service and the proper regulator is the Central Bank. VHI should have been transferred a long time ago to the Department of Industry and Commerce or some other such Department. We will have to send the record of this debate to the European Court of Justice to show how lightly its decisions are taken when we draft legislation which is essential to the operation of a proper health insurance market. I regret the bills that we are running up in defending these court cases. Why are we not now availing of the opportunity to make ourselves legally correct in the way we regulate health insurance in Ireland? The Health Insurance Authority condones the current arrangement and says that risk equalisation will be worth much more to VHI. Setting out to deliberately rig the market in health insurance or anything else is something in which the IMF will be interested. We are borrowing money to fight court cases in order to prevent competition in health insurance. I take that seriously.

I propose that regulation be moved to the Central Bank because the Department has no credibility in this matter. The Health Insurance Authority, which is a quango of the Department, also lacks credibility. When we play a match we are entitled to a neutral referee and scorekeeper. The Department never had evidence that the other companies refused to insure old or sick people. It is not possible to tell from an application form whether an applicant is sick.

As the Minister is aware, the records show they were insuring both young and old people for less than what VHI charges. That is what caused the panic in the Department, not that old people were not being insured. The Department has invented a bogus model of the health insurance market to justify what it is doing. The primary justification was the denial of access by old people to health insurance. We have had enough court cases about it. The Minister has not produced evidence of a single person who was denied health insurance at the same price, with community rating, lifetime cover and open enrolment. All of those criteria were adhered to but that was not enough for VHI. It controls the Department and therefore it wants even more draconian laws against competitors, even when those laws result in a 23% rise in claims and 200,000 people leaving the system. We know what the Department was at; it is plain as the nose on anybody's face. It was protecting the VHI but what about the alleged issue that there is a problem with old people? I want that independently evaluated and not by any agents of VHI or the Health Insurance Authority.

I have a paper by Robert Fogel of the University of Chicago in which he states that increases in life expectancy during the 21st century will be fairly large but the effect on health care will be modest. Another example we can put before the Central Bank or any neutral person is from the health education research committee of the University of Oxford which states that age is in part a red herring in relation to health expenditure; proximity to death is more important. To paraphrase a James Bond spoof, you only die once.

We know that the Department was defending VHI, and that is what it has always done, but I need independent evidence that, first, somebody ever refused to insure old people in Ireland and, second, that the old are the problem. That is what the Department continues to tell us is the problem but in that regard I have quoted evidence from Oxford and Chicago universities.

Regarding amendment No. 4, as a first step I want the Minister to give some indication that fairness will intrude into this field by transferring that actuarial function to the Central Bank, which is the Financial Regulator for all the financial sector. This health insurance company should always have been regulated by the Central Bank. That is the European Court decision and that is what the Minister was discussing with them last February. He has had enough time to reach a decision given its promise since 1999. At least let them prepare the studies so that people might have some confidence that when they get estimates of what individuals should pay for health insurance, it is soundly actuarially based rather than protectionism raising an ugly head in the Department of Health and in the Health Insurance Authority.

The Senator should be aware that amendments Nos. 4, 5 and 20 are being taken together. I presume he was speaking to the three amendments.

Yes. Amendment No. 20-----

When we come to deal with amendments Nos. 5 and 20 the Senator will not be able to speak to them.

Amendments Nos. 4 and 5 deal with the appraisals and that they should be conducted by the Central Bank.

Amendment No. 20 deals with recruitment of staff to perform certain roles, that they should be qualified in insurance and the qualification should be stipulated by the head of financial regulation at the Central Bank of Ireland. This system is in breach of the European Court and our Supreme Court. It is causing massive distortions and losses of people from the health insurance sector, contrary to the Minister's objectives. It is time to involve the Central Bank to a much greater extent and divest the Department of Health from the contradictory role of owning an insurance company and pretending to regulate the market in the interests of old people, when actually it is looking after its own incumbent insurance company. That is bad for the dynamism of the market and contradicts everything the Government says in other areas about the need for innovation, new entrants and dynamism. We have vastly increasing costs and a rapidly reducing number of customers and amendments Nos. 4, 5 and 20 are designed to address that problem.

I thank the Minister for coming to the House to deal with this matter. I note the comments made by Senator Barrett about the amendments. Regarding amendment No. 4 he is talking about the Central Bank having a role. I would have no objection to that but it is not appropriate in this case. It is something that should be examined in the long term.

I had my own difficulties with VHI in the past 12 months. I was surprised to find in a submission to the Joint Committee on Health and Children by the VHI that there was only a 60% occupancy rate of private beds in the hospitals in Cork. I found it difficult to understand that figure. I found it difficult to understand VHI's decisions in regard to competition in Cork. I agree with Senator Barrett that there is a need for competition in the health insurance area but when we consider the current age profile of VHI members it does have the vast majority of the age group over the age of 65.

The Senator referred to the cost of health care for the elderly. It is interesting that the recent statistics in the Health in Ireland Key Trends 2012 report show that the over 65 age group had a 49.2% occupancy rate of hospital beds which is a clear indication that our health care system is providing comprehensive health care for people over the age of 65.

An issue that arises with older patients is that on many occasions they will occupy a bed for a longer period than the average person. I note that the average occupancy rate in our hospitals has reduced slightly from over six days to under five days per admission. In the older age group that occupancy rate is a higher number of days, therefore, there is a higher expenditure level and a higher demand on the insurer.

On the health care area, it is interesting to see how we have moved forward in recent years. There is a great deal of criticism of health care. It is about making it more efficient because if we make our health services more efficient we help to reduce the cost of insurance. It is interesting to note that the number of day procedures has increased from over 353,000 to over 881,000 per annum. Over 60% of all procedures in hospitals now are day procedures, which is a welcome development.

It is interesting to note also the increase in the number of outpatient attendances which has gone from over 2,185,000 per annum to over 3,583,000 per annum, which is a huge increase. That means that follow-up and access to hospital services has increased dramatically.

There is a great deal of criticism of the health care system, some of it justified and some of it exaggerated but people are not looking at the bigger picture in terms of the numbers of procedures being performed that have increased dramatically in recent years. If we increase the level of hospital care we also increase the level of demand on insurance companies. That is one of the issues that arose in the debate in Cork. If we increased the number of beds available for private health care there would be an increased demand on the insurance company. The speed of the delivery of health care must be increased because that will result in a saving in the long term.

In dealing with the health insurance area we must have much more planning in terms of the way people look after their own health. Rather than looking after their health when a problem arises they should look after their health to prevent problems arising. I am not sure we are doing enough in that regard. They have done an audit on that in one European country which allowed people access to health care in terms of providing a full audit of their health needs. In that way problems are identified at an early stage and that results in a huge saving.

We need to do a lot more on that. The figures produced in the recent study, Health in Ireland: Key Trends in 2012, show that the consumption of alcohol and smoking trends have not changed dramatically. All the work being done in heath care is negatived given that not enough is being done in the area of alcohol and smoking. That is something that needs to be done in forward planning.

In regard to Senator Barrett's amendment which seeks that the Central Bank of Ireland shall conduct an annual actuarial analysis of the health insurance market, that is something that needs to be done. I do not know if this is the appropriate Bill to deal with the issue. However, there is a need to keep a careful watch on value for money from the insurance point of view especially when moving forward to universal health care. That is another reason to ensure we get value for money from the health insurers. We must ensure that those who provide health care also give value for money and that moneys are being spent unnecessarily when huge savings could be made. There is a need to be far more cost effective in that area. Obviously the Minister will respond to the amendments. If amendment No. 4 is not dealt with under this Bill it is an issue that should be examined for the long-term.

Many statements have been made here. I thank Senators for engaging with the Bill. The Central Bank is the Financial Regulator for the country and, as such, regulates for matters governing the prudential and solvency requirements for the health insurance market. Insurers wishing to operate in the Irish market must satisfy the Central Bank and other requirements before they are authorised to operate in the Irish market. It is the role and responsibility of the Central Bank to keep these issues under review and matters such as those raised by Senator Barrett are not appropriate to this legislation and, therefore, I cannot accept these amendments. However, I wish to say a few words about some of the comments he has made and also, perhaps, to address the issue of costs in VHI.

I agree with Senator Barrett that monopolies are bad. That is why under UHI we will have competing health insurers obviously heavily regulated by the Health Insurance Authority. I would point out that VHI has one of the lowest administrative costs of any insurer in the western world. I would also put it to him that if older people were not the heavier users of the service why is it that none of the new people who entered the market have sought to attract them? I do not have the exact figures with me but one of the new insurers has attracted 40% of younger people. Clearly that is because they are producing products that attract younger people? Why are they not producing products that attract older people? It is glaringly obvious to everybody that his contention that older people are not the greater users of the service is utterly wrong and misleading. While I do not have a vast array of information with me to underpin that I do have one piece of information that can be checked and verified, namely, that the average cost of a medical card is €1,000 or thereabouts. The average cost of a medical card for the over 70s is about €2,500. If that does not make the argument clear I do not know what does.

The Senator made other contentions. I have the report from the Health Insurance Authority from last month, page 13 of which states that the net cost for those aged 80 to 84 is 3.3 times that for the age group 18 to 29. I utterly reject that contention. Regretfully, I have to say to Senator Barrett that he is misleading the House with his selective quoting from the High Court case. The High Court case vindicated community rating and said there was a justifiable interference in the interests of the common good. It found against on one point only.

The European Court of Justice did not tell us that the Health Insurance Authority should not regulate VHI. It is for the Central Bank to regulate on prudential issues. In terms of the response to money for VHI insurers seeking to take on its older people, we have had a number of new entrants into the market. We have had two new players in the market in 2012, Swiss Re which underwrites Laya Healthcare and Munich Re which underwrites Glo Health. As everybody is aware the VHI share of the market is falling consistently and is down to 57%, yet it is responsible for 80% of the payout because of the much older profile of its clients. As a Government we said we would address the issues arising from the European Court of Justice case by the end of 2013. I cannot accept the Senator's contention around older people not being greater users of the service nor do I accept a very misleading comment he has made in respect of the High Court case. I regret I cannot accept the Senator's amendments and ask the House to reject them.

Does Senator Barrett wish to come back in?

We asked for an independent referee and, obviously, the Minister does not want to concede that request, given the record. It is good that Ireland should be compliant with European Union law in these matters and not further bias the market.

We have the Milliman report, which has 31 pages of redactions in a total of 67 pages, and it shows repeatedly that the VHI problems are caused largely by itself. A table on page 31 indicates that an average length of stay in a VHI bed is 10.6 days whereas in a well-managed system it should be 3.7 days. For surgical procedures the VHI pays for 7.5 days but in a well managed system the length of stay should be 3.7. On page 33 the report states: "We found little evidence of any attempt by VHI to control hospital utilisation effectively....". The report states on page 36 that VHI has focused a great deal of management time and resources in assessing the contribution of the risk difference in its claims caused by its old people and neglected efficiency issues. That is all in the report the Department has had. We rely on competition to get those out of the system, not requiring the new entrants to compensate the old people.

I thank our colleague, Senator Colm Burke, who raised very interesting points on this issue, that VHI and the system in general has to address costs. It reminds me of the Aer Lingus monopoly days when there were all sorts of Government Ministers appealing to Aer Lingus to do A, B and C. Competition achieved it far better. To require the new entrants to compensate the incumbents on grounds which are disputed both in Oxford and in Kings - there is something in what the Minister said but not the obsession which this legislation encompasses and which has been the obsession of VHI that in some way all its competitors have cheated. I recall the 50th anniversary of Ronnie Delaney winning his gold medal when one of the competitors said, "If you can remember this buy some health insurance." There are many other ways the Minister could have addressed that problem if it was a problem. He could have taken inducements from the VHI to transfer its older members to the new entrants. He could have asked the new entrants to recruit a certain ratio of old people to its younger recruits. He could have had an ombudsman as in car insurance where young people who used to be refused cover could go to the Department and get the cover. To assume that subsidising VHI more is the only solution to the problem is wrong.

On the Supreme Court case which is the one I quoted, which in turn had a quote from the High Court case, the verdict was 5-0 against the Department.

That is the result that came in. It is the overwhelming rule of law in Ireland. The Chief Justice and his colleagues ruled against the Government. I gather the first set of damages amounted to €4 million and negotiations are taking place as to what the other damages will be for rigging the market. Let us have a debate about old people and who will or will not insure them and address it from their point of view rather than to repeatedly defending the VHI, including by publishing highly redacted accounts of criticism of its inefficient operations such as those which appear on almost every page of the Milliman report.

I am at a loss for words.

I am at a loss to know whether to move this amendment or not, but I wish to do so.

Senator Barrett and I are on the same page when it comes to competition and getting the best for our people. I must point out, however, that there is no question of the health market being allowed to operate as a free market because the risk for older people is much greater. Senator Barrett is deluding himself and misleading the House if he believes it could be otherwise. I cannot believe that as an economist he believes that, although he has great experience and may have provided advice to insurance companies in the past. If competition is allowed to operate freely in this area, younger people's premiums will fall and older people's premiums will become unaffordable. Those who are less well or who have a chronic illness will find it nearly impossible to insure themselves. That is reality. That is how the car insurance market works where young drivers who crash frequently end up paying a heavy premium. That is just the way it is. Senator Barrett knows that and I know that. Risk equalisation underpins community rating and the latter is something all sides in the Houses have supported. It remains a core value. Younger, well people subsidise less well, older people. Many of those who are entering their later years subsidised older people when they were younger. It is an underlying principle which remains in place and forms part of the Government's policy. We are not moving away from it.

I did not address the issue of cost as comprehensively as I might have. The HIA continually monitors and reviews health insurance experiences and expertise from other countries and, where appropriate, carries out international research. It is an independent body. In preparing its report on risk equalisation for the Minister in 2010, it engaged consultants to review as part of their analysis the operation of risk equalisation and community-rated health insurance systems in other countries. The HIA maintains regular contacts with corresponding public regulatory bodies in other countries and exchanges research. They have this system in Holland and Germany, to name but two other countries. Risk equalisation must be put in place to level the market. I return to the original question I asked Senator Barrett which was to ask why so few older people are members of the newer companies when those newer companies are eating into the market in a significant way. Why does the VHI have 80% of the payout costs but only 57% of the market? The answer is that VHI members are much older. Older people use services more and present a greater risk. That is a fact which any actuary will confirm. I cannot accept Senator Barrett's contentions.

I have made it very clear that I want the VHI to address its cost base. To be fair, it has over the last couple of years reduced consultant fees by 15%, overall costs by €200 million and prices for various procedures by between 13% and 53%. It has introduced a revised payments system for radiologists and pathologists. I want the VHI to do more. As I said in the House previously, I want the VHI to focus on audits, particularly clinical audits. I am astonished it has not had clinical audits before now but it will be introduced and clinicians will be challenged by colleagues on why tests have been carried out in the first instance. I want the VHI to review why it pays and what it pays. Some procedures which used to take two hours now take only 20 minutes. That has to be reviewed. We have to change the way we pay. The nonsense of paying per day in hospital must stop and procedure-based payment introduced. While it will not always be possible to adopt that approach, in many cases it can be done. Those hospitals which are efficient and get patients seen quickly with more day-case surgery and inpatient procedures will be rewarded. I want also to stop this nonsense of procedures being performed in hospitals with day-room fees of €400 and €500 when they can be performed in primary care facilities without any sideroom fees.

I cannot accept the Senator's amendment. I understand that he wants to see competition, which I wish to see also. However, the HIA is independent and the purpose of the risk equalisation legislation is to support the market to support older people with chronic conditions who represent a higher risk to the insurer.

Progress reported; Committee to sit again.

Amendment put:
The Committee divided: Tá, 5; Níl, 40.

  • Barrett, Sean D.
  • Crown, John.
  • Mullen, Rónán.
  • Norris, David.
  • Quinn, Feargal.


  • Bacik, Ivana.
  • Bradford, Paul.
  • Brennan, Terry.
  • Burke, Colm.
  • Clune, Deirdre.
  • Coghlan, Eamonn.
  • Coghlan, Paul.
  • Comiskey, Michael.
  • Conway, Martin.
  • Cullinane, David.
  • Cummins, Maurice.
  • D'Arcy, Jim.
  • D'Arcy, Michael.
  • Harte, Jimmy.
  • Hayden, Aideen.
  • Healy Eames, Fidelma.
  • Henry, Imelda.
  • Higgins, Lorraine.
  • Keane, Cáit.
  • Kelly, John.
  • Landy, Denis.
  • Leyden, Terry.
  • MacSharry, Marc.
  • Moloney, Marie.
  • Moran, Mary.
  • Mulcahy, Tony.
  • Mullins, Michael.
  • Noone, Catherine.
  • O'Donnell, Marie-Louise.
  • O'Donovan, Denis.
  • O'Keeffe, Susan.
  • O'Neill, Pat.
  • O'Sullivan, Ned.
  • Ó Murchú, Labhrás.
  • Reilly, Kathryn.
  • Sheahan, Tom.
  • van Turnhout, Jillian.
  • Whelan, John.
  • White, Mary M.
  • Wilson, Diarmuid.
Tellers: Tá, Senators Sean D. Barrett and John Crown; Níl, Senators Paul Coghlan and Aideen Hayden.
Amendment declared lost.