SELECT COMMITTEE ON HEALTH AND CHILDREN debate -
Wednesday, 21 Mar 2001

Vol. 4 No. 2

Health Insurance (Amendment) Bill, 2000: Committee Stage.

Section 1 agreed to.

NEW SECTION.

Ms McManus

I move amendment No. 1:

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

"2.-It shall be a function of the Health Insurance Authority to consider and report to the Houses of the Oireachtas on the extension of health insurance to the whole population with the objective of creating quality of care.".

The word "quality" should read "equality".

I welcome the changes proposed by the Minister by way of amendment in relation to the area of general practice and out patient services. The Bill has been improved considerably. The integration of primary and secondary care is an important part of health reform but it must be matched by a recognition that the two-tier system creates grave inequality and will have to be addressed. I do not wish to dwell on the unfairness aspect as we have had that debate on other occasions. However, I am concerned at the argument that the current system of private health insurance is unstable. I support the setting up of the Health Insurance Authority to ensure proper regulation of the market. When established it should consider the future of that market, changes occurring in the market and dangers occurring in the market. The Labour Party put forward its position on universal health insurance. I do not intend to go into that now except to say that health insurance is part of the solution rather than part of the problem as regards our two tier system.

The Minister for Health and Children has argued that he wants to build up the capacity of the public hospital service. I have no problem with that but the reality is that that will have an increased impact on the instability of the private health market. If the Government remains committed, as the Minister's predecessor declared, to charging the real cost of beds in public hospitals to private patients, that will create further impact on the private health insurance area.

Almost 50% of the population are taking out private health insurance but it has been reckoned that 11% of those cannot afford to do so. If the public service is expanded and improves in terms of its capacity to respond, many of the young healthy people who are crucial to ensuring that stability is maintained in the market, that community rating can work and that risk equalisation is part of the controls, may decide not to get involved on a voluntary basis in health insurance. If that decision is made as a consequence of Government policy, greater investment, etc., what impact will it have on the market?

The regulatory authority is possibly a good expert group in terms of assessing the changes and the dangers in terms of the market. The White Paper makes that point. It states that the future viability of community rating in a voluntary environment is dependent on people joining the private health insurance system at a young age. Huge numbers currently join, not because they are attracted to the idea but because they believe they need it to get quality care. If it is the case that public policy has an impact on that decision, will we see stresses and strains within the private insurance market and, if that is the case, who better to advise us than the authority?

A strong case was made by the actuaries when they presented their paper on private health insurance. They proposed three options, one of which was to do what the Minister is doing. The other option was a limited compulsory insurance and the third was a universal health insurance system. They pointed out that it would provide more access, generate competition between providers and a more stable framework for financing overall health expenditure, facilitate the integration of primary and secondary care and, by extending the concept of risk equalisation to the whole population in respect of the basic health services, it would de facto bring about a needs based allocation of health care resources.

It could be said that the authority will do no more than the limited area of regulation specified in the Bill but if we set up an authority we should give it a task in terms of the future and the possibility of an insurance based system at a time when a consensus is building that we should have an equal, fair and efficient system. That argument goes back to 1974 when the predecessor of the IMO, the IMA, argued for a compulsory health insurance based system.

I am not necessarily asking the Minister to accept the argument but to allow the authority to examine the future of the market in terms of that and perhaps other contexts but also in terms of what has happened because it has happened relatively quickly. If somebody had taken on the task 25 years ago of assessing what would happen in private health insurance, we would not be in an almost uniquely unfair system of health care at a time when we have tremendous resources and the capability to deliver a good quality service to all.

Mr. G. Mitchell

I do not want to delay the committee on this amendment except to say that I support in principle the objectives of it. There are many detailed considerations before us in the Bill with which we need to come to terms. In the policy document I published last November, Fine Gael favours a unified health system with managed competition. Obviously in the area of health, open market competition could not be allowed, and nobody is suggesting that. Given the amount of money already being collected from the taxpayer, allowing other companies, in addition to the VHI and BUPA, to come into the market as a result of this Bill will give not only provide managed competition but choice to all patients and potential patients.

I do not know whether it is accurate, and I note a letter in The Irish Times this morning on this particular issue, but it has been suggested to me that in private run hospitals, for example, there is a 100% bed occupancy because the bed is a source of funds whereas in public hospitals it could be on average 70% or 80%. In many public hospitals, however, hospital beds are closed for a number of reasons. Clearly if patient admission is a source of funds for the hospital, there is an attraction in not having long waiting lists but there might also be an attraction in having as many patients as possible. To prevent that, the role of the insurers in terms of limited stays for certain procedures would come into play.

I have no way of knowing whether the system proposed by us is imperfect. I published it as a policy proposal rather than a discussion document and I have asked people what they think of it. I would not welcome the Department's assessment of the proposal because the Department can be protective in this regard, nor that of the Minister because if I were Minister I might have a sense of self-preservation, but it is a good suggestion, and one that Deputy McManus makes in this amendment - that the health insurance authority be asked to consider and report to the Houses of the Oireachtas on the extension of health insurance to the entire population with the objective of creating equality of care and more efficiency in the service. We would then have an honest broker. It would not be me, Deputy McManus or the Minister and a political football could not be made out of the issue. We would have an independent review of the proposals which have been floated. I would welcome such an independent assessment. I do not know whether the Minister can accept this amendment but I support the principles put forward by Deputy McManus in the amendment.

Minister for Health and Children (Mr. Martin)

I welcome the debate and I do not have any difficulty with the fundamental principle underlying it so far which is to try to create a more equitable system that we have currently. I am committed to that. We are all aware of the two tier system which has developed over the years and which primarily reflects itself in terms of waiting time for elective procedures, access to hospitals and so forth. Extending health insurance to the whole population with the objective of creating equality of care is a fundamental policy issue that belongs either to the Government or the Oireachtas. It was never envisaged that the health insurance authority would have, as part of its function, a fundamental policy function which in essence should be delivered by the Government of the day, or in partnership with the Oireachtas, which should come forward with proposals. A significant and widely consultative process is commencing on the development of the health strategy. We are committed to an open debate on alternative systems of funding the health service, of examining the eligibility issue and the delivery systems within our health infrastructure.

The Health Insurance Authority will have as its core function the operational issues pertaining to the operation of the insurance market. We have asked the consultants carrying out the value for money audit to examine the position in ten countries and to examine alternative systems in place in other countries in terms of the funding mechanisms in place ranging from general taxation methods to insurance systems. We have asked the independent consultants to do that objectively. They have been commissioned to do this by the Government and the Department of Finance and my Department are overseeing this work. In the process of carrying this value for money audit, we asked them to examine what is happening in other countries and to put forward their observations.

We envisage the health strategy will also fundamentally consider these issues. Ultimately it is a matter for me, as Minister, or for the Department to bring forward proposals on how we fund and organise the health service and for other parties to do likewise by way of proposals. It was not envisaged that the Health Insurance Authority would have a primary function in dealing with what is a fundamental policy issue.

With regard to building up hospital capacity and its impact on the private insurance market, it has been our policy to build up the capacity of our public hospital system. That is from where many of the problems spring. We have a fundamental lack of capacity in human resources and bed capacity in our public hospital system.

Deputy Mitchell referred to the occupancy rates of private hospitals vis-à-vis public hospitals, but the two are not comparable. In most public hospitals there is an 85% occupancy rate, which by international standards is near the danger threshold. Anything above that is something to be frowned upon in terms of risk management. Many of our hospitals, including some of the Dublin hospitals, have an occupancy rate of 95% at peak periods. Under the national development plan we are building up hospital capacity and some major projects are under way. We are committed to ensuring that payment for the use of private beds in public hospitals is at the full economic rate and that is over a five year period.

There is nothing stopping the Health Insurance Authority making its views or observations known to us on general issues as they pertain to the private health insurance market and how certain matters may impact on that. The issue covered in Deputy McManus's amendment is a fundamental policy issue that should be determined by the Minister of the day or by the Oireachtas. That is where responsibility for it should lie.

Ms McManus

I accept what the Minister said, if that is what had pertained up to now, but the Government policy has not led us to a situation where at some point we choose to have a two tier system, which is grossly iniquitous, not terribly efficient, underfunded and facilitates or encourages 50% of people to take out private health insurance when they already have an entitlement to hospital care. Nobody set out to reach that goal or objective in 2001. We would be all out of business if we could say this was Government policy developed over a period of years and this is the point we have reached. It is lack of Government policy, and I am not pointing the finger specifically at the Minister——

Mr. Martin

I appreciate that.

Ms McManus

Generally speaking, successive Governments have not been able to address the core issues in a way that has delivered for the patients. There are many reasons for that. Most health care systems are under pressure and we all realise that, but most of them are not as bad in terms of inequity as we are. Considering that each Government has avoided the central question of equity and even the White Paper on private health insurance did not deal with the issue of equity and argued it would be all right to continue the current position, we need to adopt a different approach.

I am delighted independent consultants are carrying out a value for money audit and examining the systems in place in ten other countries. The more of that the better. The more research and understanding and the more we can learn from those countries the better, but we must accept that we, in Ireland, have a particular set of circumstances in that 50% of people here take out private health insurance, which is central to any solution.

I agree with the Minister that the Oireachtas must determine policy in that broader sense. Nobody is taking that away from it. I argue that this is a tool, a resource, we are establishing, an authority that is specifically informing itself on understanding and assessing the private health insurance market, regulating it and ensuring it works. That is a resource any Government should be glad to use in expanding its role in delivering assessment and analysis, as the authority would have a greater understanding of the position than individual insurers. We have got tremendous material from insurers, the VHI and BUPA, which is interesting and welcome, but it does not have the independent and informed view this authority will have. That is not to in any way to take from the Oireachtas's decision-making powers and policy responsibility That point is all I am asking for.

Mr. Martin

Surely the authority would have to have a broader outlook. It is currently an authority within the private health insurance market and it will examine areas such as determining when risk equalisation triggers in. That will be its core function to a large extent. It will not have responsibility for the broader picture that the Minister or Department will have of determining what should be strategic vision for our health system going forward, the bed capacity issues, regional issues and the manpower reform, but those are issues that impact on the system. If one determines to follow a particular route, such as the provision of universal health insurance, one must add up all the other issues that must also be addressed. As we are aware, fundamental reform is required in terms of manpower, bed review and primary health care, all with significant funding tags attached.

I do not envisage the Health Insurance Authority examining all those aspects, but those aspects must be considered as we cannot promise heaven in advance of addressing all those issues. We can examine the equity argument, in other words, the waiting list may change as to who is waiting, but unless we deal with the capacity issues there will still be waiting lists. Unless we deal with the human resource reform that is necessary, there will still be a fundamental dysfunction within the system. We want to move to a consultant-provided as opposed to a consultant-led service. We want to reduce the junior doctors' hours in line with EU directive to 48 hours. All that is properly assessing the context of the exercise in which we are now engaged on the health strategy.

The Deputy said Government policy did not determine where we are at today, but that is an open question. The bottom line is that successive Governments of different political hues tolerated the system for a long time. We have had a number of health strategies, with the one introduced in 1994 being the most overall strategy. Prior to that different approaches to the issue were adopted. From the 1950s onwards we have tolerated the emergence of a public system and a private system. The political system over successive generations cannot abdicate itself from what has happened or how matters were determined. It was governed by historical circumstances and forces within society, some of which are still there. Nonetheless, I sense a different approach within the political system. Collectively, people are looking at the issue of eligibility and a two tier system in a more focused way than previously. Perhaps because we now have a significant resource base, which we did not have previously, we are in a position to look at the issue in a different way.

The Deputy is correct that as we develop the public system and increase capacity within that system, it will have an impact on the private sector and on the private insurance market. That market might have to diversify, evolve and move into different areas.

Ms McManus

I am not suggesting what the Minister claims I am suggesting, that this authority would look at all aspects of reform. The body being set up will look at the private health insurance market, how it works and how it will work in the future. Strong arguments are being presented, not just by politicians, in relation to making it a universal system so the market itself is stable, quite apart from considerations of equity.

I have lost the argument but I still believe I am right in terms of this being a resource for any Minister with responsibility for health. It is a pity it is not perceived in that way by the Minister and his advisers. It is a resource. The authority will deal closely with the private market and it is looking to the future in a way that previous Ministers failed to do.

Mr. Martin

It has the facility to articulate its views to the Minister of the day. In terms of the consultative process and even in terms of the strategy, it can make its views known. It will not exactly be silent on all issues pertaining to the private health insurance market. One must consider this issue in the overall mix.

Ms McManus

I have lost the argument but I am still correct.

Amendment, by leave, withdrawn.

SECTION 2

Chairman

Amendments Nos. 2 and 9 form a composite proposal, amendments Nos. 3, 11, 12 and 42 form an alternative composite proposal and amendment No. 4 is related. Is it agreed that we discuss amendments Nos. 2, 3, 4, 9, 11, 12 and 42 together? Agreed.

Ms McManus

I move amendment No. 2:

In page 3, line 18, after "provision of" to insert "ancillary health services and".

I am happy to withdraw this amendment in favour of the Minister's amendment. This is a technical area. My understanding is that "relevant health services" includes general practice and outpatient services. That is a significant and important change in the Bill. Initially I said I could not support the Bill because this area had not been included but this changes the nature of the Bill considerably. I am happy to withdraw my amendment in favour of the Minister's.

Mr. Neville

I concur with the Deputy. My interpretation of the Minister's amendment is that it caters for what we seek in amendment No. 4, which was designed to bring insured contracts which provide payments for outpatient and general practice services within the definition of the insurance contract. The Minister's amendment caters for that so we will withdraw our amendment.

Amendment, by leave, withdrawn.

Mr. Martin

I move amendment No. 3:

In page 3, line 18, after "services" to insert "or relevant health services".

This amendment will cover hospital inpatient, day patient and outpatient services, general medical practitioner services and services for the supply of drugs and medical preparations. We listened to the debate on Second Stage during which a number of Deputies raised this issue. We also received representations from a number of bodies. In consideration of developments which have already taken place in the market, we considered it important to put down this proposal. I welcome the contributions Deputies made on Second Stage and I am reflecting their arguments in the amendment.

Amendment agreed to.

Amendment No. 4 not moved.

Chairman

Amendments Nos. 6 and 7 are related to amendment No. 5. Amendments Nos. 5, 6 and 7 may be discussed together. Is that agreed? Agreed.

Mr. Neville

I move amendment No. 5:

In page 3, lines 22 to 25, to delete all words from and including ", directly" in line 22 down to and including "arrangement," in line 25.

Under the Bill thousands of cash plan policy holders will be deprived of the direct payment facility they currently enjoy. This amendment would restore this direct payment facility. Its purpose is to restore the status quo with regard to the direct payment facility and to continue the present approach for cash plan policy holders.

Amendments Nos. 6 and 7 refer to the duration of treatment of sickness, injury or disease. I will await the Minister's response before I comment further.

Mr. Martin

Amendment No. 5 seeks the deletion from the Bill of terms which prohibit cash plans from paying benefits direct to health service providers. This requirement is intended to ensure that a clear distinction is maintained between cash products and indemnity products. In the interests of clarity for consumers, I want to minimise the possibility of a situation recurring such as that dealt with by Deputy Noonan when he was Minister for Health. A question could arise concerning the establishment of a Lego effect between cash and indemnity plans.

The intention in the section is to keep clear blue water between the two different types of insurance. Based on the evidence available to my actuarial advisers, it is the case in this country and in the United Kingdom that benefits payable under cash plans are predominantly paid to the individuals rather than to service providers. To reinforce this point, no representations in this regard have been received from insurers who currently offer cash plan type contracts in this country. Furthermore, an inquiry made by officials of my Department in the course of recent discussions with a major UK cash plan provider confirmed that as benefits are paid directly to the customer, a provision of the kind contained in the Bill was not a matter of concern or objection.

Amendments Nos. 6 and 7 provide for inclusion of a reference to the duration of the treatment of sickness, injury or disease. This ensures that cash plans which provide a daily-weekly benefit, calculated solely on the duration of treatment, come under the exemptions from health insurance contract in the same way as plans that provide such benefits over the period of sickness, injury or disease. There are two different types of plan involved. One is a hospital cash plan and the other is a permanent health insurance or income continuance plan.

Amendment, by leave, withdrawn.

Mr. Martin

I move amendment No. 6:

In page 3, to delete lines 27 and 28, and substitute the following:

"reference only to the duration of-

(i) the sickness, injury or disease, or

(ii) the treatment of the sickness, injury or disease,

or".

Amendment agreed to.

Amendment No. 7 not moved.

Mr. Martin

I move amendment No. 8:

In page 3, line 35, to delete "person;'." and substitute the following:

"person, or

(c) a contract of insurance that complies with the following conditions-

(i) it provides for the making of payments in respect of the provision of relevant health services but not hospital in-patient services,

(ii) the premiums payable under it are payable on the basis of community rating,

(iii) it is effected by a person (including a body established under the laws of a place outside the State) who-

(I) on 1 May 2000 effected or offered to effect contracts of insurance which, had section 2 of the Health Insurance (Amendment) Act, 2001, been in operation on that date, would have fallen within subparagraphs (i) and (ii), and

(II) on or before that date had been informed by the Minister that he was not required to be registered for the purpose of effecting such contracts,

and

(iv) it is not effected on or after the date (being a date falling after the commencement of section 2 of the Health Insurance (Amendment) Act, 2001), if any, on which the person is entered in the Register pursuant to an application by him in that behalf, or

(d) a contract of insurance, or any other insurance arrangement, the purpose of which is to provide for the making of payments specifically for the reimbursement or discharge of fees or charges in respect of the provision of hospital in-patient services or relevant health services to persons or any dependants of any of them and the following conditions are satisfied-

(i) neither the said persons nor any such dependants are domiciled or ordinarily resident in the State,

(ii) of the said persons to whom the said contract or arrangement relates who are temporarily resident in the State during the subsistence of the said contract or arrangement-

(I) those persons are so resident for the purpose of carrying out their duties as employees, and

(II) those persons constitute not more than-

(A) 20 per cent. of the total number of persons (other than dependants of them) to whom the said contract or arrangement relates, and

(B) 20 of the total number of persons employed in the State by the one person;'.".

This amendment provides for two further limited exemptions to the definition of a health insurance contract and consequently provides for the particular areas of business concerned to be conducted outside the regulatory framework. The exemption dealt with under paragraph (c) is intended to accommodate health plans classified as mixed cash indemnity plans which have been established in the market for some time. These were not regarded as health insurance contacts under the principal Act because their sole or principal purpose was not considered to be medical indemnity. The plans concerned are operated by the Hospital Saturday Fund and the Hospital Savings Association. While not subject to the insurance legislation, the premiums have been traditionally based on community rating and membership is generally open to anybody under 65 years of age. These two organisations between them cover in excess of 30,000 people.

Paragraph (c) subsection (iv) of the amendment provides for the exemption to end in respect of any of the undertakings concerned when it is entered in the register maintained under the principal Act. A possible reason for such a development might be a desire to have the premiums paid for plans considered for tax relief, which under taxation legislation may only arise in the case of registered health insurers.

The exemptions included under paragraph (d) address an unintentional impact of the principal Act on expatriate health insurance business. This business is concerned with insuring key personnel of multinational companies who, as part of their employment, are required to locate temporarily in third countries. Such an employer might wish to have one policy to cover, say, 1,500 people across 25 countries. Only three of these might be situated in Ireland. As matters stand a separate community rated policy would have to be set up for the three Irish based employees if the cover is being provided by an Irish based insurer. This puts such an insurer at a competitive disadvantage. A major international insurer has established such worldwide operations here that it has requested this matter be addressed in a manner that would not be detrimental to regulatory underpinning community rating. This amendment achieves both of these objectives.

Amendment agreed to.

Section 2, as amended, agreed to.

SECTION 3.

Amendment No. 9 not moved.

Mr. Neville

I move amendment No. 10:

In page 4, between lines 11 and 12, to insert the following:

"(c) the substitution of the following definition for the definition of ’health benefits undertaking’:

' "health benefits undertaking" means a person (including a body established under the laws of a place outside the State) carrying on health insurance business in the State;',".

This amendment makes clear that the State is not seeking to impose extra-territorial control on health insurance business conducted by a company in the State for business outside the State. If a company in this country wanted to conduct insurance business in France it should not be determined by the rules laid down in this State rather than those laid down in France.

Mr. Martin

Does the amendment seek to ensure that? I am unsure about its raison d’être and I do not consider it to be necessary. I do not see how this State could impinge on the right of insures who are authorised to conduct the relevant classes of business covering sickness insurance in another EU member state to engage in the provision of such services in Ireland.

Mr. Neville

What is the position for companies based in Ireland but providing services outside the State?

Mr. Martin

Under this legislation any business conducted outside the State would not constitute a health insurance contract. I will get further clarification on the matter for the Deputy and he may, if he wishes, resubmit the amendment for Report Stage.

Mr. Neville

I will withdraw the amendment on that basis.

Amendment, by leave, withdrawn.

Mr. Martin

I move amendment No. 11:

In page 4, paragraph (d), line 23, to delete "and".

Amendment agreed to.

Mr. Martin

I move amendment No. 12:

In page 4, between lines 23 and 24, to insert the following:

"(e) the insertion of the following definition after the definition of ’the Registrar’:

' "relevant health services" means out-patient services, general medical practitioner services and services consisting of the supply of drugs or medical preparations;',

and".

Amendment agreed to.

Chairman

Amendments Nos. 23, 24, 28, 31, 36 and 37 are related to amendment No. 13 and all may be discussed together by agreement.

Mr. Neville

I move amendment No. 13:

In page 4, between lines 23 and 24, to insert the following:

"(e) the insertion of the following definition after the definition of ’the Registrar’:

' "relevant risk" shall be construed in accordance with section 12(10)(a);’,”.

The purpose of these amendments is to ensure that the comparison of the nature and distribution of risks among registered undertakings is carried out on the basis of comparative risk.

Mr. Martin

These amendments deal with risk equalisation, which is a central feature of the Bill. Risk equalisation is an integral part of an effective regulatory framework supporting community rating and open enrolment. Successive Ministers have indicated that it would be a central feature of our health insurance regulatory framework. Risk equalisation measures are permitted under the EU's third non-life insurance directive, which makes reference to loss compensation between insurers. Our private health insurance system operates under the principle that insurers must accept all comers, irrespective of their age or health status, and charge them a standard premium for a given level of cover. In other words, insurers cannot be selective about the risks they will cover or the price they will charge. This means there is solidarity between the young and old, the healthy and the sick. People do not have to buy health insurance, so their trust and confidence in the long-term stability of the system is vital if this solidarity is to be maintained.

This is workable so long as all insurers' risk profiles are broadly similar. However, there is a danger that the market could be destabilised if significant variations in risk profiles emerge. For example, if an insurer, by accident or design, ends up with a younger, healthier population it will be able to charge lower premiums, which means that premiums will inevitably rise for those insurers left to cover less healthy individuals.

For these reasons I am convinced that risk equalisation is essential to prevent potential destabilisation of the market and in that context the amendments are unacceptable because they tend to narrow, restrict or dilute its importance and its impact in terms of maintaining market stability. There is considerable international evidence to support this position. While I will not elaborate on all aspects of the theory behind this, I cannot accept the amendments because they represent an assault on the principle of risk equalisation.

Mr. Neville

Does the Minister not agree that the amendments would give him the power to prescribe the nature or class of risks that fall within the definition?

Mr. Martin

The legislation allows for the health insurance authority to have significant discretion in terms of deciding when risk equalisation is triggered. The Bill also provides for the establishment of a scheme of risk equalisation. It will take a flexible approach.

We have endeavoured to be fair to all sides on this. The two players in the market hold directly opposing views as to when risk equalisation should be triggered. We have come a long way in terms of when it should start to be triggered. All new entrants to the market knew as far back as 1994, when the principal Act was passed, that risk equalisation would be a feature of the private health insurance market. That was clearly understood by all. What I am saying is that we are giving a great deal of discretion to the health insurance authority. Deputy McManus has tabled an amendment, to which we will come later, regarding the introduction of regulations subsequent to the passage of the Bill, that it be done by an affirmative resolution which would have to go before both Houses of the Oireachtas. I have not tabled a similar amendment but, subject to arriving at a wording with which the Deputy agrees, I propose to introduce an amendment on Report Stage facilitating that.

Perhaps that is necessary in the context of this Bill. That is a broader issue for the Oireachtas to look at in terms of the way in which we do our business but in the context, people might like to see the details of the scheme as we flesh them out. Later I can elaborate on how we see the scheme operating, the broad bands, about which we are talking, regarding giving the window of discretion which the authority should have and at what stage the Minister should become involved.

The key question here is, do we look at age and gender or age, gender and sickness? We are giving that discretion to the authority to decide whether it will trigger risk equalisation on the basis of age and gender or of age, gender and sickness. We also are looking at giving a range or setting parameters between certain percentage points as to when they can decide to apply a lower or higher percentage point. In other words, if it gets to the stage where one is up to a 10% distortion of the marketplace and we think that is very serious at that particular time, the Minister, if the authority is not moving, would have the power to become involved. We are willing to come back to the House via the scheme in the context of regulations which would have to be moved by an affirmative resolution of both Houses because I am conscious that this issue has generated a great deal of interest from Deputies.

Nonetheless, I want to make it clear that our position is very definite in terms of the absolute centrality of a risk equalisation provision in the Bill. There are arguments around the degree of flexibility and discretion one allows the health insurance authority and the precise point at which one triggers risk equalisation, but our position is that it is too late to wait for the market to collapse to trigger risk equalisation. There is no point in suggesting that we should wait until the system collapses before moving. It would be too late at that stage because people would have lost confidence in the product. Frankly that aspect of it is not an exact science. We do not have all the figures from the various companies in that regard. They have not provided those figures to us but under the Act such data would need to be provided to the health insurance authority, which obviously would be in a far better position.

The Bill allows for a whole series of appeals, both to the authority and subsequently to the Minister in terms of any determination which the Minister might make following a recommendation from the authority. Therefore, we are trying to build into the Bill as many safeguards as possible at all times while trying to maintain confidence in the market.

Mr. Neville

I reserve the right to table the amendment again on Report Stage.

Amendment, by leave, withdrawn.

Ms McManus

I move amendment No. 14:

In page 4, lines 24 to 32, to delete paragraph (e).

If the Minister can assure me, I would be happy to withdraw this amendment. The only reason I tabled the amendment is that I have a concern. I understand why the definition in the Bill was changed from that contained in the original Act to copperfasten the position of people who are dependent on the named health insurance subscriber, that it includes those dependants of the named person. I appreciate that. From the point of view of legal clarification, I accept it and I am happy to withdraw my amendment.

However, I was concerned - I hope the Minister can remove the doubt - that this might undermine the position of those dependants in other legal contexts. If it must be specified in this regard that these people are included, does that have an impact on the status or security of their health insurance cover? That is the only question I want answered.

Mr. Martin

No, I can assure the Deputy that it will not.

Amendment, by leave, withdrawn.

Section 3, as amended, agreed to.

NEW SECTION.

Chairman

Amendment No. 15 is in the names of Deputies Mitchell, Neville, Ring and McManus. Amendments Nos. 43 and 46 are related. Therefore amendments Nos. 15, 43 and 46 may be discussed together by agreement. Is that agreed? Agreed.

Mr. Neville

I move amendment No. 15:

In page 4, before section 4, to insert the following new section:

"4.-Section 2 of the Voluntary Health Insurance (Amendment) Act, 1996, is hereby amended in subsection (1) by the insertion after 'as it may think fit' of 'and may provide such other services, including services to persons outside the State, as it may think fit'.".

The amendment facilitates a situation where the insurance companies can provide such other services, including services outside the State, as they may see fit.

Ms McManus

I support this amendment. It is self-explanatory. Indeed, earlier the Minister referred to the fact that as changes occur in the provision of health services, the VHI, for example, might wish to engage in providing other services.

Now that we are talking about it, what is the Minister's policy regarding the future of the VHI? The impression one got from the previous Minister was that the VHI was going down the road of privatisation. I understand that the current Minister is talking about mutualisation and therefore I would ask him to spell out his view precisely.

Mr. Martin

Amendments Nos. 15, 43 and 46 relate to or arise from the inclusion of an amendment under the Bill to extend the powers of the VHI regarding the products and services it is empowered to provide.

My amendment, amendment No. 43, is proposed arising from a request received from the VHI and further to consultations my departmental officials have had with the company on the matter. The Government is committed to changing the corporate status of VHI to that of a public limited company, with the Minister for Finance as the sole shareholder, and its proposals thereon are set out in the White Paper. Arrangements in this regard are progressing and, jointly with the Minister for Finance, I engaged corporate finance and legal consultants at the beginning of the year to provide advice and assistance in regard to this process and the general issue of VHI's future corporate status.

I hope it will be possible to bring pro-posals for legislation in this area to Government for consideration during the current year. That might be ambitious but we are awaiting finalisation of that. In the meanwhile VHI is anxious to have greater scope to advance plans and exploit opportunities in the market. Apart from the obvious merits of such an approach, I do not see this as conflicting in any way with the proposed future VHI legislation which would be aimed at providing it with greater commercial options and flexibility.

The amendment we are putting forward will allow VHI to engage in new areas of business as a principal or agent, as appropriate. I understand that in both respects the VHI is actively looking at a number of possibilities and I will give every consideration to facilitating it in regard to whatever developed plans it may present to me under the new section in the future.

Amendment No. 46 is essentially technical and involves the elaboration of the Bill's long title to comprehend the inclusion of the provision relating to VHI powers. I am satisfied that the amendment I am proposing for the Voluntary Health Insurance Board is the more appropriate one at this time. Amendment No. 15 would give the VHI undefined powers regarding the services it could provide and would represent a departure from the existing legislative structure, which requires the approval of the Minister to propose schemes of health insurance. Literally, amendment No. 15 would give the VHI the power to provide any services it saw fit. However, under its existing status, the VHI is not an authorised insurer and would not meet the prudential requirements of the Department of Enterprise, Trade and Employment for carrying on either life or non-life insurance business.

It is considered that the proposed amendment would conflict with the existing legislative framework, which requires the approval of the Minister to new schemes and VHI's exemption from meeting the normal requirements for authorisation as an insurer. Given its current status and its position regarding the usual reserving requirements for insurers, it is considered appropriate that new schemes should be subject to the approval of the Minister and, where necessary, any regulatory or other conditions he or she may deem appropriate. The unspecified approach could give rise to competition issues with other insurers if the VHI was to engage in new forms of business without complying with the general insurance regulatory provisions.

Ms McManus

There has been a difficulty in recent weeks in obtaining the transcripts of committee meetings. Would it be possible for the Minister to circulate to Members copies of the reply he has just given?

Mr. Neville

The transcripts usually appear quite quickly.

Chairman

That is not the case. It is usually about four weeks before they are available.

Mr. Martin

I will send a copy of the reply to Deputy McManus.

Ms McManus

That would be very helpful.

Amendment, by leave, withdrawn.

SECTION 4.

Mr. Neville

I move amendment No. 16:

In page 5, between lines 2 and 3, to insert the following:

"(3) Subsection (1) does not apply to any arrangement entered into by an employer whereby the employer agrees to discharge the whole or part of any fees or charges which have been or may be incurred by an employee, or any dependant of the employee, who is a part to or named in a health insurance contract (effected with a health insurance business other than the employer) in respect of health services received by the employee, or his or her dependant, which are not payable by the insurer under that health insurance contract.'.".

Section 4 inserts a new section into the 1994 Act, the purpose of which is to ensure that employers are not prevented from self-insuring their employees. This could also prevent employers from meeting any cost which their employees would have to pay because they may have availed of health services which are not covered by their insurance contract. For example, this could happen in a case where an insurer might not pay for treatment relating to a condition that predated the signing of the contract. Amendment No. 16 proposes that such employers would not be required to register as health insurers.

As matters stand, employers are prevented from self-insuring their employees. It may happen, however, that if an employee suffered a heart attack and was exempted under the normal rules applied by health insurance companies, the employer may want to provide insurance for the stricken employee. Under the current provision, such an employer would be obliged to register as a health insurer.

Mr. Martin

This section provides that a health contract is deemed to be in existence in situations where employers meet or guarantee to meet the hospital in-patient costs of their employees. It provides that an employer who agrees to reimburse or discharge the fees or charges incurred by employees, or any dependant of an employee, in respect of hospital in-patient services will be deemed to be carrying on a health insurance business and will be subject to the amended legislation. Self-insurance of this kind on the part of employers would have the effect of damaging community rating by removing a predominantly young and healthy population from the general risk pool. Clearly such a development - this type of self-insurance is common practice among large employers in the United States - would threaten the solidarity between generations, which underpins community rating.

The specific reason for this provision is to support the financial integrity of community as it operates in our system. The development of self-insurance practices on the part of employers, if they became widespread, would damage the system by removing or diminishing the contribution which employer-paid schemes, because they cover predominantly younger and healthier lives overall, provide to the system. Covered or employer-paid business represents approximately 20% of the market in terms of total premiums paid. Amendment No. 16 appears to suggest that this positive contribution to the overall risk pool, represented by the entire population, is not needed in full. Such a development would impact on the cost of insurance generally to those who are not paid for by their employers.

The amendment, if accepted, would provide an opportunity for insurers to segment the employer-paid portion of the market by offering the minimum level of cover permitted under the regulatory system on a community rated basis and cover for anything above that on a risk rated basis. I do not believe that opening the door to such practices would enhance the strength of community rating in the future.

Amendment, by leave, withdrawn.

Section 4 agreed to.

Sections 5 to 7, inclusive, agreed to.

SECTION 8.

Mr. Martin

I move amendment No. 17:

In page 9, between lines 41 and 42, to insert the following:

"(b) is of or over a prescribed age,”.

This amendment relates to the arrangements for specifying maximum waiting periods which insurers may impose in respect of payment of benefits under health insurance contracts. Waiting periods, a necessary element of an insurance system, operate on the basis of open enrolment and community rating. They are a strong protection for insured persons against the potentially serious effects of adverse selection or hit and run by persons purchasing insurance specifically for the purpose of claiming in respect of an existing condition. Behaviour of this kind on the part of consumers, if it became widespread, could seriously undermine and destabilise the insurance system. This was a serious problem in the Australian system which the authorities in that country have addressed in recent years.

Section 8(3) of the principal Act provided for the Minister to prescribe the maximum waiting periods for eligibility under a health insurance contract. The open enrolment regulations made in 1996 allow insurers to impose waiting periods up to specified maximum periods. The amendment permits the prescription of waiting periods for first-time purchasers of health insurance who are over 65 years of age. These people will now be able to avail of the open enrolment provisions of the principal Act.

In the interests of clarity, I should point out that the waiting periods apply to elective treatment and do not impinge upon care necessitated as a result of accidents or emergencies.

Amendment agreed to.

Section 8, as amended, agreed to.

SECTION 9.

Ms McManus

I move amendment No. 18:

In page 10, after line 50, to insert the following:

"(2) Regulations prescribing a scheme under this section shall not be made unless a raft thereof has been approved by both Houses of the Oireachtas.".

I welcome the indications from the Minister in relation to his reply, to which I will listen with great interest. In my opinion an important and fundamental issue is at stake here in respect of accountability. Departments produce regulations on a regular basis. Until now, the tendency has been for Ministers to disregard any proposals to have such regulations approved by both Houses of the Oireachtas before their implementation. This has led to serious deficiencies in terms of accountability. The most graphic example of this is that highlighted by the Ombudsman in his report on nursing home subventions. I cannot imagine an area where regulations will be more important than that involving the prescription of a risk equalisation scheme. I look forward to the Minister's acceptance of the amendment.

Mr. Martin

I accept the broad thrust of the arguments made by the Deputy. I also accept that Members would want to have the opportunity to approve of any regulations introduced during the subsequent rolling out of the scheme. I would appreciate it if the Deputy would withdraw her amendment to allow me to bring forward a replacement for Report Stage, which might be somewhat broader in scope and contemplate all regulations pertaining to the Bill.

Ms McManus

It might contemplate all regulations pertaining to the Bill?

Mr. Martin

What I am saying is that there might be a broad affirmative resolution. In other words, the House will affirm all regulations that have to be brought into force as a result of the passage of the Bill.

Ms McManus

I do not mind being outflanked on this matter. I am satisfied with the Minister's reply.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 19 to 21, inclusive, are related and may be taken together by agreement. Is that agreed? Agreed.

Mr. Martin

I move amendment No. 19:

In page 11, line 1, to delete "paragraph (b)” and substitute “paragraphs (b) and (c)”.

Essentially, these are technical amendments required as a consequence of including relevant health services under the scope of a health insurance contract - as we have already agreed, following our consideration of amendments Nos. 2, 3, 4, 9, 11, 12 and 42. Amendments Nos. 19 and 21 provide that a scheme need not apply to health insurance plans which are solely concerned with health services provided on a basis not involving a hospital admission. The inclusion of the word "specifying" in amendment No. 20 is also technical in nature.

Amendment agreed to.

Mr. Martin

I move amendment No. 20:

In page 11, line 5, after "provision" to insert "specifying".

Amendment agreed to.

Mr. Martin

I move amendment No. 21:

In page 11, between lines 16 and 17, to insert the following:

"(c) A scheme may include a provision specifying that the scheme shall not apply to so much of the activities of a registered undertaking as consist of effecting health insurance contracts that solely provide for the making of payments for the reimbursement or discharge in whole or in part of fees or charges in respect of the provision of relevant health services.”.

Amendment agreed to.

Chairman

Amendments Nos. 22, 29, 32 and 34 are related and may be taken together by agreement.

Mr. Neville

I move amendment No. 22:

In page 11, to delete lines 34 to 47, and substitute the following:

"(i) the making of payments by registered undertakings to the Authority of such amounts as may be determined by the Authority in such manner and by reference to such matters as may by regulations be prescribed,

(ii) the making of payments by the Authority of such amounts as may be determined by the Authority to such registered undertakings as may be so determined in such manner and by reference to such matters as may by regulations be prescribed,

in the event that such conditions as are specified in the scheme relating to the nature and distribution of insured risks among the undertakings and any of the conditions in paragraph (d) are fulfilled.”.

Amendment No. 22 would empower the Minister to prescribe, by means of separate regulations, the formula which the health insurance authority must apply in determining the amount to be demanded from and paid to health insurers under any risk equalisation scheme. It provides flexibility in ensuring different criteria to be set, including calculating the amount of risk equalisation payment and determining which payments need to be made. This will enable the Minister, by regulation, to ensure any payment is in proportion to the need.

Mr. Martin

These amendments relate to the triggering of risk equalisation and when it can commence. I will outline our intentions in this regard. The health insurance authority will carry out risk equalisation calculations on a notional basis in the beginning. It is not intended to resort to financial transfers between insurers under risk equalisation unless there is a material level of distortion in the risk profiles of competing insurers which would threaten the operation of genuine community rating across the system as opposed to each insurer having its own community rate.

On the wide parameters to be set in regulations it will be first a matter for the health insurance authority to decide when the degree of difference, as measured by the level of notional transfers, was such as to warrant the commencement of risk equalisation having had regard to all other relevant considerations. The system will not be triggered if material differences in risk profiles do not emerge and we are examining the application of specific tests in terms of whether potential payments under the system remain below a lower trigger point, which could be, for example, equal to 2% of all claims, approximately £7 million annually, within the system. If potential payments lie between the lower trigger point and an upward trigger point at 10%, for example, could be introduced, which would equate to £35 million annually, the payments under risk equalisation will only commence if the authority makes a recommendation to that effect, which must be accepted by the Minister of the day.

If the potential payments under the system exceed the upward trigger point, risk equalisation will commence unless it appears to the Minister of the day, having consulted with the authority on the matter, that there are good reasons for not doing so. In other words, we are trying to give broad parameters to the authority but if the authority does not act when the distortion has reached the upper percentage point set in the regulations we will suggest in the regulations that the Minister of the day should have the power then to intervene to save the market from collapsing or at least consulting the authority again if it has good reasons for not doing so.

It also will be open to the health insurance authority to take into account whatever facts it considers relevant in exercising its crucial discretions in regard to the regulation of health insurance business in the overall best interests of health insurance consumers. However, its consideration process will have to include regards for the stability of community rating and the facilitation of competition. It must balance the two. The stability of community rating is pre-eminent and the authority must examine it but it must facilitate competition in the market. The authority's approach outline will position risk equalisation as a genuine reserve power to put into effect in circumstances where an independent body, the Health Insurance Authority, determines that material distortion in the risk profiles of competing insurers represents an effect to the stability and maintenance of community rating. It further provides that it will be fair and proportionate as regards commencement and application.

The amendments are far-reaching. They seek to severely limit the ability to have recourse to use risk equalisation as a necessary protection for community rating. They also seek to ensure if risk equalisation is brought into effect it will be so limited in its impact as to be of no avail to correct what would then constitute major and established distortion in the community rated market. They fail to recognise that risk equalisation is an instrument of stability and not a panic measure. There is no point in introducing risk equalisation when the game is up. Risk equalisation not only addresses distortions which may occur through unintentional risk, it also represents an effective counter measure to the strong incentive that exists for insurers to engage in preferred risk selection.

The proposal to insert a new section 4(d) in amendment No. 34 is very worrying by reference to maintaining the stability of community rating. The amendment envisages corrective steps rather than preventive steps to be relied upon to safeguard community rating. On this basis it envisages action being taken after certain serious problems have become apparent rather than before arriving at the point of crisis. It is an unusual approach to stability to begin measures when the commercial viability of one or more insurers is threatened after a material reduction has occurred in the market size. Has damage not largely be done at that point? Can enough be done in the midst of such decline to retrieve the situation? Is the trust and confidence of consumers in their insurer or the integrity of the community rated system not irreparably damaged?

Under the section the specific criteria must be considered to have occurred in consequence of the nature and distribution of insured risks among the registered undertakings. There is plenty of scope for competing insurers to gain this provision or frustrate the reaching of a determination on risk provisions by arguing numerous factors other than risk differences as the reason for the difficulties. This is exacerbated by the absence of any elaboration of the terms "threatened" and "material reduction". This scenario does not appear to lend itself to easier resolution and would, therefore, by likely to further perpetuate the descent into stability. We are strongly opposed to the amendments as they fundamentally alter the nature of risk equalisation proposed.

Mr. G. Mitchell

I am most concerned about this section in the legislation. I am also concerned that the Minister has not accepted any of the amendments, some of which are quite reasonable. Amendment No. 34 seeks to set the three conditions that are, in the opinion of the Minister or the authority, necessary. The conditions are the person's experience and difficulty, commercial viability and material reduction. Why has the Minister objections to the amendment?

It has been put to the committee by those in the industry that the Minister is not comparing apples with oranges in this area and when, for example, foreign legislation is quoted, the expert opinion on risk equalisation seems to have been greatly influenced by those associated with the VHI and the Department and the expert group was apparently chaired by a Mercer consultant and former VHI employee. The Society of Actuaries of Ireland did not have a competition representative from its health care committees. The suggestion made during extensive submissions to the committee is that risk equalisation is being introduced at the behest of the VHI, which in the eyes of some is little more than an extension of the Department as it is an agency of the Department. Has the Minister given due consideration to all the concerns that have been received?

During the briefing we received from the Department a number of international studies were mentioned but the briefing did not quote best international experience. The national system in the Netherlands, not the private system, got into difficulties according to submissions we received. The German national system uses equalisation to distribute earnings related contributions from employers and employees. We are told the German private system does not use any risk adjustment. The other markets cited in the briefing have already been examined in a separate report and the only similar example, Australia, has been unstable.

This is an area about which, clearly, there is a great deal of concern. The Minister should consider some of the amendments tabled, the reason for which Deputy Neville has explained, which would introduce a certain degree of flexibility to the legislation and would leave the Minister with certain options. I want to see the maximum number of entrants to the market, with both BUPA and the VHI staying in and returning sufficient surpluses to meet their operating costs. The legislation is too belt and braces and too protective of the fears of the VHI. Whereas the other contender for business, BUPA, takes a different view, I do not want to speak for either. I want to achieve a fair assessment of what is right and necessary. The amendment I quoted gives the Minister a certain amount of flexibility and perhaps he will reconsider it. It would strengthen the Bill, and the amendments generally to this section would meet the Minister's objectives but would not impose a belt and braces. Perhaps the Minister will reconsider those specific points.

Mr. Martin

I have confirmed that we will bring the draft regulations before the House for approval and I will table an amendment before Report Stage to give effect to that. We discussed the area of risk equalisation earlier. I appreciate the Deputy was not in a position to be present for that part of the committee's deliberations. Perhaps I can go over the area again because it is a fundamental issue.

The Society of Actuaries in Ireland has stated: "The Society is firmly of the view that a risk equalisation system is fundamentally necessary where health insurance is community-rated." The advisory group on the risk equalisation scheme, which reported to the then Minister in April 1998, said: "The Advisory Group concludes, based on its own deliberations and on the basis of the arguments made and evidence presented to it, that risk equalisation is essential to underpin community rating;" and "The Advisory Group agrees, therefore, that a Risk Equalisation Scheme is a necessary feature of the private health insurance market." It has been claimed that the advisory group was compelled by its terms of reference to find in favour of the necessity for risk equalisation. This is a misrepresentation of the advisory group's position as set out in its report and is directly contradicted by the following quotation therefrom:

The Advisory Group's terms of reference make it clear that it is public policy to protect the stability of community rating, and that the facilitation of competition is to be subject to this. If the primary policy had been to facilitate and encourage competition and the secondary objective had been the protection of the stability of community rating, the Advisory Group would have recommended a scheme of risk equalisation based only on age and gender, as described in section 6.5. This would have offered considerable encouragement to new entrants to enter the market.

This makes it abundantly clear that the advisory group recognised and was supportive of the need for risk equalisation and considered it necessary, even in circumstances where competition was to be the primary objective.

Mr. Peter Bacon, economist, was commissioned by a private client to examine the matter of risk equalisation and the competitive nature of health insurance in Ireland. His work in that connection was supportive of the need for risk equalisation in the context of the Irish private health insurance market.

Risk equalisation is operated in Australia as a necessary feature of that country's community rated private health insurance system. A major examination of the Australian system was undertaken for its Government by a statutory commission which issued a comprehensive report in 1997. This report stated the following on the necessity for risk equalisation arrangements, referred to as reinsurance, in the Australian system:

The purpose is to underpin community rating by sharing the hospital costs of the chronically ill and the aged. If there were no such arrangements, instability could develop in the industry; funds with a higher proportion of individuals with high claims would be forced to charge relatively high premiums; this would drive out members to other funds - especially members with low health claims - which would drive up premiums further, and so on.

In a paper delivered to a conference in Ireland in May 1998, Mr. Russell Schneider, chief executive of the Australian Health Insurance Association, put it bluntly that: "Without an effective risk equalisation scheme, community rating cannot exist".

We obtained actuarial advice from the United States from a sister company of Mercer Limited. The advice obtained indicated that there was no consensus in the US about risk equalisation and that it was too early to form a definitive judgment in cases where risk adjustment had been put into effect. However, it was clearly stated that: "Nothing that has happened in the US provides evidence that risk adjustment is unnecessary and US experience should not discourage the Irish Government from proceeding with the development of a system of risk adjustment."

In January 1999 the United States Health and Human Services Secretary, Donna Shalala, announced the implementation of a risk adjustment method in respect of payments for Medicare managed care plans. In making the announcement, she stated: "There is widespread agreement among health care experts that risk adjusted payments will pay plans more fairly and reduce incentives for plans to enrol only healthier beneficiaries." A further view of US developments was provided in the keynote address to the November 2000 annual health insurance conference at the UCD business school by Professor Alan Eindhoven. The professor, who is a recognised US and international authority on managed competition in health insurance, stated that the United States of America was moving towards risk adjustment as part of the competitive health insurance market. He expressed the view that risk adjustment was absolutely necessary to get the incentives right in a competitive health insurance market.

A strong independent endorsement of the need for risk adjustment in a competitive health insurance market operated on the basis of community rating-open enrolment was provided by Wynand van de Ven, Professor of Health Insurance at the Erasmus University in Rotterdam in the Netherlands, who is a recognised authority on managed competition. The professor argued as follows: "Adequate risk equalisation is an ABSOLUTELY necessary complement to community rating in a competitive market for individual health insurance."

Several countries, such as Belgium, the Czech Republic, Germany, Israel, the Netherlands and Switzerland, which in the 1990s made their compulsory individual health insurance more competitive, have rightly implemented a risk equalisation system as a complement to community rating.

I could go on and I thank the Chairman for his tolerance so far. I wish to add that recent experience in Germany underpins the argument more strongly. The experience of instability in the Dutch system during the 1970s and 1980s has a parallel in a difficulty in the German sickness fund system relating to a financial crisis which has beset the sickness fund of Hamburg undertakings. BKK Stadt Hamburg is a health insurance fund set up originally to provide health insurance benefits to State employees in Hamburg. Many funds in continental Europe were originally set up for employment groups.

Following a liberalisation of the market, this and other funds can now accept all comers. BKK Stadt Hamburg has recently run into financial difficulties and has an accumulated deficit of DM100 million. Two primary reasons for its financial difficulties are the relative high cost of health care in the Hamburg region and the fact that it has experienced a disimproving claims ratio which, because the risk equalisation scheme in force is not adequate, has forced it to raise premium rates. The increase in premiums has meant it has lost a significant number of clients which has exacerbated its difficulties.

The German Government commissioned an expert group to review the development of the German risk equalisation system. The group reported in February of this year. It recommended that the risk equalisation system be strengthened by including morbidity as a risk adjuster on the basis of diagnosis-based risk adjusters and the establishment of a high cost claims pool.

In South Africa, we made inquiries of Mr. Alex van den Heever, adviser to the Council of Medical Schemes and co-ordinator of the Committee of Inquiry into a Comprehensive System of Social Security for South Africa. He clarified the position in the following terms:

The risk equalisation mechanism has been discussed in conjunction with major strategic reforms of the health system since 1995. The longer-term reform would seek to link equalisation to achieving both health and income related cross-subsidies;

and

In the medium term risk equalisation is required to deal with continued cream skimming occurring through indirect means. For instance, brokers are being offered incentives to split groups (where an employer is transferring business) dumping pensioners and moving only the young and healthy.

The problem with the Deputy's amendments is that they wait for the system to collapse before intervention. There must be a preventative dimension to risk equalisation.

Mr. G. Mitchell

Much of what the Minister said could be dealt with by the community rating provisions rather than by equalisation. It seems also to me that the VHI has the right leg of the Minister and that the provisions have been drawn up to fit their concerns. They are entitled to put their case but other issues have been raised with members of the committee, mainly by BUPA. BUPA states that international experience does not support the value of a risk equalisation scheme in preventing market instability. It went on to say, when raising the matter of the impact on competition, that risk equalisation kills competition and that its threat has prevented meaningful competition since 1996; that it requires BUPA Ireland to pay £20 million over the next three years to VHI and further payments each year after that; and that it removes the incentive for VHI to compete for business.

I mentioned Australia, Germany and the Netherlands. The Minister quoted the advisory group on risk equalisation but I am informed that they said risk equalisation was a barrier to market entry. The Minister said they were misquoted but I am informed that the group said risk equalisation was a barrier to market entry.

The Mercer Ireland advice appears to conflict with the Mercer US advice. The Minister said the Mercer US advice was inconclusive. The New York office of Mercer, the Department's actuarial advisers, stated that risk adjustment has been tried on a very limited basis in the US and that the case for or against has not been proved by extensive actual experience. I understand that that is what they said. If that is the case and it has not been proven by actual extensive experience, then we have Mercer Ireland saying one thing and Mercer US saying another. Who is Mercer Ireland? It created the current system with VHI data and is pension administrator to the VHI. Yet the Minister accepts Mercer Ireland's view, against that of Mercer US; the latter believes it is inconclusive.

Mr. Sean Barrett of TCD said the benefits of risk equalisation are nil but the cost in deterring new entrants and preventing efficiency improvements are considerable. Deputy O'Malley said in the Dáil in November 2000 that the proposed regulatory regime sought to impose a draconian regime designed to stifle competition. Mr. Willie Fagan, when Director of Consumer Affairs, said he had seen no QED for a risk equalisation scheme in Ireland and that the essence of competition was the ability to lose and gain customers. An article by Professor Ray Kinsella in The Irish Times on 16 October 1999 stated that consensus to ensure the stability of Ireland’s voluntary private medical insurance market needs to be balanced with the news that risk equalisation deters competition and inhibits the market building essential for an equitable and sustainable public/private health care mix. The insurance industry conference was quoted in the Sunday Independent of 24 October 1999 as saying that it did not appear to be very concerned by the deeply controversial proposals for risk equalisation and the Minister’s hopes of getting competition into health insurance looked slim enough to judge from the consensus views of the private meeting; the Minister’s representatives were reminded in strong terms that the key skill in insurance was in judging and evaluating risk and that the Government’s White Paper on health insurance was removing that skill.

I understand that the collapse in the Australian health insurance market is a timely warning that risk equalisation does not bring stability and that international evidence has been used selectively - I do not know if that has been done with deliberate intent - to justify risk equalisation, in other words, to mostly justify the concerns of VHI, the biggest player in the Irish market. The Minister quoted some examples and I understand that Ms Shalala was referring to the US Medicare system for over 65s which is funded by taxation. For every quotation the Minister can use from his officials to justify the presentation which favours the dominant player in the market, BUPA can supply the committee with an alternative. The truth may lie somewhere in between or with one side or the other. It is not, however, the job of this committee to accept that the views of the VHI, which is little more than an authority which is "owned" by the Minister. Their views should not be purveyed to the extent the Minister wants regarding this section. There are two players in the market and one player is totally opposed to this concept; it has quoted people to support their view. I quoted the Director of Consumer Affairs, Sean Barrett of TCD and others. The Devil can quote scripture to suit himself but I am not satisfied that this section either provides stability or is the best for encouraging people into a competitive market. The amendments proposed would assist with this though I note the Minister will come forward with proposals later.

I would be happy to withdraw these amendments on the basis that the Minister's officials would brief us in advance of Report Stage on the precise wording and nature of the amendments he proposes. This section is central to the legislation and has caused the most concern.

Ms McManus

I promise not to bring up any examples. When the Minister replied to Deputy Neville's questions he read out a very comprehensive and interesting description of how the system is to work. Could we be furnished with those details? That would be extremely helpful. BUPA came into the market knowing the rules of the game but when those rules were applied and they were designed in such a way that BUPA had to hand over a certain amount of money, BUPA went to the Minister who put that on hold, as I recall. In terms of what the Minister is describing now, is that particular issue history?

In relation to the question of other insurers coming into the market, everyone agrees that it would be a good thing if we had at least one other insurer in the market to assist with competition. Presumably there is room for another insurer but what is the Department's and the Minister's assessment of the likelihood of another insurer coming in? As far as I am concerned, the Minister is fighting the good fight on risk equalisation but there are also questions as to where the balance is in attracting insurers in and making sure the system works fairly and in a way that will meet people's needs. What are the possibilities envisaged by the Minister?

Chairman

Deputy Mitchell is prepared to withdraw his amendments if the Minister will make his officials available with the direct wording of amendments prior to Report Stage.

Mr. Martin

We have the amendments, I think, but the Deputy is referring to the scheme which would come into play after the passage of the Bill, which would be regulations. In line with an amendment tabled by Deputy McManus, I stated that the regulations could only be introduced by way of affirmative resolution in the Houses of the Oireachtas. In other words, both Houses would have to see the detail of the proposal before passing it. That will provide a third opportunity to go into the detail of the scheme. I outlined our intentions in terms of the lower trigger point of 2% and the upper trigger point of 10% and the discretion being allowed to the Health Insurance Authority. My officials can, certainly, brief Deputies on the matter once they understand that it is not cast in stone.

Let me make it absolutely clear that we are not advancing the VHI agenda. Rather, we are putting forward the community rating agenda, to which risk equalisation is critical in terms of intergenerational solidarity. We want to ensure the sick and the elderly are looked after in the insurance market. This view has been adopted by successive Governments since the enactment of the principal Act in 1994 which envisaged the introduction of risk equalisation. Athough I am sure BUPA will disagree, we have come a long way in liberalising the process and making it more flexible.

An independent body will decide when this measure will be triggered. We also intend to give it a significant degree of flexibility and are of the view that two overriding principles should underpin its decisions, namely, market stability and competition. While community rating must be pre-eminent, competition must be facilitated and the overall interests of consumers in the private health insurance market taken into account. The independent body will operate according to broad criteria with more specific parameters in regard to the lower and upper percentage points.

The VHI is far from happy and has significant difficulties with the proposed scheme. BUPA has been far more active in terms of the lobbying process if the number of representations I have received from Deputies from all parties is anything to go by. The amendments tabled by the Fine Gael Party are broadly in line with the BUPA argument. I do not have any difficulty with this because it allows arguments to be aired in a democratic forum. My officials and I have met BUPA and the VHI, each of which dislikes the aspects of the legislation favoured by the other. We are now in a position where both are unhappy with the measures being proposed which satisfies me in that the dissatisfaction expressed by the two main players in the market may mean that we are approaching a balanced position.

I will be happy to facilitate consultation between my officials and Deputies in regard to the proposed detail of the scheme. Report Stage and the introduction of the regulations will offer two further opportunities to debate the issue.

Mr. G. Mitchell

I am happy to withdraw the amendments on that basis, but I intend to resubmit them on Report Stage and will press them at that point if I do not hear anything in the meantime to change my mind.

Mr. Martin

On the point raised by Deputy McManus on competition, we are satisfied that risk equalisation does not present a barrier to a third player entering the market.

Mr. G. Mitchell

I was also due to meet representatives of the VHI, but the meeting had to be cancelled and I did not have an opportunity to do so. I have made it clear that some of the amendments I have tabled are based on information I have received from BUPA and I make no apologies or excuses for this. It would be very helpful if the main Opposition spokespersons were offered some assistance in drafting amendments in view of the myriad health legislation going through the House. I have raised this matter previously.

Mr. Martin

I raised the point in the Department, but we, too, are very stretched. The Oireachtas should provide political parties with the resources they require to obtain independent advice in this area as a Department cannot be sufficiently independent.

Amendment, by leave, withdrawn.

Amendments Nos. 23 and 24 not moved.

Ms McManus

I move amendment No. 25:

In page 11, line 47, after "undertakings" to insert "and the reduction of hospitalisation costs through prevention and disease management programmes and coverage of services in non-hospital settings".

This amendment relates to how the risk equalisation scheme will operate in terms of the performance of the insurers. I am concerned that this is not an exact science. The fact that an insurer's performance is efficient, progressive and proactive in terms of keeping its subscribers out of hospital more than another insurer as a result of preventive strategies, assistance to GPs etc. must be factored in. I am not sure whether the Minister is considering this in terms of the regulations which will govern the risk equalisation scheme, but it is a very important issue. There is a huge and unhealthy - ironic though it may seem - degree of concentration in the health service on hospital care and hospitalisation. Resources, effort and attention are concentrated more on getting people into hospital than keeping them out. If the scheme is designed in such a way that insurers who adopt a preventive approach are not rewarded or affirmed, we will end up rewarding inefficiency. Is it possible for the Department to ensure the regulations will take account of this?

Mr. Martin

I accept the rationale behind the amendment in terms of the desirability of prevention and the concentration on hospitalisation. The objective of comprehensive risk equalisation is to replace an insurer's actual risk profile with the risk profile of the market in general to ensure all insurers bear their fair share of the overall risk of the insured community. Insurers, however, retain their own claim costs. The aim, therefore, is to put the insurer in the position where its overall claims experience, after equalisation, is a product of the overall market risk profile and its own claim costs.

Age and gender are two obvious and easy ways of assessing insurers' risk profiles. There is, however, a substantial body of evidence which suggests that these factors on their own are not sufficient to explain why one insurer's claims pattern might differ from that of another. There is a need to take into account other factors such as past health history, employment status, income, education level, socio-economic group and urban or rural living. These latter factors are not easy to measure and, therefore, the usage of hospital services - known as "prior utilisation" - was adopted as an effective measure. Interestingly, the proposed strengthening of the German risk equalisation system, to which I referred, also envisages the adoption of an approach based on prior utilisation.

Risk equalisation arrangements provide for insurers to retain their own unit claim costs in order than an efficient insurer does not import the costs of an inefficient insurer in the risk equalisation process. Full equalisation of claims experience is not involved and insurers will only be liable to share up to 50% of the market utilisation experience. This will give generous recognition to its capacity to manage claims.

It would not be appropriate to specify in legislation issues contained in amendment No. 25. Crucially the Health Insurance Authority will have discretion to determine if the calculation of payments will be solely on age and gender or whether a measure of health status should also be incorporated. In the exercise of this discretion, it would be open to the authority to take a view, based on the information before it, including some insurance returns and otherwise, as to which approach best strikes the essential balance between offsetting the effects of risks selection and ensuring positive claims and management practices of the type identified by the Deputy are not penalised or impeded. It is intended that ultimately risk equalisation, with a focus on equalising more resourced intensive types of in-patient discharges, will not include the kind of areas to which the scheme refers. However, we can return to the issue on Report Stage.

Ms McManus

As I understand it, neither general practice nor out-patients are included under the scheme. This creates a problem in terms of getting the scheme right. I am not an expert in this area but it does not measure in a way that will produce the best possible practice and outcome if we are to concentrate solely on hospitalisation, or prior hospitalisation, and disregard the fact that at least there is a start in relation to integration where general practice is included for community rating. Increasingly, all the arguments are leading towards more dependence on primary care and less dependence on hospitals, yet this legislation is essentially in the old mode. I am not in a position to table an amendment to get this aspect correct but I am very disappointed that it is not possible for the Minister to come back——

Mr. Martin

Perhaps the regulations——

Ms McManus

If the Minister is talking about the regulations, perhaps we will have another go at it then. I do not get the impression that the Minister knows how to deal with this issue.

Mr. Martin

We are giving the Health Insurance Authority discretion in terms of——

Ms McManus

I do not mean to be rude but the Minister is saying it will be up to the authority to raise the issue on——

Mr. Martin

No. In terms of age and gender or age, gender and mobility.

Ms McManus

That does not deal with the issue.

Mr. Martin

It deals to a degree with what the Deputy is advancing.

Ms McManus

Perhaps it needs to be spelt out in one of the long answers the Minister is giving, which are very interesting but with which I cannot keep up because I need to have a copy of them. In terms of the regulations, what the Minister proposes would not be sufficient to meet the approach about which I am talking, that is, progressing efficient best practice in terms of patient care. It would not encourage that kind of redirection in terms of health care. In my view, it would perpetuate the status quo. I do not know how far we can go with this, but it is something the Department should be considering to see if it can be incorporated.

Mr. Martin

We have considered it but we can undertake to consider it again between now and Report Stage. We did not find it possible to include it as outlined in the Deputy's amendment.

Ms McManus

As I have great faith in the Minister, I will reintroduce the matter for Report Stage.

Amendment, by leave, withdrawn.

Chairman

Amendments Nos. 26 and 27 are related and will be discussed together.

Mr. G. Mitchell

I move amendment No. 26:

In page 11, after line 47, to insert the following:

"(b) It shall be the duty of the Minister and the Authority to ensure that where any provision is made for the making of payments of the kind referred to in paragraph (a), the need for such payments to be made is kept under review and reported on annually to the Oireachtas.”.

Amendment No. 27 seeks to insert the words, "and shall only have effect for so long as the Minister determines". This would literally empower the Minister to provide for the duration of any payments under the risk equalisation scheme. I do not know how that fits in with what the Minister said.

I tabled amendment No. 26 because I would like the Minister and the authority to have a duty to ensure that where any provision is made for the making of payments of the kind referred to, the need for such payments is kept under review and reported on annually to the Oireachtas. In other words, this section would require risk equalisation provisions to be kept under review and to be reported on annually. That would give us as Members of the Oireachtas an opportunity to see how these recommendations are, in effect, being used. It would give us an opportunity to propose changes, have proposals rescinded or amended or, if they are working satisfactorily, to say so. I would like that requirement to be included in the Act, therefore, I ask the Minister to accept the amendments.

Mr. Martin

Under section 33 of the principal Act, provision is made for the authority to make an annual report to the Minister which shall be laid before each House of the Oireachtas.

Mr. G. Mitchell

I have tabled an amendment in that regard which I presume is superfluous. I am not talking about that aspect. I am talking about an annual report on this section.

Mr. Martin

If there was intervention in terms of risk equalisation, the authority is obliged to make recommendations to the Minister on whether it believes risk equalisation should be triggered. The Deputy seems to be suggesting that every time it is triggered, we immediately go back to the House.

Mr. G. Mitchell

No. I am saying this proposal would require payments under this provision to be kept under review and to be reported on annually to the Oireachtas. This is not spelt out specifically in the original Act because equalisation is being implemented in this section.

Mr. Martin

The principal Act states, "as soon as may be after the end of each financial year of the Authority, but not later than 6 months thereafter, the Authority shall make a report to the Minister of its activities during that year and the Minister shall cause copies of the report to be laid before each House of the Oireachtas."

Mr. G. Mitchell

That could be a one pager. We are drawing up legislation and I want to be specific.

Mr. Martin

Let us be realistic. It would be difficult to comprehend the Health Insurance Authority making an annual report where during that year it triggered risk equalisation and does not make any reference to it in its report. I find that incomprehensible.

Mr. G. Mitchell

No, I am asking that the report be on the need for such payments to be made and that the review be reported on annually to the Oireachtas.

Mr. Martin

I will table an amendment on Report Stage if the Deputy wishes to refine what is included in the principal Act. I have no difficulty with the Health Insurance Authority making a report to the Oireachtas on its activities. That is already provided for in the principal Act.

Mr. G. Mitchell

I want a specific provision in the legislation whereby the workings of the payments referred to under equalisation will be kept under review and, when the mechanisation is used, that it will be reported on annually to the Oireachtas. Presumably there would have to be regular reviews in order to implement equalisation provisions. Therefore, why should we not require a specific report to the Oireachtas on how the payments are working so that we can keep under review the need for this risk equalisation and the regulations proposed?

Mr. Martin

I will consider that issue. I can direct the authority at any stage to include information in such form and regarding such matters as I direct. In other words, I can direct the authority to provide a comprehensive report to the House, including its activities in relation to risk equalisation. I will consider the matter for Report Stage because the Deputy wants it to be more specific. We must have some degree of trust in primary legislation. We are getting to the stage where we are writing every detail into primary legislation. If the Legislature sets up authorities, it is valid to ask it to submit an annual report. We are writing every detail into primary legislation. Asking authorities, set up by way of legislation, to provide annual reports is valid. It is also valid that committees of the House debate those reports. Let us not overstate this point.

Mr. G. Mitchell

We need to establish a couple of things. The Minister is a member of the Government, we are Members of the Dáil. The Oireachtas writes the legislation; the Oireachtas holds the Minister accountable as a member of Government. When Deputy McManus and I are on that side of the House next year and the Minister is on this side he will be exercising that role.

Mr. Martin

With a bit of luck. I hope Deputy Mitchell is as accommodating as I when he is on this side of the House.

Mr. G. Mitchell

I promise I will provide some assistance in writing legislation. The Deputy can quote that to me some day.

Mr. Martin

I will write it down.

Mr. G. Mitchell

Far from us writing too much into legislation, we are giving far too much power to Ministers and Departments to do things by way of regulation. We are merely seeking accountability.

Mr. Martin

I will come back on that. I will amend the main Act to provide for authority to report back to the House.

Mr. G. Mitchell

Annually?

Mr. Martin

Yes.

Amendment, by leave, withdrawn.

Mr. G. Mitchell

I move amendment No. 27:

In page 12, line 5, after "paragraph (c)” to insert “and shall only have effect for so long as the Minister determines”.

Mr. Martin

I cannot accept this amendment because risk equalisation is essentially a stability measure. It cannot be inconsistent in its application. The amendment would promote uncertainty and instability. It ignores the fact that risk equalisation only redistributes risk differences that exists and redresses the situation where one part of the insured population has to pay materially more for their cover simply because their insurer is not fortunate enough to have a high risk population. We must allow this to work. The Minister will not intervene every month on this issue.

Amendment, by leave, withdrawn

Amendments Nos. 28 and 29 not moved.

Chairman

Amendments Nos. 30, 33 and 35 are related and may be taken together by agreement. Agreed.

Mr. Martin

I move amendment No. 30:

In page 12, line 33, after "appropriate" to insert "having regard to the best overall interests of health insurance consumers".

These amendments give effect to my intention that in carrying out their functions, including the exercise of discretion where necessary, the Minister and the Health Insurance Authority will have regard to the overall bests interest of health insurance consumers.

Ms McManus

If such concern exists about health insurance consumers and subscribers is it not possible to have a consumer representative on the authority?

Mr. Martin

The Deputy has tabled a later amendment in that regard.

Ms McManus

I was not sure.

Mr. Martin

Amendment No. 42(a) deals with that matter.

Ms McManus

Is it to be taken?

Mr. Martin

Yes. We elected the Director of Consumer Affairs to make a nominee.

Ms McManus

So you have a nominee?

Mr. Martin

Yes. One member was appointed on the basis of an approach made to the Office of the Director of Consumer Affairs.

Ms McManus

Could the Minister describe that person?

Mr. Martin

I do not have the details with me.

Mr. G. Mitchell

He is probably from Cork.

Mr. Martin

His name is Tom Green, he is an accountant nominated by the Director of Consumer Affairs. There is no generic body out there which represents——

Ms McManus

The Consumer Association.

Mr. Martin

That is very broad.

Ms McManus

It strikes me that they are very much based in the actuarial profession. I am not sure if that is the way to broaden the remit of an authority which is responding to the consumer or subscriber.

Mr. Martin

I appreciate the Deputy's point. We went to the Director of Consumer Affairs with the intention of their suggesting a person who would have a remit representing the consumer. We could go back to them on this issue.

Ms McManus

It would be -

Mr. Martin

That is a fair point in terms of how we can ensure that the authority comes back to me in its annual report with a recommendation.

Ms McManus

I would be happy to withdraw my amendment on the basis that the Minister does give a clear guidance to the authority that it would come back with suggestions regarding consumer participation.

Mr. Martin

I will do that.

Amendment agreed to.

Amendments Nos. 31 and 32 not moved.

Mr. Martin

I move amendment No. 33:

In page 12, line 48, after "Minister" to insert ", having consulted with the Authority in relation to the best overall interests of health insurance consumers,".

Amendment agreed to.

Amendment No. 34 not moved.

Mr. Martin

I move amendment No. 35:

In page 14, to delete lines 20 to 25, and substitute the following:

"(a) A reference in this section to-

(i) a health insurance consumer is a reference to a person, other than the registered undertaking, who is party to, or named in, a health insurance contract or likely to be interested in being such a party or being so named,

(ii) insured risks among registered undertakings is a reference to the risks that have been respectively insured by the undertakings under health insurance contracts, and

(iii) the best overall interests of health insurance consumers includes a reference to the need to maintain the application of community rating across the market for health insurance and to facilitate competition between undertakings.

Amendment agreed to.

Amendments Nos. 36 and 37 not moved.

Section 9, as amended, agreed to.

SECTION 10.

Mr. G. Mitchell

I move amendment No. 38:

In page 15, line 15, to delete "36" and substitute "18".

Will the Minister tell us what "it is necessary under subsection 12(b)(i)(b) that the other provisions of any scheme in respect of the period of 36 months beginning on that date” means? Why 36 months? This relates to the limited extension from requirement to make returns. Why this period?

Ms McManus

I would also like to discuss this. The period of 36 months appears to be an unnecessarily lengthy time particularly when one considers it applies to the current players or participants. How and why was this timeframe selected?

Mr. Martin

This relates to competition. Everyone has argued about competition and the need to facilitate its development in the market. The White Paper proposed giving new market entrants a choice of an exemption from risk equalisation for a period of 18 months in recognition of the value which new entrants are in a position to bring to consumers but following publication of the White Paper and in consultations with a wide variety of parties, including the broader insurance industry, it became apparent that the proposed window of 18 months was not sufficient or attractive to potential new market entrants. Bluntly put the 18 months, from all the consultations we have had, as a window period would not do the business in terms of bringing in new entrants. There was nothing to suggest it would do so in the future. Coming into the market involves significant start-up costs and it takes time to build up a critical masse of numbers in terms of members. Taking both factors into account we feel that the 36 months is an appropriate balance between entering and becoming established in the market and protecting community rating. Extending the period to 36 months will not undermine community rating. It is an important incentive in trying to create more competition within the market.

Amendment, by leave, withdrawn.

Mr. Martin

I move amendment No. 39:

In page 15, line 16, after "undertaking" to insert "(other than a restricted membership undertaking)".

The amendment qualifies the nature of bodies which can avail of the temporary exemption from risk equalisation. A primary objective of the exemption is to encourage entry to the market by insurers who would provide cover on a community-wide basis. Such insurers offer the potential of enhanced choice of service to the general public who are entitled to be provided with cover under the open enrolment provisions. The same considerations are not present in the case of restricted undertakings where membership is restricted to persons in a specific occupation or profession. A compelling consideration in establishing such a body would be to ensure cheaper insurance for the members purely by virtue of their better than average age and health profile. It is clear that any significant movements in this direction, if allowed to operate outside of risk equalisation, would effectively represent a deterioration in the shared risk profile of the community generally. In such circumstances no benefit would accrue to the general public from making special arrangements for such developments and a temporary exemption from risk equalisation would not be in the interests of the common good.

Ms McManus

Is it possible to have new restricted membership?

Mr. Martin

No.

Ms McManus

I thought the EU had a problem with that.

Mr. Martin

Not that we are aware of.

Ms McManus

Obviously the Minister's advice is better than mine. So they can actually develop?

Mr. Martin

Yes.

Amendment agreed to.

Section 10, as amended, agreed to.

NEW SECTIONS.

Mr. G. Mitchell

I move amendment No. 40:

In page 15, before section 11, to insert the following new section:

"11.-The following section is inserted after section 21 of the Principal Act:

21A.-It shall be the duty of the Minister and the Authority to carry out their functions and exercise the powers conferred on them under this Act in a manner which-

(a) does not discriminate unfairly between registered undertakings,

(b) promotes competition in the provision of health insurance, and

(c) protects the interests of consumers, having regard to the need to preserve community rating in the provision of health insurance for essential health care.’.”.

I hope the Minister will shock the committee and the wider public by accepting the amendment. This would impose similar obligations on the Minister and the Health Insurance Authority as are imposed on others. It would require them, in the exercise of their powers under the Act, to have regard to the wider effect of their decisions, notably in relation to consumer interests, competition and adherence to the principle of non-discrimination. This amendment which is straight-forward would greatly enhance the Bill. In the spirit of the discussion we have had about openness, transparency and accountability, I hope the Minister will accept it.

Mr. Martin

Unfortunately, I do not propose to shock the committee by accepting the amendment, although I have accepted a number of amendments on other Bills. It would be superfluous to include a provision that either the Minister or the independent authority should not discriminate unfairly between insurers. I am not aware of evidence to date which would warrant such a specific provision in legislation apart from the serious constraints under international and EU law. We just cannot discriminate against any undertaking. There would be no motivation or rational to discriminate. The particular form of words in the amendment refers directly to promoting competition but it is less direct about safeguarding community rating. The amendment fails to take proper account of the delicate nature of community rating, its central role in a successful voluntary health insurance system and the need for balance between stability and competition considerations. The inclusion of a reference to promoting competition in the sector could be interpreted as being a superior consideration to provide community rating. Our view is that we are providing for facilitation of competition and that strikes a more appropriate balance between the two considerations, this is, competition and community rating.

The Deputy's amendment is wide-ranging in its application as it covers the exercise of power by both the Minister and the authority under the Act. I refer to the reference it contains to the need to preserve community rating and the provision of health insurance for essential health care. I would like further elaboration from the Deputy on what he means by "essential health care", because the term would need considerable clarification and elaboration if enshrined in law. There is an insurance plan in the market called "an essential plan". Is the purpose of the amendment to reflect that essential plan? What does the Deputy mean by the term "essential health care"?

Mr. G. Mitchell

I find it strange that the Minister, with all the advice available to him, rejected an amendment about which he requires clarification. He does not understand what the section means. In relation to heath insurance for essential health care, the Minister knows the essential basket of health care provisions to which we are all entitled in any public hospital, and that is what I have in mind. We all know we are entitled to essential health care in a general hospital when admitted. There is a definition of this and the Minister knows what it covers. His Department should know what is covered by it. I presume the Minister is the sole shareholder, in the interests of the State, and the owner of the VHI. In terms of natural justice, given that the VHI is one of two players - it may in time become one of three or more players - a person could take a case to the courts on the basis that here is somebody who owns one of the players and he and the authority he appoints has a role in policing himself in another guise. If the Minister was able to point to legislation and say he was required under the Act not to discriminate unfairly between registered undertakings and to promote competition and to protect the interests of consumers, and that he was accountable to the Oireachtas for this, a case in natural justice might not be taken. Without wishing to be critical of the VHI, the Minister and the VHI might be seen as the same thing. Since it is my job as prosecution counsel here today to highlight real concerns, I wish to highlight this matter. Some people hold the view that the VHI and the Minister, in certain circumstances, could be the same. It would be in the Minister's interest while the VHI remains in public ownership to have this type of provision included in legislation. If the VHI was a private entity, as is BUPA, and if another entity existed it might not be necessary to include such a provision in legislation. Given the Minister's ownership on behalf of the State, or certainly his statutory powers over the VHI, it is not in the same category as other players and, therefore, the Minister should be seen to be at arm's length and at one remove. Anything in the legislation that copperfastens that would be to the benefit of the Minister and the public.

Mr. Martin

I regard paragraph (a) of the amendment as superfluous, but if the Deputy wants to be doubly assured that the Minister of the day will not discriminate I can bring forward an appropriate amendment on Report Stage in relation to paragraph (a). I have a difficulty with paragraphs (b) and (c) in that we have struck a balance in terms of community rating and facilitating competition. It is a delicate balance and we think it is the correct one. As the amendment is worded, the Deputy is indicating that competition should have a superior currency than community rating and I am not prepared to accept that.

The point in relation to "essential health care" is an important one and I was not being facetious when I raised the issue. For example, there is an insurance plan in the market called "an essential plan". It covers primarily fees and charges in a semi-private ward in a public hospital. That plan is comparable with VHI's plan A, but this level of insurance covers a minority proportion of the overall number of private beds. About 10% of the insured population hold this level of cover, with most insured persons opting for cover which at least provides access to semi-private accommodation in most private hospitals. It is necessary for the proposers of the amendment to state whether it is their view that the need to preserve community rating in the provision of health insurance only applies to plans giving access to semi-private accommodation in public hospitals because if that is not the case, they should say what it means. If that is the case, they should let the other 90% of the insured population know what are the implications for their plans.

Our view is that community rating should continue to apply across health insurance contracts generally. Perhaps the Deputy did not intend it that way but the wording is similar to the wording of a particular player in the marketplace currently, and another player has a particular plan also. The language is the same and it affects about 10% of the insured population. I was not being mischievous when I asked the question but it is a fair point.

Ms McManus

I want to get some information. The Minister said his role is to facilitate competition, and we are all in favour of delivering competition in his area, but will he explain how far he can go with that? If there was not a third insurer and it was felt important that there should be another participant, could the Minister establish a new insurer? Can the State do that?

Mr. Martin

In theory the answer is "probably, yes" but in practice it would be very unlikely.

Ms McManus

I am thinking in terms of the EU context.

Mr. Martin

I will have to refer back to the Deputy on that. It is not something that has ever featured on the horizon. That prospect is simply not on the agenda.

Mr. G. Mitchell

On the basis that the Minister would come back with an amendment on 21A(a), and that half a loaf is better than no bread, I will withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. G. Mitchell

I move amendment No. 41:

In page 15, before section 11, to insert the following new section:

"11.-The following section is inserted after section 21 of the Principal Act:

21.B.-The Authority shall report annually to both Houses of the Oireachtas on the performance of its duties and activities.'.".

Did I understand from something the Minister said earlier that this amendment is provided for in the 1996 Act?

Mr. Martin

Yes, in the 1994 Act, which states:

(1) The Authority shall furnish to the Minister such information regarding its income and expenditure as he or she may direct.

(2) As soon as may be after the end of each financial year of the Authority, but not later than 6 months thereafter, the Authority shall make a report to the Minister of its activities during that year and the Minister shall cause copies of the report to be laid before each House of the Oireachtas.

(3) Each report under subsection (2) shall include information in such form and regarding such matters (if any) as the Minister may direct.

(4) The Authority shall, whenever so requested by the Minister, furnish to the Minister information in relation to such matters as he or she may specify concerning or relating to the scope of its activities generally, or in respect of any account prepared by the Authority or any report specified in subsection (2) or section 32 or the policy activities, other than day to day activities, of the Authority.

Amendment, by leave, withdrawn.

SECTION 11.

Mr. Martin

I move amendment No. 42:

In page 16, lines 1 to 7, to delete paragraphs (b) and (c), and substitute the following:

"(b) in section 10, by the substitution for ’ancillary’ of ’relevant’,

(c) in section 11(ii)(I), by the substitution for ’an ancillary’ of ’a relevant’,”.

Amendment agreed to.

Amendment No. 42a not moved.

Section 11, as amended, agreed to.

Chairman

Amendment No. 43 in the name of the Minister has already been discussed with amendment No. 15.

NEW SECTIONS.

Mr. Martin

I move amendment No. 43:

In page 16, before section 12, to insert the following new section:

"12.-In addition to the powers conferred on it by the Voluntary Health Insurance Acts, 1957 to 1998, the Voluntary Health Insurance Board may, with the consent of the Minister and subject to such conditions as he or she considers appropriate and specifies in writing, carry out a scheme for the provision of, or otherwise provide (whether as principal or as agent for another person) services in respect of, health care, health insurance, illness related insurance, personal care or related activities (including activities of an advisory or consultative nature (and, in particular, activities involving the exploitation of information technology or the provision of advice with respect to such exploitation)).".

Mr. G. Mitchell

Will the Minister indulge me by explaining why it is necessary to enshrine this area in legislation? It concerns additional powers for the VHI Board.

Mr. Martin

We went through all of that.

Mr. G. Mitchell

I know we did, but we might yet vote on this amendment.

Mr. Martin

It was agreed.

Mr. G. Mitchell

No, I was not here.

Mr. Martin

The Deputy put down a similar amendment to this one but he wanted to give more powers to the VHI.

Mr. G. Mitchell

Why is there a need to enshrine all of this in legislation?

Mr. Martin

We have to do that, given its legal status and the legal framework within which the VHI works. It has to operate under certain regulatory authorities.

Mr. G. Mitchell

Let me put the question another way. Why was the need for these powers only discovered between the time the Bill was printed and now? Why was it not in the original Bill?

Mr. Martin

The VHI approached us after publication of the Bill. We do not have any desire to restrict the activities of companies but we have a desire to make sure that any expansion of product or activities would be such as to come within the overall legal structure in terms of current status and so on. The Deputy's amendment stated that it should have whatever it wants. I tabled a more reasonable amendment, given the regulations, and now the Deputy is asking me why——

Mr. G. Mitchell

No. The Minister is questioning the Opposition. The way our Constitution works is that the Minister answers to the Dáil.

Mr. Martin

I would like to think that this is also an opportunity for genuine debate.

Mr. G. Mitchell

I am struck by the words "illness related insurance, personal care or related activities". Will the Minister tell us if that is related to any proposals to bring the VHI more into the area of primary care?

Mr. Martin

That matter is dealt with in another amendment.

Mr. G. Mitchell

I am asking about this amendment. Is it for that reason that the VHI is seeking these extended powers?

Mr. Martin

No.

Mr. G. Mitchell

Why is the VHI seeking these powers?

Mr. Martin

It is looking at a number of areas. Long-term care, for example, is one such area. It is also examining the emerging area of e-health, consultancies and so on.

Amendment agreed to.

Mr. G. Mitchell

I move amendment No. 44:

In page 16, before section 12, to insert the following new section:

"12.-The Health Insurance Authority, as provided for in the Health Insurance Act, 1994, shall be constituted only after the Ministers' nominees to serve on the Authority have been ratified for appointment by an Oireachtas Committee appointed by both Houses of the Oireachtas for such purpose.".

I regret to have to come back to this type of amendment. I tabled a similar amendment to the Health (Miscellaneous Provisions) Bill. I put down this amendment because it appears that of the ten people appointed to almost every board by this Minister, four are from Cork, or from the hinterlands, and while the address of a chairman or vice-chairman of a body is given as Malahide, Roebuck or somewhere like that, surprisingly they turn out to be from Cork.

Mr. Martin

Come off it.

Mr. G. Mitchell

I will quote chapter and verse - the Irish Medicines Board, which the Minister appointed recently, and the Blood Transfusion Service Board, which he appointed. The Minister seems to think his powers as Minister, given to him by us, are to be used to copperfasten his political ambitions in his own back yard. That is not a proper use of the power we are giving the Minister and for that reason we will have to provide in law for him to bring before the Oireachtas committee for ratification any future nominations to boards. All things being equal, I understand that certain people can be known to Ministers but the Minister has gone overboard in this respect. It is totally wrong. At a time, for example, when the Irish Blood Transfusion Service needs everybody to put their weight behind it to return confidence to that service, the Minister - and I quoted him chapter and verse on this before——

Mr. Martin

The Deputy quoted me wrongly.

Mr. G. Mitchell

I did not quote him wrongly.

Mr. Martin

Yes, he did.

Mr. G. Mitchell

The Minister is misleading the debate.

Mr. Martin

The Deputy said the chairperson was from Cork. I did not even appoint the chairperson of the IBTS. The chairperson of the IBTS is not from Cork.

Mr. G. Mitchell

Does the chairperson live in Malahide?

Mr. Martin

I do not know where the person lives. The person is registrar of Dublin City University and in a press release the Deputy incorrectly stated that he came from Cork. The Deputy got it wrong.

Mr. G. Mitchell

Time and again the Minister has abused his powers and I would be happy to go into the Dáil and list these appointments for the Minister. The numbers in that regard are totally disproportionate, somewhere between one-third and 50% of those appointments to boards and committees. In many health board areas, for example, nobody suitable was found to be appointed to the Irish Blood Transfusion Service while all these appointees came from the Minister's bailiwick.

I will list them. It is not in the public interest that we empower the Minister to use the trust we have put in him in this way. That is not what the blood transfusion service is for. It is not in place to enhance the Minister in his bailiwick, nor is that what any other board is for. It is not what the boards established under this and amending legislation are for. We put trust in the Minister and, all things being equal, I can understand one or two——

Chairman

That is extraneous to what we are discussing.

Mr. G. Mitchell

It is not; it is related to the amendment which states, "That the Health Insurance Authority, as provided for in the Health Insurance Act, 1994, shall be constituted only after the Minister's nominees to serve on the authority have been ratified for appointment by an Oireachtas committee appointed by both Houses of the Oireachtas for such purpose". I tabled the amendment because every time an announcement is made by the Minister, any fair assessment of the matter would indicate that not only is the number of persons from Cork appointed by the Minister disproportionate, but wholly disproportionate.

Mr. Martin

I only nominated two persons to the Irish Medicines Board, one of whom was a GP from Cork. I reappointed the chairperson who had been appointed by my predecessor, Deputy Noonan, the type of behaviour I respectfully suggest to the Deputy in which he would not engage if Minister. His track record and that of his party are nothing to write home about when it comes to appointments to boards. He does not bring any credibility to the argument given his party's track record when in power. I have appointed professionals to all boards within my brief. I do not appoint party hacks to such boards. The Deputy can refer back to my time in the Department of Education and Science or in the Department of Health and Children and how such boards subsequently behaved.

The second person I appointed was not appointed because of her geographical location. She returned from Germany recently and the significance of her appointment was missed. It was the first time a person representing the alternative traditional medicine field had been appointed to the board, which many in that field considered represented conventional medicine. I appointed a leading light in that field who favoured consumer health choice and was interested in striking a balance between conventional and alternative medicine and she happened to be from Cork.

Mr. G. Mitchell

The Minister used those words.

Mr. Martin

The Deputy took umbrage at that fact and ignored the characteristics and qualifications of the person concerned. The third person appointed, also from Cork, was a nominee of the Minister for Agriculture, Food and Rural Development. It was a reappointment as a former Fine Gael Minister——

Mr. G. Mitchell

From where is the Minister for Agriculture, Food and Rural Development, but Cork.

Mr. Martin

The previous Minister for Agriculture, Food and Rural Development appointed to the board the gentleman concerned who was reappointed by the current incumbent. The Deputy should read between the lines. If we were to take the line suggested by him, the appointments may not have been made in same manner, but I adopted a reasonable and balanced approach and reappointed a significant number of the existing board members and made some additional appointments. To the best of my knowledge, there is not a Cork person among the members of the Health Insurance Authority, on which we took advice from outside bodies.

The issue as to whether all those appointed to a State authority, board or agency should appear before an Oireachtas committee is a broader political one, on which political parties and the Oireachtas must adopt a position. I put down that marker. While some might like the concept of Seanad hearings whereby candidates for big positions or high positions in Government would be grilled, I am not sure there would be many candidates if the Minister of the day wanted to appoint persons to a Council for the Aged or the Women's Health Council, of which the chairperson, appointed by me, is a Galway woman, if they were to be grilled in this way. That would not be desirable given that many of the people concerned give freely of their time without remuneration. The idea that they should be brought here to be grilled about this, that and the other by Deputies who put themselves on a pedestal would not be desirable and I am not sure one would have many candidates. While I am willing to debate the matter with the Deputy, members of my party or anybody else in order to bring balance to the debate, I stand by the persons I appointed who come from a professional background. I respectfully suggest to the Deputy that there is nothing wrong with Cork and that Cork people have an entitlement to be members of boards. For some reason the Deputy seems hostile towards the Cork region.

Mr. G. Mitchell

The Minister's final comments do not do him credit and show that he is a nasty package when it comes to dealing with reasonable points put to him and that he is not the Mr. Nice Guy he portrays himself to be. I raised an important public interest point, that the Minister is abusing his powers——

Mr. Martin

That is an outrageous allegation, which I reject.

Mr. G. Mitchell

——in making appointments to boards as if there was some kind of honours system in place. He has drawn attention, in a bad way, to Cork which he has brought into disrepute by his self-serving behaviour which has nothing to do with Cork and everything to do his ego and re-election. It is not right that a Minister should make appointments to boards in this way. It would not be tolerated in a banana republic. The Minister has blamed the Minister for Agriculture, Food and Rural Development by saying, "He did it; it was not me". In the Dáil recently he blamed the Minister for Foreign Affairs, Deputy Cowen, in respect of other decisions made. When will he have the courage to take responsibility for his own decisions? If he made them, he should, at least, own up to this. Every time he makes such decisions I will document them, table a similar amendment and raise the matter at Question Time. He should not paint me as being anti-Cork; I will paint him as being anti-25 other counties.

Mr. Martin

The Deputy has done so.

Mr. G. Mitchell

What does he have against Dublin South Central, Dublin South East, Wicklow, Limerick and the rest of the country that we are not capable of putting people's names forward? While I do not question that the doctor the Minister put forward has the necessary credentials, there are others in other parts of the country with the same credentials.

Mr. Martin

I have appointed persons from other parts of the country.

Mr. G. Mitchell

Why does the Minister bring bad publicity to Cork by behaving in such an unacceptable and unprofessional manner?

Mr. Martin

The Deputy does not highlight appointments to boards where the appointees do not come from Cork. The chairperson of the Irish Medicines Board who has been reappointed is based in Dublin. The record speaks for itself. The Deputy has not highlighted those boards on which there is not one member, including the chairperson, from Cork as worthy of mention simply because it does not add up to a political charge. His is a cheap political charge.

Mr. G. Mitchell

I accuse the Minister of using his powers to enhance himself in his bailiwick.

Mr. Martin

I will have no difficulty in rebutting that.

Mr. G. Mitchell

It is an outrageous abuse. To do so in the case of the Irish Blood Transfusion Service, in particular, is outrageous.

Chairman

To return to the amendment, can I take it that it is being withdrawn?

Mr. G. Mitchell

I do not know about that. We may have to vote on it. I raise the matter in the case of the authority mentioned, in particular. My party has made broad proposals for Dáil reform and while I am sorry to have say this, it is my duty to say that there is no Minister abusing the powers we have entrusted in him or her more than this one, a matter about which people are concerned. This is not the right thing to do, particularly in the sensitive area of health.

Chairman

The Deputy has raised the matter before there is general agreement on the related procedures in the Dáil. If he wishes to raise it as a national issue, does he accept that it would be preferable to do so among the parties and in the Dáil rather than on this Bill?

Mr. G. Mitchell

In sympathy with the Chairman and the way in which he suffers because he does not have the ability to make such appointments in his constituency which he shares with the Minister - he will understand exactly what I mean when I say that this has nothing to do with Cork and everything to do with the Minister - I will withdraw the amendment.

Mr. Gormley

When the debate started to get a little heated I paid attention to it on the monitor. While I do not necessarily disagree with the amendment, I wish to state on behalf of my party that the appointment of Breda Dooley to the Irish Medicines Board was a good one. It has rebalanced the board in favour of the alternative viewpoint. From that point of view, I welcome it and would not impugn the Minister's integrity.

Mr. G. Mitchell

Somebody's name has been mentioned. I do not know the person concerned. I do not raise the issue in the case of that one person; I raise it because every time the Minister has an opportunity to appoint the members of an authority, power or body——

Mr. Martin

That is not true.

Mr. G. Mitchell

It is.

Chairman

The matter can be argued in another forum.

Amendment, by leave, withdrawn.

SECTION 12.

Mr. Martin

I move amendment No. 45:

In page 16, subsection (2), line 17, to delete "2000" and substitute "2001, and shall be construed together as one Act".

This is a technical amendment which provides for the collective citation of health insurance legislation.

Amendment agreed to.

Section 12, as amended, agreed to.

TITLE.

Mr. Martin

I move amendment No. 46:

In page 3, line 6, after "1994" to insert "AND TO MAKE PROVISION WITH RESPECT TO THE POWERS OF THE VOLUNTARY HEALTH INSURANCE BOARD".

Amendment agreed to.

Title, as amended, agreed to.

Bill reported with amendments.