I welcome the Minister.
Health Insurance (Amendment) Bill 2013: Committee Stage
Section 1 agreed to.
SECTION 2
Question proposed: "That section 2 stand part of the Bill."
I also welcome the Minister. The theme of our debate on this issue was continued in The Irish Times summary yesterday on the McLoughlin report which urged health care insurers to query bills. The Minister has said this so many times. This is a sector in respect of which premiums have increased rapidly. The Minister for Finance, Deputy Michael Noonan, stated here last week that premiums had increased by 86% over a four-year period. The Minister proposes to go in the opposite direction and provide universal health insurance. Are we in this regard applying for a further derogation from the European Court decision? The Minister will be aware that there was a substantial difference of opinion at the beginning of this year between the Department and VHI in regard to risk equalisation, as reported on 18 February last in The Irish Times. The issue of whether VHI would receive a capital injection and whether we could satisfy the competition requirements of the European Union by the end of this year were to be addressed. Reports published in the past few weeks indicate that a further derogation is being sought. It would be a pity if that were the case.
The Minister is correct in what he is doing to tackle the problem which he inherited. The insurance companies should have been told ten years ago to tackle the cost base. The cost of health insurance in Ireland should not be, as stated in the Milliman report, based on unnecessary admissions. According to that report, average lengths of stay here are substantially in excess of international averages. I know the Minister shares the concerns expressed by Senator Colm Burke in relation to the high cost of drugs in Ireland. Is the whole system wrong in economic terms and are we now trying to correct it? What will happen to the tax reliefs referred to in section 2? The Minister for Finance gave a strong indication that as the cost of providing tax relief in this area has escalated to €500 million and is now heading towards €1 billion, it will be necessary to put in place a cap in this regard.
We need to move to a situation whereby competing health insurers are in a position to offer lower premiums because having implemented the recommendations of the Milliman report, the Minister's advice and what was recommended in the McLoughlin report, there are no longer unnecessary admissions or lengthy stays in hospitals and they have moved to the DRG system described by the Minister. During the Second Stage debate I asked the Minister if there was scope for the Health Information and Quality Authority to set policy in regard to the length of time in respect of treatments and whether expensive hospital admissions are required, thereby eventually moving as many as possible of such treatments to the general practitioner system. We have discussed in other forums the deskilling of GPs near hospitals because it is easier for them to refer patients on to consultants rather than treat them.
I welcome the Minister's proposal to move from an unsatisfactory inherited model to a new model. We were supposed to have a competitive health insurance market in 1994 but it still remains distorted and prices remain high. I appreciate the Minister's concerns in that regard. In The Irish Times article mentioned Mr. John McManus stated: "Reilly's optimism on VHI at variance with the facts". I appreciate that the Minister has tried to tackle this problem, particularly in the past year. I welcome his decision to have further reviews of VHI undertaken by the Milliman and Mr. McLoughlin groups. It is important we confront the cost problem in this sector. I suppose that is what the troika is saying in the background. I appreciate the difficulties and problems this creates for the Minister, including the revelations of recent times in regard to voluntary organisations topping up pay and increasing their cost base.
As stated in the Milliman report the obsession of the incumbent and previous monopoly insurance company with its older client numbers has diverted its attention from a least cost approach. Milliman referred in the report to his being unable to find much interest in cost effectiveness but a great deal of data on older people. Last week I asked the Minister the reason we do not have open enrolment, which means no patient is required to state his or her age. The insurer would then be admitting people. To make the risk equalisation payments we have to know people's age. This encourages the high cost model we are dealing with today. Could the issue regarding older people be tackled in any other way? For example, could the VHI when it reaches a particular quota, refer people to one of the competing firms? Could lists of older people be supplied to competing firms? I accept the Minister's point that while we have open enrolment, community rating and lifetime cover, by skilful marketing the new entrants have only 6% of old people even though their market share is substantially in excess of this.
Normally in a market an attempt is made to ensure that people swap and shift. They do this in response to a price saving or they can decide to stay. In subsidising them to stay we will never get the type of shift required either in the cost curve which the Minister desires or in market share. The health insurance ombudsman could deal with people who have been refused cover by the new entrants. We need, particularly in the environment about which the Minister spoke last week, to move to a situation where old and young people can gain by shopping around for alternative suppliers of health insurance.
The protection given to VHI, which the European Court and Central Bank have criticised, and I gather, if newspaper reports are true, is to continue for another year is obstructing what we are trying to do. There has been a tradition in the Department of trying to protect VHI, using old people as the excuse for doing so. If we were concerned about the insuring of old people and their being refused cover, we could have accomplished that goal in other ways. We have ended up with a system that is now losing members, has a large increase in costs and is diverting the Minister and us away from the goal of universal health insurance.
In opposing this section I am seeking a change in the definition of "net premium" to take account of full costs rather than the cost when taxes have been written down. We need to get to a situation where insurance companies in competing with each other act on behalf of the consumer and the wider society by negotiating much better deals from health service providers.
I assure the Minister of any support we can give him from these benches in achieving his goal. The cost base of hospitals and the health service in Ireland needs to be tackled and the Minister does not face a very popular task in doing so. However, it is necessary because otherwise this situation would have got out of control as the Minister for Finance said here last week.
I remind Members that we are on Committee Stageand that we should try to avoid Second Stage speeches and try to be precise to the amendment or section being discussed. I am not referring to anybody in particular, but in general, because the Bill needs to be disposed of within about an hour and a half.
I welcome the Minister. In the past five years more than €3 billion has been taken from the health budget. When people talk about cost, they seem to assume that cutting funding from health care also means cutting services, but that is not the case. It is about making it more cost effective. We have saved money as a result of being proactive in getting value for money and we need to go down that line. The private health care sector must also become cost effective and I am not sure if that message has been taken on board by the private health care sector, particularly as it relates to health insurers which are paying out for private health care.
Senator Sean D. Barrett spoke about cost competitiveness and the provision of medical insurance for older people. There is no proactive effort by VHI's competitors to go after that market, which is why we have had to introduce amending legislation to bring balance regarding those competitors which are going after a longer term market and targeting the younger age group. If the other three companies are interested in the older age group, we certainly have not seen any evidence of it and I do not believe we will see any such evidence in the immediate future. It is unfortunate that the insurance companies are not making enough effort to reduce costs in the private sector. That is how cost effectiveness from an insurance point of view can be introduced and we need to be more proactive in that regard.
The Bill deals with a number of issues in order to ensure fairness in the market when it comes to the cost of insurance.
I am reflecting on Senator Sean D. Barrett's comments and agree with him that the costs have been a problem. VHI having a large cohort of older clients and, therefore, greater cost has become a bit of a focus to the neglect of many other areas where it can control and needs to address costs. That is very much my focus and I am pushing it down that road. It has a new cost containment committee and it reports to me that it will have new very aggressive methods of dealing with its existing high costs. I will not reiterate what I said previously.
I am concerned that the average length of stay has risen in the private sector while it is falling in the public sector and the cost of claims is increasing despite fewer people being insured. Regarding many of the Senator's other suggestions, risk equalisation addresses the issue. It is very clear that it is a subsidy to older customers by younger customers and to less well customers by customers in better health. However, the key point is that it is a subsidy to any insurer which cares to insure older people. As Senator Colm Burke pointed out, the problem is that they are not doing that. Therefore, we will continue with the risk equalisation scheme in order to address that issue.
I thank the Senator for his amendment. However, clearly my priority is the implementation of a robust equalisation scheme while minimising the impact on insurers' ability to carry out their business. The legislation contains consumer protection measures providing that notification of a variation to product benefits already on the market may only be made once a year and subject to 30 days' prior notice to the Health Insurance Authority. The Bill makes provision to extend the applicable date by which changes to existing product must be notified to two months from 1 January 2014 to 1 March 2014. It means that changes that alter the product categorisation from non-advance to advance may only take effect from 1 March 2014 and any subsequent year. Any changes that alter the product categorisation from advance to non-advance can only take effect from 1 March 2014, thus in keeping with section 7 where the effective day for revised rates of risk equalisation credit is amended to 1 March 2014.
While I have no doubt that the Senator's intention is to protect the consumer, the result of his proposed amendment would be to create a window of opportunity where registered undertakings could increase the benefits or reduce the price to target individuals and thus further segment the market. Therefore, I regret I must reject the proposed amendment.
I thank the Minister. I assure the Leas-Chathaoirleach that I support the timetable he described and will, of course, comply. We are trying to get some competition to reduce costs and I support what Senator Colm Burke and the Minister have said. We have a system based on the risk equalisation subsidy to older people and VHI which has the majority of them gets most of the money. What else could we do? We could close membership of VHI to old and sick people. We could require the new health insurance providers to recruit a proportion of their membership from designated target groups and make them increase their 6%. I want them to be able to present better deals to both young and old people, and allow the Minister to do his job as Minister for Health rather than having to take on the failures of insurance companies to shop around, get better value and pass it on to their consumers, regardless of whether they are young or old. Perhaps we should inform all old and sick VHI customers of alternative plans that are available and have an ombudsman to deal with cases where anybody is denied cover.
I thank Senator Colm Burke and the Minister because this is an important one relative to the goal. I will not move the amendment and will not be excessively verbose.
Question put and agreed to.
SECTION 3
Question proposed: "That section 3 stand part of the Bill."
A hospital bed in a publicly funded hospital is being substituted for private hospital accommodation. I believe this happens anyway. Will we get a price reduction as a consequence? Nobody knows what semi-private means. Does it mean there are four other people in the room or 14 other people in the room? It puts the consumer into a public hospital bed when he or she has paid for private hospital accommodation. Is that sharp practice? Most people have private health insurance and are signed up as taxpayers. Do we not get the hospital bed in a public hospital as taxpayers with health insurance as some kind of top-up? Is this denying the benefit for which they have paid? Is it a downgrading of the health insurance product?
That is the point I am making. One might say a passing Martian who was not an Irish taxpayer has contributed nothing to the public system and should pay a market price for a private hospital, bed but the vast majority of people are in both systems and pay heavily to both.
Question put and agreed to.
SECTION 4
I move amendment No. 1:
In page 4, line 5, after "January"." to insert the following:
"This section shall not apply in the case of registered undertakings who wish to increase the benefits payable under a type of health insurance contract or to reduce the price of a health insurance contract.".
Would we not welcome it if they wanted to achieve the goal the Minister and I share and increase benefits or reduce the price? They are both good things that we seek. Of course, we would want to keep an eye on them if they wanted to either reduce the benefits or increase the price. Again, I am trying to encourage them to listen to the Minister's urgings and put some efficiencies into the system and pass them on as quickly as possible. That was the purpose of the amendment. If they are doing good things, does the Minister need the original section? Of course, we need to retain it if they are up to the old tricks of reducing benefits and increasing the price.
I have no doubt that the Senator's intention is to improve things for and protect the consumer. The result of this proposed amendment would be to create a window of opportunity where registered undertakings could increase benefits or reduce prices, which might on the surface seem like a good idea. However, they may do it to further segment the market, as they have been doing, where they take certain things off certain plans they know are popular with older people and put other things into those plans which may on the surface look like a great benefit but which are of no benefit to older people and might be quite attractive to younger people. That is how they have been segmenting the market. I will not be accepting the amendment.
Amendment, by leave, withdrawn.
Section 4 agreed to.
SECTION 5
I move amendment No. 2:
In page 4, line 12, to delete "The Authority" and substitute "The Central Bank of Ireland".
I referred earlier to the Central Bank's views on this issue. Health insurance is a financial service and the European Court of Justice decided on 29 September 2011 that it was to become such. Ireland had to pay the costs in the case. The court found against Ireland for failing to apply to all insurance undertakings, on a non-discriminatory basis, the European Union insurance legislation in its entirety. Last February it was in the process of moving over to the Central Bank. There are difficulties when the Minister owns an insurance company and other people try to compete with it. We have been very slow to implement the decisions of the European Court of Justice and other decisions. I was hoping we could arrange for the transfer of that authority to the Central Bank on the basis that it is a financial service and on the basis that we have been asked by the European Court of Justice on a number of occasions and have continually sought to defer it. It is supposed to be done by the end of 2013. The rumour is that it is being deferred again. Should we not do it?
The Central Bank of Ireland is the Financial Regulator for this country and, as such, regulates for matters governing the prudential insolvency 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. On the other hand, the Health Insurance Authority, which is the independent regulator for the health insurance industry, and its statutory functions are set out in the Health Insurance Acts. As the independent regulator for the industry, the authority is the appropriate body to carry out the over-compensation test on registered or former registered undertakings.
On 25 January 2007 the Commission sent a letter of formal notice to Ireland drawing attention to the fact that the continuing exemption of VHI from the application of EU legislation on direct insurance other than life insurance was contrary to the requirements of the first directive, despite considerable changes made to the capacity of that body since 1973. I hope that is implemented soon. I will not press the amendment, but we have been asked by the European Union on numerous occasions to do this. It is a matter that should be addressed soon.
Amendment, by leave, withdrawn.
Amendments Nos. 3 and 4 are related and may be discussed together, by agreement. Is that agreed? Agreed.
I move amendment No. 3:
In page 4, line 16, to delete "12 per cent" and substitute "10 per cent".
In the light of the fact that we are dealing with a lot of legislation today, I thank the Minister for taking the time to debate this issue. My simple rationale is that 10% is enough.
I have a long answer, but I will not go into it in the interests of brevity other than to say we had all this in the Dáil and the Seanad earlier. The fact of the matter is that this is accepted as reasonable by the European Union and to go away from it would not make much sense. Regrettably, I will not be accepting the amendment.
Question, "That the words proposed to be deleted stand," put and declared carried.
Amendment declared lost.
I move amendment No. 4:
In page 4, line 35, to delete "12 per cent" and substitute "10 per cent".
Question, "That the words proposed to be deleted stand," put and declared carried.
Amendment declared lost.
I move amendment No. 5:
In page 5, line 5, after "(4)", to insert the following:
"and international and other cost data on average length of stay in hospital, cost efficiencies in the health service including drug costs, and the publication of the observations of the Health Information and Quality Authority on such data".
As we are moving towards this model of leaving the issue of older people on the side and trying to get value for money, should we insist that the companies could make only a reasonable profit, not have excess costs and take into account international cost data relating to average length of stay? The Minister pointed out that it is declining in the public sector and increasing in the private sector. Should we also insist on cost efficiencies, including drugs costs, and the publication of the observations of the Health Information and Quality Authority on such data?
We are moving towards that model in general. We got some advance notice from the Department of the preparation of health indicators. However, we could know whether this is not an excess cost market and could have some control over its operators in order that they at least notify us when they keep people beyond the average length of stay and have a drug cost base which is excessive. What I have in mind is for the Health Information and Quality Authority to afford the Minister some support in that it has the qualifications to know if people have been kept in hospital for excessively long periods of time to drive up the bill to VHI and allow all the other health insurance companies to follow up that cost. I think "backstop" is the word currently used to ensure we do not end up funding an excessively expensive health insurance industry.
The effect of this amendment would be to introduce an element of flexibility to the agreed 12% return on equity ceiling above which an insurer would be deemed to be over-compensated. I agree that only efficient insurers should be rewarded and to this end, I am committed to maximising cost efficiencies across the market. All of the insurers are working with the Health Insurance Authority and my Department through the Consultative Forum on Health Insurance under the stewardship of Mr. Pat McLoughlin to reduce costs across the industry. Given that European Commission approval was provided for the risk equalisation scheme for 2013 to 2015 on the basis of the 12% ceiling, it would not be appropriate to introduce an additional measure at this stage.
Therefore, I cannot agree to this amendment.
Amendment, by leave, withdrawn.
I move amendment No. 6:
In page 5, lines 8 and 9, to delete “a registered” and substitute “an”.
The purpose of the amendment pertains to the definition "a registered undertaking". Some undertakings which provided health insurance were not registered. I believe one referred to the ESB and the other to the Garda Síochána. It always appeared strange to me that they were exempt from risk equalisation, which is the reason I tabled the amendment.
An undertaking, as defined in the Health Insurance Act, means a health benefits undertaking, "registered in relation to an undertaking" means registered in the register and cognate words shall be construed accordingly. The term, "health insurance undertaking" means the business of effecting health insurance contracts and, therefore, the effect of this proposed amendment would have no material impact on the provision. The definition of "relevant health insurance business in the State" includes all the insurer's health insurance business in the State. Therefore, I do not accept the amendment.
Amendment, by leave, withdrawn.
Section 5 agreed to.
Sections 6 and 7 agreed to.
SECTION 8
Amendments Nos. 7 and 8 are related and may be discussed together, by agreement. Is that agreed? Agreed.
I move amendment No. 7:
In page 6, line 23, to delete “referred to in subsection (1), (2) or (3) that it has carried out”.
Again, the background to the McLoughlin report is that evaluation and analysis is required in respect of how costs here compare internationally and the reason this excessively high cost system has developed. In tabling the amendments, I did not know how much work Mr. McLoughlin was doing as details of his report were published in The Irish Times just yesterday. The point now has been made that these are the kinds of considerations that should be inherent in any agreements between the industry and the risk equalisation fund. Consequently, I will not press the amendment on the grounds that everyone is ad idem that there now are mechanisms in place to ensure this actually happens. Moreover, it is important that it does because of the rapid rate of cost escalation before the Minister started to move in this regard. As the Minister indicated, one must have comparative data on the length of stay and on whether the treatment was effective. The Minister referred to diagnosis-related groups, DRGs, and I agree with him. The Oireachtas should be involved, which the Minister is doing, and I note he is one of the most regular attenders in this House. In these circumstances, I do not wish to move amendment No. 8. It is a matter that is in hand and on which work is under way.
As the Senator has kindly suggested he does not intend to press amendment No. 7, that might temper the Minister's response. I note he is happy to move on.
Amendment, by leave, withdrawn.
Amendment No. 8 not moved.
Section 8 agreed to.
Section 9 agreed to.
SECTION 10
Amendment No. 9 has been ruled out of order as it is outside the scope of the Bill.
Amendment No. 9 not moved.
Section 10 agreed to.
Section 11 agreed to.
SECTION 12
I move amendment No. 10:
In page 11, between lines 33 and 34, to insert the following:
“(3) Nothing within the provisions set out in subsections (1) or (2) above shall require the payment of more than one specified rate per insured person in any 12 month period.”.
On this amendment to the Stamp Duties Consolidation Act 1999 to ensure only one levy is payable per person per year, there was an error in the legislation last year which allowed for multiple levies to be paid if a person was changing insurer or the type of product and the Revenue Commissioners were obliged to issue guidelines last summer. My understanding was this would be corrected through legislation, which has not happened.
Section 12 of the Health Insurance (Amendment) Bill 2013 amends section 125A of the Stamp Duties Consolidation Act 1999 in respect of the revised rates of stamp duties which will apply in respect of health insurance contracts entered into or renewed after 1 March 2014. The current legislation provides for the payment of the stamp duty levy by authorised insurers on a quarterly basis in respect of each health insurance contract entered into or renewed in each quarter. The change from an annual to a quarterly payment was made to improve the overall funding of the risk equalisation scheme from a timing viewpoint but with the overall objective that health insurers would continue to pay only one levy per insured person per year.
Amendment, by leave, withdrawn.
Section 12 agreed to.
Section 13 agreed to.
Title agreed to.
Bill reported without amendment.
When is it proposed to take Report Stage?
Next Thursday.
Report Stage ordered for Thursday, 19 December 2013.
Sitting suspended at 2.25 p.m. and resumed at 3.55 p.m.