Select Committee on Social Affairs debate -
Thursday, 14 Dec 1995

SECTION 3.

Mrs. Geoghegan-Quinn

I move amendment No. 5:

In page 5, delete lines 25 to 35 and substitute the following:

"under section 2, it shall notify the Minister in writing of the proposal not less than 30 days before the date on which the proposed increase is intended to have effect and, in determining the amount of the increase, shall have due regard to any representations made by the Minister to the Board during the said 30 day period.

(2) The Minister may make regulations enabling him to issue, within 30 days of the notification of a proposed increase referred to in subsection (1), written directions to the Board requiring the Board not to implement the said increase. Any such regulatons shall provide that the Minister shall, when giving a direction to the Board pursuant to the regulations, at the same time give to the Board his or her reasons in writing for the direction.

(3) The Board shall comply with a direction issued by the Minister pursuant to the regulations referred to in subsection (2).

(4) Every regulation made by the Minister under this section shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation is passed by either such House within the next 21 days on which that House has sat after the regulation is laid before it, the regulation shall be annulled accordingly, but without prejudice to the validity of anything done hereunder.".

In tabling this amendment I agree with what the Minister is doing but I am adding to it. When the regulations are made by the Minister under this section, they should be laid before each House of the Oireachtas as soon as they are made. If they are not annulled by either House within 21 days they will take effect. It is important that the Oireachtas has an opportunity to debate the policies of a health insurer, whether it is the VHI or another insurer, which applies for increases.

The Minister is amending the Voluntary Health Insurance Act, 1957, because of the difficulties various Ministers have had over the years. There has been a cosy agreement between the VHI and Ministers that Ministers would be informed of increases the company may wish to make, but would not have power to prevent increases. It would be good from both our point of view and that of the health insurance providers if we had such a debate in the House. If the Opposition did not want to initiate a debate, the regulations would go through. The amendment provides an extra way of ensuring that the VHI responds to the needs in the health insurance market while at the same time not imposing premiums, like those in the past 12 months, which are running well above the rate of inflation.

Mr. Noonan (Limerick East)

Section 3 places an obligation on the board to give notification of proposed premium increases to the Minister and allows for each such increase to take effect automatically unless the Minister issues a reasoned direction against implementing it.

Under subsection (1) (a) the board is obliged to inform the Minister of any proposed increase in premiums at least 30 days before such increase are to have effect. This is reasonable in view of the need to have applications analysed by the Department of Health in sufficient detail.

Under subsection (1) (b) the board may implement any increase notified to the Minister after the period of 30 days has elapsed unless, before the expiry of the period, the Minister has directed in writing that this should not be done.

Subsection (2) imposes a duty on the Minister to give the board his or her reasons for directing that any increase not be implemented. This is to be done at the same time as giving the direction.

Subsection (3) stipulates that the Board must comply with the direction of the Minister under the section and must, therefore, not proceed to implement the increase or increases in question. This is reasonable in view of the need to maintain a strong public-private mix. Some 35 per cent of the population are covered by the VHI.

If, for cost reasons, the VHI wants to increase premiums, it must notify the Minister. If the Minister does nothing the increase takes effect after 30 days. If the Minister wants to prevent or modify the increase, he must act by writing to the chairman of the board within 30 days and must give reasons for not agreeing to the increase. There is no requirement that the Minister must introduce regulations. He simply sends a letter to the board. Thus, there is no procedure necessary for bringing regulations before the Oireachtas because increases will not be implemented on a statutory basis. The formal, but non-statutory, position applies that if the VHI decides it needs to raise premia, it would do so without undue delay. If the obligation was on the Minister to draw up statutory regulations, by the time they are drafted, checked, put through Government and sent back to the House for sanction a considerable period of time could have elapsed. I want a fail-safe mechanism to ensure control over increased premia. The VHI should put its own house in order first before it passes the problem on to the person paying the premium. I want to ensure there are other ways of reducing costs. Its obligation is to ensure that its costs meets its premia income with what it gets from historic investments. That is the way its balance sheet is at present. I want to ensure a two phased approach to this. It should not automatically look at increasing premia; it should also look at reductions in costs.

I cannot accept the Deputy's amendment, it is not necessary since there are no regulations to bring into the House.

Mrs. Geoghegan-Quinn

Apart from the fact there are no regulations, the Minister is also stating it would delay it even further.

Mr. Noonan (Limerick East)

Yes. If I compelled the VHI, by way of statutory regulations, to desist from raising premia, there would be a delay in drafting those regulations and bringing them to the House for positive affirmation within 21 sitting days. This could take three months rather than 30 days.

Mrs. Geoghegan-Quinn

At present, a gentleman's agreement exists between the VHI and the Minister of the day and that has operated over the years. What kind of notice does it give to Ministers now? For example, what type of notice has the Minister got each time there has been an increase by the VHI in the past 12 months?

Mr. Noonan (Limerick East)

Notice that was so short it gave me cause for concern. I was normally presented with a fait accompli.

Mr. O'Malley

The last increase, which happened recently, was one of the highest in the history of the VHI. The cost of the premia is high, yet the VHI is still losing money. It attributes its difficulties to the costs which it incurs in a small number of the more expensive private hospitals, especially two in Dublin. It has a different level of subscription for these, but it still loses money. I have always been concerned that those who subscribe to the more modest plans of the VHI are subsidising those who subscribe to the more expensive ones. Under this section can the Minister, who now has a more formal role in approving its increases, prevent such cross-subsidisation and, in particular, prevent cross-subsidisation of the users of the more expensive places by the users of the less expensive ones?

Mr. Noonan (Limerick East)

Yes, I have such power under this section. As Deputies will recall, the VHI was in extreme difficulty in the late 1980s; 1989 was a crucial year but its balance sheet has improved significantly since then. If one looks at the way it balances its accounts to make ends meet, one will see that in the past couple of years historic investment income played a part in ensuring that it did not trade at a loss. In February 1989 the total increase was 7 per cent; in July 1990 it was 4 per cent; in September 1991 it was 5 per cent; in January 1993 it was 4 per cent; in August 1993 it was 6 per cent; in August 1994 it was 9 per cent; and the last one was in mid-August of this year, at 6 per cent. The previous one, at 9 per cent, was the historic high.

Mr. O'Malley

That is 15 per cent in 12 months.

Mr. Noonan (Limerick East)

I have a breakdown of the percentage increase across the various plans. Deputies might like this information so I will ask my officials to circulate it. Deputies will be able to see the level of cross-subsidisation.

Mr. O'Malley

Each one of those, as expressed in percentage terms, is a percentage of a premium which has already been increased many times. It is not simple interest, but compound interest. Some 9 per cent and 6 per cent is more than 15 per cent. They amount to a 16.6 per cent increase based on compound interest.

Mrs. Geoghegan-Quinn

As regards other companies coming into the health insurance market and the level playing field the Minister mentioned, what control, if any, will he have over those which decide to increase their premia? This Bill deals with the VHI and not with any other health insurance provider.

Mr. Noonan (Limerick East)

I do not have any control and I do not propose to take such control. It is important to put what we are doing in context. Major changes are taking place in the health insurance market because of decisions in Europe and the way medical services are using high technology.

The Health Insurance Act, 1994, is the base legislation which has preserved the concepts of traditional voluntary health insurance. All other incoming insurers must comply with the provisions of the 1994 Act, in the same way as the VHI. The draft regulations which I published last March, and which are the subject of discussion, are nearing completion in Brussels. I think the Commission will be happy with the line we are taking in the regulations. The combination of the 1994 Act and the regulations will be the legislative background against which insurers will come into the market.

This is the first legislation to change the statutory base of the way the VHI operates since it was founded and it is my intention to come back to the issue. The principal issue I would like the new board to address, when it is in place, is the legal basis of the VHI. We need to move towards a different structure. If we were to move in the way other State enterprises have moved, the first step would be to put a legislative framework in place on the lines of that available to Telecom Éireann or Coillte Teoranta so that it would have full commercial independence.

If there is sufficient competition we should leave it to the market to control prices. I could envisage a situation where I or one of my successors, would again look at the price control measure in this section. However, at the moment it is necessary and will be for some time. In the event of a new corporate structure being put in place for the VHI, it would be prudent for whoever is the Minister for Health at that stage to again look at this. As a general matter of policy, if there is proper competition in the market it should decide the price.

However, I do not know whether that level of competition will be reached.

Amendment, by leave, withdrawn.

Section 3 agreed to.