I have received apologies from Deputy Dan Neville who will be replaced by Deputy Marcella Corcoran Kennedy. I welcome the Minister for Health, Deputy James Reilly, and his officials, Mr. Dermot Ryan, Ms Patsy Carr and Mr. Paul Flanagan, and I thank them for being here. Would the Minister like to make an opening statement?
Health Insurance (Amendment) Bill 2013: Committee Stage
The Health Insurance (Amendment) Bill 2013 provides for a permanent risk equalisation scheme in the private health insurance market from 1 January 2013. It provides the legal framework for risk equalisation in 2013. My policy objectives are to have a risk equalisation scheme that will continue to be as effective as possible in providing the necessary support in terms of community rating, while remaining robust and transparent, promoting fair and open competition in the market and ensuring there is no over-compensation from the scheme for any insurer, as required by the European Union in its approval of risk equalisation in the period 2013 to 2015.
The main purpose of this Bill is to specify the amount of the hospital bed utilisation credit and the amount of risk equalisation credits, in respect of age, gender and level of cover, payable to insurers from the risk equalisation fund from 1 March 2014 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the stamp duty levy required to fund the risk equalisation credits for 2014. In addition, there are some technical amendments to the Health Insurance Acts.
Sections 1 and 2 agreed to.
SECTION 3
I move amendment No. 1:
In page 3, line 29, after “hospital” to insert “where a charge is payable under section 55 of the Health Act 1970 for such stay”.
Section 55 of the Health Act 1970 will come into effect from 1 January 2014. This amendment to the definition of "relevant amount" in the health insurance Acts clarifies that the hospital bed utilisation credit will also be payable in respect of health insurance policies affected on or after 31 March 2013, the day the charge was introduced, in respect of each overnight stay in a hospital bed where a charge is payable under section 55 of the Health Act 1970 in respect of a private patient in a public hospital bed.
I ask the Minister for clarity in regard to this section, but if I have made an error and am raising the wrong issue, let me know and I will finish.
The Health Insurance Authority did an assessment, as did some other independent people, regarding the amount of money that would be raised by charging private patients the full cost of a public bed. Is this the section that redefines beds?
No. That has nothing to do with this Bill.
What is this section about?
This is to do with the hospital bed utilisation charge. I will explain what it is about.
That would help me a lot.
In fairness, I had to have it explained to me too. The hospital bed utilisation charge, which was €75 but has now been reduced to €60, will be paid back by the risk equalisation fund to the insurers for patients who are in a bed. This is about helping us know the health status of insured people. In other words, the insurers know who has been in hospital and in a hospital bed, but we have no way of knowing. By paying this small discount back to the insurers, we have an understanding of which of the insurers' clients are high or low users. This gives us some indication of their health status. To make it simple, if insurers have 40,000 clients and we see that only 3,000 of these have availed of a bed and we have paid the hospital bed utilisation charge, we know the rest of the 40,000 clients never ended up in a hospital bed. The charge gives us more information on the health status of people insured privately. That is information that is not available to us otherwise. This system is not ideal, but it is one way of gaining knowledge of people's health usage and status. This is not a cost to insurers, but is a return to them.
This is returned to insurers, is it?
Yes.
I want to speak on this issue, although we have had this discussion before. I disagree with the use of this as an indication of health status. The hospital bed utilisation credit is the wrong way to go in regard to defining health status. When the legislation was introduced 12 months ago and this new definition, the hospital bed utilisation credit, was introduced into the health insurance system, we had this debate. The Minister has explained the basis for the credit and I understand that. The difficulty is that now, 12 months down the road, we are still using the same tool to measure health status. This encourages health insurers to send clients through the hospital system, which is contrary to the direction we should be taking. We should be encouraging insurers to ensure people are treated outside of the hospital system.
The Minister will argue that this is a relatively small payment that is only indicative of the utilisation of health services in general, but the ethos and thrust behind the development of our health service and everything the Minister has espoused is to try to encourage insurers to ensure people are treated as close as possible to home and in the primary care setting where possible. This is part of our objective of universal health insurance. This bed utilisation credit system builds in an incentive for people to be treated within the hospital setting.
I know the Minister will make the financial argument that the cost of a hospital bed is €600 or €700 a day and that the insurer is only getting a return of €60. However, the problem is the ethos created in regard to this. The Minister's accounting mechanism in regard to insurance acknowledges someone's occupation of a hospital bed as a calculation in regard to health status. We should be doing the opposite. We should be rewarding insurers that keep people out of hospital and that, through proactive schemes, ensure they do not go into hospital. We should have a far more effective mechanism of measuring health status than hospital bed utilisation. I cannot see how, 12 months after the introduction of this measure, we have not developed this. All we are doing is tweaking and tinkering with hospital bed utilisation rather than coming up with a more accurate assessment. As the Minister said, the legislation we are dealing with now is putting risk equalisation on a permanent basis. As a result, it is also putting the measure of hospital bed utilisation on a permanent basis, instead of coming up with a more effective way of measuring health status.
The Minister has known for a long time that I am far from being an enthusiast of private health insurance. However, I accept that the risk equalisation approach is necessary in the context of where we are at this point in time and have no problem accepting that this is a requirement. I have some concerns and am disappointed my amendments have not been allowed.
In regard to hospital bed utilisation, I understand from the experience of others that in day cases where there is so-called bed utilisation - it is questionable as to whether these cases constitute bed usage because they are dealt with in a day ward where there are a number of trolley facilities - significant charges apply. These charges do not only apply to overnight stays. Will the Minister throw some light on this situation? Do these charges apply universally for privately insured day case patients presenting at hospitals? Are they charged significant sums for the utilisation of a bed over a period of hours during the day, when there is no overnight stay? What is the situation in regard to patients who are referred to the private attention of doctors and consultants?
The Deputy is straying off the Bill.
It is within the context of the Bill.
I do not think it is.
Where direct payment is made to the doctor or consultant as a private referral what is the situation - if the Minister is able to listen to me - with regard to the support staff of the doctor or consultant? They are not being paid privately. They are being paid by the public purse, including a number of associate supporting nursing staff for the private practice element of the practitioners' daily work. It surely is another area-----
The Deputy is straying from the Bill. We are on section 3.
I am absolutely certain the public dimension with regard to private health insurance cannot be left out. We are speaking about private health insurance and amending the substantive legislation through the Bill, but entire areas are not being addressed where public moneys support in a major way the private practice element of the day's work of doctors and consultants throughout our hospital sites. Will the Minister offer a view on this? Should we not ensure those who are privately, and more speedily, accessed look at the holistic in the round cost of providing this exceptional access?
In response to Deputy Naughten we already pay risk equalisation credits based on age, gender and the level of cover. The hospital bed utilisation charge is an additional credit in respect of health status. In 2014 we will work to expand the measurement of health status. The Deputy stated I will say this is a small amount of money by comparison to the true cost and of course I will because it is true. Anybody who has any business acumen would know it would not be a very clever business proposition to spend €800 or €850 on a bed to get €60 back. I reject the contention it is a problem from an ethos point of view. It is nothing of the sort.
With regard to Deputy Ó Caoláin's contribution, the issues he raised are not for the Bill, not for the section we are discussing, and not for the amendment. They are issues worthy of discussion at another forum at another time but not with regard to this.
I spoke to the section.
I did not state the Deputy did not do so.
To be of assistance to Deputy Ó Caoláin, is it correct the hospital bed utilisation charge is only for overnight stays?
Yes. It does not apply to day cases.
It does not cover day case procedures. This comes back to the point I made on health status. We should, through legislation, encourage insurers in so far as it is possible to improve the health status of patients and not use this measurement with regard to hospital bed utilisation. The difficulty I have with the response given by the Minister is this time last year I proposed a sunset clause on the hospital bed utilisation credit and the Minister assured me at the time that during 2013 he would come up with a far more effective tool with regard to health status. Here we are at the end of 2013 and he is now telling me this will happen in 2014. Health insurance premia are rising on a daily basis. Will hospital bed utilisation be taken off the statute this time next year or will we be back here at square one in 12 months time?
I am quite happy what we are doing gives us some measure of health status. I am not happy it gives us the full measure but it gives us some measure. We have discussed this issue with the insurers and we continue to examine further measures we can agree between us.
I wish to share some good news with the committee. As all private patients will pay for their services from 1 January, it has been possible to reduce the level of charges for private patients for day case surgery. The day case charge has been reduced by 50% from €828 to €407.
I accept we need greater measurements of health status and a raft of measures need to be taken in health. We are taking it one step at a time. We are committed to universal health insurance and we will get there. We are building the building blocks. I could take up another 20 minutes going through what has been done already but I will be directed by the Chairman to stick to the Bill-----
Section 3.
-----and that is what I intend to do.
It is positive that the cost of day case procedures will be reduced. Are there any plans to allow the insurers negotiate with the public hospitals, even the hospital groups? This would be the intention down the road, particularly where hospital groups may have spare capacity for day procedures and could make them available at a discounted price to the insurers to ensure the facilities are fully occupied. Is any intention to go down this road in the short term?
Not in the immediate short term but the Deputy is quite correct. In the longer term this is what will pertain. Insurers and the health care commissioning agency will negotiate with providers to get the best deal they can. There are reports of certain hospitals which have additional capacity that could be used. We must be careful how it is used because we have had incidents in the past where hospitals have been very productive, which is great to see and the money follows the patient, but they have been active in a way we did not request. In other words, we have set targets that nobody should wait longer than eight months for an inpatient treatment, but we find some hospitals focus on those waiting three to five months instead of those waiting for longer than eight months, burning up their budget on the money follows the patient side and coming back with their hands out stating they cannot make their list because they got it wrong. We will not tolerate this. People will be given very clear instructions on how to approach the waiting list. Once the urgent cases and cancer cases are looked after the longest waiter should be seen first. Nobody will disagree with this. Failure to adhere to this cannot be rewarded. At the same time we do not want to dampen down what has clearly proven to be a very good incentive for hospitals to become much more productive.
Will the Minister elaborate on the points he has made? He indicated a 50% reduction in the cost of day cases from approximately €825 to €407. What is the mechanism for its introduction? When will it come into effect?
As I stated, it will begin on 1 January.
Did it require legislation? Was it an order? What is the mechanism for the delivery of the reduction?
It is being done through existing legislation, the Health (Amendment) Act 2013.
Amendment agreed to.
Section 3, as amended, agreed to.
Section 4 agreed to.
SECTION 5
I move amendment No. 2:
In page 4, between lines 7 and 8, to insert the following:
"(a) in subsection (1)(a), (b) and (c), by substituting "1 May" for "1 April”,".
My priority is the implementation of a robust risk equalisation scheme while minimising the impact on the ability of insurers to carry out their business.
Under section 7F(1) of the Health Insurance Act 1994, registered undertakings are obliged to maintain and furnish information returns, including a statement of profit and loss and a balance sheet, before 1 April each year, while the Central Bank also requires all insurance companies to submit their returns within four months of the end of the financial year which in the vast majority of cases is 31 December. Therefore, most firms are obliged to submit their returns on or before 30 April. In order to reduce the administrative burden arising from having two separate dates for related data sets, I am extending the deadline for the making of returns to 1 May, which will have the practical benefit of providing insurers with an additional month to finalise their preparations and meet the requirements laid down.
It is welcome that the system is being streamlined.
Amendment agreed to.
Amendments Nos. 3 and 4 are related and will be discussed together.
I move amendment No. 3:
In page 4, line 15, to delete "12 per cent" and substitute "10 per cent".
The purpose of this amendment is to reduce the relevant figure from 12% to 10%. The rationale behind it is quite simple. Under the provision in the Bill, VHI can make up to 12% profit on its equity before it is deemed to be over-compensated by the fund. Any analysis of the equity and return on investments of insurance companies suggests 10% is a fair and reasonable figure. VHI is already heavily subsidised in the context of risk equalisation as a result of the age profile of its customers. It is over-compensated and over-subsidised. Is this a method by which the calf is being fattened before it is put up for sale? A key issue which must be addressed relates to the fact that VHI is over-compensated by other health insurers as a result of the age profile of its customers and the provisions relating to the risk equalisation fund. Allowing it to make a further 12% on equity is a step too far. A reduction to 10% would oblige it to become more streamlined and efficient. It would also, as the Minister has stated on many occasions, encourage it to drive down its costs. In addition, he has requested that the company bring in various organisations and firms to assist it in this regard. If I was obtaining a 12% return on my money, I would be an extremely happy camper.
Effectively, this over-compensation and over-subsidisation of VHI by other insurers is a hindrance to competition in the market. The hallmark of the Minister's policy is that he wants vigorous competition in the market in order to drive down costs because this would make health insurance more affordable. Again, I return to the simple principle underlying the Minister's policy, namely, that everything that is done runs contrary to what he is saying in the context of escalating private health insurance costs. He must examine this matter, particularly as money is being transferred from other insurers to VHI. As stated, VHI will be allowed to make up to 12% on its equity before it is deemed to be over-compensated by the fund. If the figure was reduced to 10%, the company would obviously not receive as much in compensation.
The Health Insurance Act 2012 provides the legal framework for the risk equalisation scheme 2013. It has European Union approval. In this decision, the European Commission has concluded that the risk equalisation scheme satisfies the conditions laid down in the 2012 EU framework for state aid in the form of public service compensation. It is, therefore, a scheme which is compatible with the internal market under Article 106(2) TFEU. On the basis of external and internal benchmark calculations, the Commission accepts the Irish authorities' proposal to consider VHI as over-compensated if its return is above 12%. The Deputy's proposal would, therefore, run contrary to what was approved by the Commission earlier this year. Furthermore, independent advice, including that of the Health Insurance Authority, indicates that this is a reasonable percentage.
The Deputy has referred to the fact that I want to drive down costs. That is certainly the case. It is a matter of great concern to me that premia continue to rise year on year and that a medical inflation rate of 9% was accepted for many years, including by the Government of which the Deputy was a member. Since 2009 every other area has been hit by deflation, but the cost of health insurance continues to rise. As stated, there has not been sufficient auditing of the system. Astonishingly, a clinical audit has not been carried out. This means that no one is challenging doctors on why they have certain tests performed on patients. That matter must be addressed. There has been no benchmarking process in respect of what is being paid for. As a result, procedures which now only take 20 minutes to complete are still being paid for at the rate which applied when they took two hours to carry out. Ten or 12 procedures can now be carried out on one day and this would result in individual consultants receiving incomes of €450,000 per year on the basis of working a one-day week. We cannot afford or sustain this and nothing was previously done to address this problem. However, we are now taking steps to tackle it.
The reason we have not been able to deal with it is the relevant contracts will not become renewable until the beginning of next year. We are going to tackle it and we are also going to introduce a clinical audit whereby cardiologists will challenge other cardiologists and surgeons will challenge other surgeons. We are also going to introduce benchmarking and thereby evaluate why we pay what we are paying as opposed to allowing the current position to continue to obtain. What happens when a new procedure is introduced is similar to what occurs when new technology comes into being; it is very expensive at the beginning but as increasing numbers of people buy it and volume increases, costs go way down. Mobile phones used to be the size of bricks and cost a fortune. The most up-to-date models allow a person to do a hell of a lot more than previously and, relatively speaking, they probably cost less. The situation is the same with regard to the matter under discussion. Nothing was done about it in the past, but we are taking steps to tackle it.
I would like the Deputy to consider something. If the risk equalisation scheme were over-compensating in an attractive way, why would new insurers not have the same share of older customers as VHI? He has stated money is being transferred to VHI which has more customers than the other insurers. Let us consider the example of Aviva Health Insurance which has 17% of the market. If it had a reasonable share across all age groups, one would expect that it would also have 17% of those aged 70 to 79 years. That is not unreasonable, is it? However, it only has 9% of those in that category. One would also expect that it would have 17% of those over 80 years of age, but it actually only has 6%. Why is that? GloHealth only has 1% of the market and it has no customers in these age groups. As a result, it is not relevant to this discussion. Laya Healthcare has 22% of the market. As a result, one would expect it to have 22% of those in the 70 to 79 age bracket. However, it only has 12% of these customers. One would also expect it to have 22% of those over 80 years of age, whereas it has only 6%. If risk the equalisation scheme were so attractive, these insurers would surely be advertising in order to try to attract older clients, but we all know that they do not do this. The reason they offer over 256 different policies is to confuse people and facilitate their segmenting of the market. In the next year we are going to put in place legislation that will allow the Health Insurance Authority to beef up its approach, control the market in a much greater way and reduce the number of packages on offer as they are confusing people.
I am very happy to say that the HIA has a website where people can get very good advice on the policies best suited to their individual needs. I advise anybody who is listening or viewing the proceedings to avail of that service. In my view, the myriad of policies is a deliberate cause of confusion. People should take advice also on whether their children require the same level of cover.
To restate the point, it is all about the consumer. If the Minister carries out his audit and enacts legislation on competing policies, will the customer see a reduction in the cost of his premium? The Minister is correct; the graph is going one way and the cost is not coming down.
There is no rationale for this. Is it feasible that medical inflation is running at 9% when the rest of the country was in deflation and only in recent times has returned to very low single-digit inflation? There is no logical explanation. As a doctor working in the system, I see no logical explanation for it. What we have seen is a drop in the number of people insured and at the same time an increase in the number of claims and an increase in the number of payouts. Clearly, the controls on the private health insurance system are not what they should be. We will rectify that. If we do not rectify it, we will have an unaffordable health service when there is universal health insurance. That is not what we intend doing.
Central to the principle of intergenerational solidarity is community rating and risk equalisation. It is obvious from the statistics that insurers are cherry-picking the newer entrants to the markets. One of the reasons for the choice of 260 policies arises from a Bill on advanced and non-advanced health care products. We were told at one stage that a substantial number of existing policies would qualify as non-advanced, so they would attract a lower duty and risk equalisation levy. That did not happen. They all turned out to be in the advanced category. The difficulty I have with the section, and the reason for my amendments Nos. 3 and 4, is that the VHI will be allowed to make a 12% return on its equity before it is deemed to be over-compensated. When the return on equity goes over 12% it will receive a lower amount from the fund. The point is that a return of 12% on equity investment is deemed to be good. The Minister stated that the HIA had done the assessment and deemed that a 12% return was reasonable; however, the Minister has not always agreed with its recommendations. I cannot believe he can cherry-pick and dismiss other proposals and recommendations by the HIA. For those reasons, I believe this is critical to ensuring we have a stable, viable, vibrant health insurance market.
The Minister referred to the rise in the cost of claims and payouts on a pro rata basis, but the reason is that 240,000 healthy young people have left the market, so the burden is falling on fewer people the whole time. We have a smaller cohort of younger healthy people cross-subsidising older people who need more supports and will be in hospital more often and drawing from the health insurance companies. That is an actuarial fact that cannot be disputed. The private health insurance companies and the Health Insurance Authority appeared before the committee and what they said concurs with the report published by Colm McCarthy. The only dissenting voice is that of the Minister. This proposal will cause difficulties in the sense that it will not allow companies to attract and cherry-pick customers. It is better that people have some health insurance rather than no insurance, because there will be at least some transfer in risk from healthier younger people to older people. If they are not in the market, it will cause major problems. I believe the Minister is presiding over an insurance market that is in crisis.
The Deputy is straying a little.
My amendment is straightforward and central to ensuring the VHI will not be over-compensated once it hits a 10% return on its equity. I did not see the advice from the HIA, but the Minister has more often than not rejected and ignored the recommendations of the HIA.
The Deputy has made that point already.
In the context of his earlier contribution, has the Minister re-examined the issue of lifetime community rating? We discussed this issue during a debate on a Bill this time last year which is now on the Statute Book and at that time the Minister undertook to investigate it. Will he comment on it?
There is merit in Deputy Kelleher's amendments. By reducing the threshold from 12% to 10%, it would reduce the demand on the risk equalisation fund and as a result reduce the upward pressure on the health insurance levy. It would mean that across the board everyone paying health insurance would pay a reduced levy. That would be a positive development. I accept that the European Commission has said 12% is adequate, but the health insurance system is in crisis and this would alleviate the pressure. The Minister has given very stark figures on the percentages of people over the ages of 70 and 80 years who change provider in the health insurance market. He told people to shop around and said the HIA has a very good website, but as a person who has used the HIA website, I found it very confusing. I am half the age of an 80 year old and I would not like to be that person trying to negotiate his or her way over the web. The HIA has a fund of €8 million in cash; would it not make far more sense for it to tap into some of that money, engage with active age organisations around the country and Age Action Ireland and actively sit down with older people and show them where they can get the same level of cover at a cheaper price from another insurer? The HIA has appeared before this committee and has given evidence that some of the other insurance companies are providing the exact same cover, but older people are risk averse and afraid to shift from one insurance company to another. This is part of the problem. My point is that the HIA itself needs to actively engage with this issue. It is a damning indictment of the HIA that there is such a stark contrast between the overall level of cover and that of the different age cohorts. If the Aviva and Laya health insurance companies had a higher number in the older age cohort, it would reduce the overall pressure on the risk equalisation fund and as a consequence reduce the cost of health insurance for everyone.
Let me explore further arguments on Deputy Kelleher's amendments. Has the Minister or his officials extrapolated exactly the comparative impacts on the customer base of the difference between the 12% and 10% levy? As the Chairman said, it is about the customer at the end of the day.
I hope there is a wish across the board that the negative impact, in terms of cost for policy holders across the various competing entities, will be kept to a minimum. There should be no increase. Amendment No. 8 in my name sought to ensure this would be a consequence of the legislation, but it was ruled out of order. Has the Minister carried out an assessment of the likely impact of the figures now being discussed in the context of amendments Nos. 3 and 4? Can he provide us with a summary of the comparative projected impacts in order that we will be better informed when we consider his argument in favour of the figure of 12% and Deputy Billy Kelleher's argument in favour of a figure of 10%?
I would like to comment on Deputy Denis Naughten's proposal regarding the engagement of the HIA with particular groups such as older people. The HIA's website is somewhat confusing, even for those of us who are some way nimble on the computer. The HIA, to be fair, has engaged in a significant amount of promotion, but it would be a great idea for it to engage with elderly people who tend to be risk-averse, as the Minister said. A good marketing campaign might encourage them to shop around. We know what Mary Harney meant when she famously said people should shop around. It is important that we make it easy for people to do so. The insurers have their own vantage point, as is their entitlement, but we have a duty to look after the consumer also.
I accept that totally, but I have to point out that the HIA has an excellent website. I accept totally that older people do not avail of it.
We are not criticising the website. However, it is difficult to navigate.
I accept that.
Okay.
The HIA also has a telephone number and is happy to engage with people over the telephone. Older people much prefer to engage over the telephone. If the committee is suggesting officials from the HIA should go and sit down to talk to people, the cost of doing so would be utterly prohibitive. It is not a runner; it really is not going to happen. The HIA has a telephone number and its staff are very happy to talk to people. I know and accept totally that older people are much more familiar with this mode of communication than they are with the Internet. I think the HIA has done some sterling work in that regard and is continuing to do so.
We do not want to get hung up on this issue. The public information campaign being suggested could take the form of a roadshow, for argument’s sake. Deputy Denis Naughten has mentioned that €8 million is being spent in this area. Is there any capacity within that funding? We are familiar with the campaigns organised by the Road Safety Authority and the health promotion unit of the Department of Health. I am just posing the question. My only concern or motivation is to drive down the cost for the consumer because it has become prohibitive. There is a duty on all of us to make sure we get that message across. Health insurers only care about themselves. The rest of us have a different vantage point.
On a point of information, I am not talking about HIA staff members calling to every crossroads in Ireland.
Neither am I.
I am suggesting they work with active age groups around the country, including Age Action Ireland, to get the message across that the system in place, including the telephone line, can be used to get people to engage actively. That is not happening. While I accept that the figures mentioned are an indictment of the insurance industry, they are also a damning indictment of the role of the HIA which should be ensuring this engagement happens.
I have to reject the Deputy’s statement that this is a damning indictment of the HIA. The spread is not better because the market is segmented. The HIA would have to be given much stronger powers if it were to be in a position to prevent this. That matter is under consideration.
The HIA’s role in the health insurance market has changed considerably in recent years. Its workload has increased substantially since its establishment owing to the changing nature of the private health insurance market. We are considering its role as part of the implementation of a universal health insurance system. I intend to have a review carried out in the coming months to assess the current role and functions of the HIA, with a view to determining how they can be strengthened and enhanced to fulfil any requirement that may arise when the universal health system is in operation.
The €8 million fund that the Chairman mentioned cannot be frittered away. The HIA has a significant amount of work to do. It will need to take on more personnel to do the work involved in monitoring and correcting what is happening in the insurance business. As a universal health insurance system is introduced, we want to make sure we have proper controls at regulator level with regard to matters such as the pricing of packages, etc. There is a need for clarity.
In fairness to Deputy Denis Naughten, the idea of engaging with Age Action Ireland and other bodies on how to communicate better with older people is a good one. I will ask the HIA to take it on board and consider running information campaigns to encourage older people to shop around. As Deputies have said, older people are reluctant to change. There is no question about this.
I would like to respond to the contention discussed with regard to non-advanced and advanced policies. At the end of March this year, when we brought forward the new Act, there were 20 non-advanced policies. The number of such policies is now 34. It is open to the market to offer more of these products. As we all know and as I said previously, these companies make their profits from younger people who do not get sick. Perhaps they are not using these profits to attract more young people.
We do not know what Laya’s gross capital investment is, but we know from last night’s programme that it has made a profit of €5 million. There is a great deal of money in the health insurance market and I do not believe for one minute that VHI is being over-compensated.
It seems Deputy Billy Kelleher wants to second-guess the HIA and the European Commission. By the way, the Commission’s report has been published, although the HIA’s report has not.
On a point of information, they do not insist on a figure of 12%.
They do not insist on anything other than it does not go above 12%.
I reject the Deputy’s amendment. I am not prepared to accept it. I do not accept the claim that the HIA is not doing the job it is empowered to do, or that certain figures represent a "damning indictment" of it.
Deputies raised the issue of community lifetime rating which I am examining actively because I agree with the principle that somebody who has been insured for all of his or her life should not be charged the same as somebody who decided to become insured for the first time at the age of 55 years. I do not think that is fair. We can look at other ways of encouraging more young people to enter the market. The insurers could be doing certain things that are not prohibited by law, but they are choosing not to do them. I am not prepared to accept amendments Nos. 3 and 4.
Deputy Caoimhghín Ó Caoláin asked about the availability of certain figures.
Has a calculation of the likely impact of these changes been made? The comparative position-----
That cannot be done in advance. The calculations are made at the end of the year on the basis of what has happened, as opposed to what might happen.
To be clear, Article 106(2) of the Treaty on the Functioning of the European Union clarifies whether risk equalisation constitutes a state aid. It does not include a reference to whether the relevant figure should be 8%, 9% or 10%. According to the Minister, the figure is determined by the HIA on the basis of its assessment of what would be a reasonable profit rate return on equity. If we allow VHI to make a profit of 12% on its equity before it is deemed to be over-compensated by the fund, the effect will be that the company will receive more in compensation than it would if the figure was 10%. That is a statistical and mathematical fact. It is not a logarithm or an algorithm; it is a mathematical equation.
It would be better if there were more young people in the insurance market than is the case, regardless of whether they are cherry-picked. The HIA’s report makes it clear that young people are dropping out of the health insurance market in their droves. The method of transfer in the risk equalisation fund from other insurers to VHI, on the basis of the company’s demographics and age cohort, means that insurance will cost more. That is a simple fact. Therefore, young people will not be encouraged to enter the health insurance market in the first place. That will mean that there will be fewer people supporting the risk equalisation fund and thereby supporting older people.
I would like to take up the Minister on what he said about the fact that insurance companies were making money out of young people. Of course, they are making money out of young people. It is better that there be more young people insured in order that they will transfer to the risk equalisation fund. That is what the fund is for.
It is better that there would be more young people insured so they would transfer to the risk equalisation fund. That is the purpose of the fund. The Minister should be doing everything in his power to assist and encourage aggressive marketing by the insurers of good quality cover that would be attractive to young people and the opposite is the case. This is one more case in point. The 12% will mean that there will be a larger transfer from younger healthier people to VHI's cohort, which means higher insurance for younger people. I do not understand how the Minister does not see that as the corollary of what will happen.
I shall finish with this:
The Commission considers that the approach above is coherent and in line with the state of the art. Considering the intrinsic variability present in such calculations the Commission accepts the proposal of the Irish authorities to consider that VHI is over compensated if its return on equity is above 12%.
That is a direct quote. Is Deputy Kelleher suggesting for a half a minute that VHI is making unreasonable profits? That is what he seems to be saying.
I did not interrupt the Deputy.
I will chair the meeting.
I have sat here and listened for the past 20 minutes to a Deputy who has gone around in circles. This came from an individual who was a Minister of State in a Government that destroyed this country and caused 250,000 people to lose their jobs, which might have something to do with the fact that 250,000 people have left the insurance market and that 250,000 more have medical cards.
We are on the Bill.
We are on the Bill.
I thank the Minister.
To hear from somebody who was in a position in government to do something about this for the past 14 years-----
On the amendments please.
-----starting to lecture us on what we should do now when we have made more progress in two years in the health service generally and in this area than it made in its entire 14 years in government, as it wrecked the country, is a little bit much to swallow.
Does Deputy Kelleher wish to come in?
I am not being argumentative. We get the history lesson every time. I was making a very reasonable point. It has nothing to do with lectures but a simple principle. I am not saying VHI is making excessive profits. It would be great if it was making a profit. The difficulty we have is that it would put more fat into the system if VHI was obligated to have a 10% return on equity. This would put further pressure on VHI to be lean, efficient and effective - everything the Minister says day in and day out that he wants it to do.
We shall revisit this when it reaches 10%. How about that? At the moment, what we are talking about here is putting in place a clause that will not allow it to exceed 12%. I look forward to the day when it reaches 10%, let alone exceeds it. The risk equalisation has increased from 73% to 78% the effectiveness of the compensation for people over the age of 70 and under the age of 80 and increased the effectiveness for people over 80 years from 83% to 86%, so they are not fully compensated by any means by these measures. In fact, they are continually complaining to me about that and they are independently assessed figures. Rather than continue around the Houses I reject the amendments and suggest we put it to a vote.
Amendment put and declared lost.
I move amendment No. 4:
In page 4, line 34, to delete "12 per cent" and substitute "10 per cent".
Amendment put and declared lost.
Section 5, as amended, agreed to.
NEW SECTION
I move amendment No. 5:
In page 5, between lines 18 and 19, to insert the following:
"Amendment of section 7H of Principal Act
6. Section 7H(ii) of the Principal Act is amended by inserting "after deducting from the net premium the deduction to which such insured person is
entitled, for the year of assessment concerned, by virtue of section 470 of the Taxes Consolidation Act 1977" after "each insured person".".
Following the amendment to the Taxes Consolidation Act, introduced by the Minister for Finance, to limit the relievable amount of premium and the amendment contained in this Bill to the definition of "net premium" in section 2 of the principal Act, I am making provision to amend section 7H(b) of the Act so that the renewal notice-statement issued to a policyholder by a registered undertaking will clearly show the premium payable by the insured member, net of tax relief at source. Basically, this is about giving the insured person more information as to what their premium really is.
It has also to do with a budgetary change in terms of the decision of the Minister for Finance to cap the tax relief. That, in effect, is one of the reasons this issue is coming before us today.
This would have come before us in any event.
Is the Minister sure?
Absolutely. Why not? It is about informing people. The more information one has the more empowered one is---
Yes but the reason the Minister has to inform people is that up to now there was no cap on tax relief. Therefore, a person's insurance was the net amount for which they were billed, because the tax relief was deducted at source. What is happening now is that there is a cap on tax relief, €1,000 for an adult, €500 for a child, which means that the average two plus two policy with VHI will increase substantially. This is about giving people more information because it is now a determining factor in the cost of private health insurance.
As I say, this is to help people to know precisely what their insurance is costing. It is a move we would make in any event. Up until now many people did not know precisely what their insurance was costing, they just knew what they had to pay. They did not realise the true cost of what the taxpayer was subsidising. For the information of the Deputy, two years ago it cost the taxpayer €400 million in tax subsidy, last year it cost €450 million and this year it will cost €500 million. That is an unsustainable increase in tax subsidies by any stretch of the imagination. In any event, that is a taxation matter for the Minister for Finance. My duty of care here is to people to ensure that they know what their policies are costing them, both net and gross.
I welcome the fact that the information is being provided but up until now the position was that one was billed and one paid the net sum and the insurance company deducted at source and was reimbursed at a later stage. What is happening now is that there will be an additional cost on the average health insurance policy of any family in the State whereas we were told initially that it would only be the gold plated policies. We are talking about more than 0.5 million policies whose health insurance costs will increase due to the cap on tax relief. The reason this information is being made available is that it will have a financial impact on their premia because there is a cap on it. It is not that the Minister wanted to show in great light openness and transparency, it is because the Minister for Finance decided to put a cap on tax relief which drives a coach and four through the Minister's policy of universal health insurance. We should rename universal health insurance, UHI, as unaffordable health insurance.
I will forgive the Deputy the dramatics of his coach and four through UHI. We are on target to bringing in universal health insurance. We are putting the building blocks in place. It is not part of this Bill but obviously this Bill relates to it. I stand over what I have said. I propose that the amendment be accepted.
Amendment put and declared carried.
Sections 6 to 10, inclusive, agreed to.
SECTION 11
I move amendment No. 6:
In page 11, between lines 27 and 28, to insert the following:
“(3) Nothing within the provisions set out in subsections (1) or (2) above shall require the payment of more than one specified rate per insured person in any 12 month period.”.
There is no point in my going into a long debate. Obviously, the Minister is in an argumentative mood. I am only trying to put forward viewpoints. That is my duty and obligation as an Opposition Deputy as well as to at least tease out issues. In fairness, the Minister should recognise that is the purpose of the committee. The purpose of the committee is for the Minister to come before it, for me to put down amendments, for the Minister to answer them and for me to argue the case. There is nothing unusual in that. It has been happening in this House since 1922 and it should continue. Obviously, we can have robust debate from time to time, but when I table an amendment I do so in good faith and if the Minister can counter the argument, that is fine. I do not see why the Minister has to get over-dramatic and excited about these issues.
The Deputy is straying off a little now.
I am straying from the amendment. As I said, it is an amendment to ensure that only one levy is payable per person per year. That is basically the purpose of it.
The Deputy referred to the history but the Mansion House was where the first Dáil sat.
Yes, but they had Committee Stage there as well.
I call on the Minister to reply.
Was this building built in 1922? It is called the LH2000 annex. Is there a hint there?
At the risk of being called combative-----
We are on section 11 and amendment No. 6 from Deputy Billy Kelleher.
I do not agree with the amendment. Section 11 of the Health Insurance (Amendment) Bill 2013 amends section 125A of the Stamp Duties Consolidation Act 1999 in respect of the revised rates of stamp duty that will apply to health insurance contracts entered into or renewed after 1 March 2014. The current legislation provides for the payment of the stamp duty levy by authorised insurers on a quarterly basis in respect of each health insurance contract entered into or renewed in each quarter. The change from an annual to a quarterly payment was made to improve the overall funding of the risk equalisation scheme from a timing viewpoint, but with the overall objective that health insurers would continue to pay only one levy per insured person every 12 months. I regret I must reject the amendment.
Was there not an error in the legislation previously to the effect that if a person changed insurer or insurance cover he would be met with a second levy? The amendment is to ensure that is not the case and that no one incurs anything more than one levy in any 12 month period. I believe it is a perfectly fair amendment.
In view of what the Minister said about shopping around he should be encouraging people to shop around. This amendment is right up the Minister's street in terms of ensuring that people are encouraged to shop around. If they do shop around and find cheaper insurance cover or more efficient cover, then they are not penalised on the double by paying two levies.
I thank the Deputy for that. However, the reality is that it is a matter for the Department of Finance. The Department of Finance has met the insurance representatives and issued them guidance notes. The insurers were satisfied with them following that meeting.
Not all of them were.
I am sorry. That is what my Minister tells me and I will take his word for it. I cannot accept the amendment.
How stands the amendment?
I am pressing it.
Amendment put and declared lost.
Section 11 agreed to.
Amendment No. 7 is ruled out of order because it is in conflict with the principle of the Bill as read a Second Time.
Amendment No. 7 not moved.
Amendment No. 8 is ruled out of order as it is outside the scope of the Bill.
Amendment No. 8 not moved.
SECTION 12
Question proposed: "That section 12 stand part of the Bill."
If I could just comment-----
We are on section 12. We are not having a discussion without amendments.
You are having no discussion at all. I have nothing to hand to explain the reason.
I understand, Deputy Ó Caoláin-----
Surely you will allow me to finish my sentence?
Excuse me. Sorry, I was going to say I was of the impression you were given the information at the start. That is what I was going to say. Go ahead.
I have no idea what you have just said.
I said I was of the impression that you would have been given the information prior to the meeting.
I have not had sight of it. All that I have received is the statement: "The following amendments have been ruled out of order." End of story.
For the record of the meeting I will read what I have been given. I understand that amendment No. 7, in the name of Deputy Caoimhghín Ó Caoláin, has been ruled out of order as it proposes that the commencement of the Act would be contingent on the publication and laying of a paper before the Houses of the Oireachtas on the financing of universal health insurance. This is in conflict with the principle of the Bill as read a Second Time and, therefore, must be ruled out of order in accordance with Standing Order 131(1).
I understand amendment No. 8, in the name of Deputy Caoimhghín Ó Caoláin, provides that nothing in the Act shall authorise or permit an increase in premiums for customers consequent on the provisions of the Act. The rate charged for premiums are decided by the health insurers and are not within the powers of the Minister. The amendment is, therefore, outside the scope of the Bill and must be ruled out of order in accordance with Standing Order 131(1).
I was of the impression, Deputy, that this was furnished to you. I was told it was e-mailed to you today. That was the point I was making at the beginning. I was not trying to be in any way discourteous to you. In fact, I was trying to be courteous to you.
I have not received that, or, rather, I have not had sight of it. I make the distinction between the two. I have not had sight of it.
I very well understand the point in respect of commencement. It is an opportunity to reflect again to the Minister the importance of the White Paper on the financing of universal health insurance. We are talking in a limbo situation in respect of the system that needs to be urgently addressed.
I wonder about the Minister's expectation on the passage of the legislation in respect of premiums and the customer base of the various competing health insurance providers. I would have hoped that the Minister might also have been of the view that he did not want to see a consequent further increase in already expensive premia on whole sections of our communities.
The Deputy is quite correct. I certainly do not want to see that. Next year will be very focused on renegotiating contracts with private hospitals and consultants in respect of the payments they receive, how they bill, the procedures they charge for and how they are paid. We shall have an opportunity to reduce greatly the cost of private health care in this country, which should result in a reduction in premia for health insurance. That is my desire and goal. I do not suggest that it will not be fraught with difficulty and that we will have many a protestation.
Interruptions.
As the author of the greatest disaster the country has had, Deputy Billy Kelleher, would be best out of that.
We are on section 12.
I am unsure why amendment No. 8 could not have been accepted, because it would have most certainly protected the customer base of the various institutions.
Question put and agreed to.
TITLE
Question put: "That the Title be the Title to the Bill."
The Committee divided: Tá, 7; Níl, 2.
Tá
- Buttimer, Jerry.
- Conway, Ciara.
- Corcoran Kennedy, Marcella.
- Dowds, Robert.
- Doyle, Andrew.
- Fitzpatrick, Peter.
- Reilly, James.
Níl
- Kelleher, Billy.
- Ó Caoláin, Caoimhghín.
Question declared carried.
I thank the Minister for Health, Deputy James Reilly, and his officials for attending the meeting and the members of the committee for engaging in what has been an informative and a passionate debate.
I inform the committee that Mr. Dermot Ryan has today been promoted to assistant Secretary General in the Department of Children and Youth Affairs.
Bill reported with amendments.