Provision for risk equalisation is a feature of the health insurance market following the introduction of the risk equalisation scheme 2003.
Under the Health Insurance Acts and the provisions of the scheme, the Health Insurance Authority has a central and independent role to play in whether or not risk equalisation transfers between insurers are warranted. Participating insurers submit data returns to the authority on a six monthly basis, and the authority analyses these returns to assess the level of risk differential between the insurers.
The risk equalisation scheme provides that: (i) risk equalisation transfers cannot be commenced where the difference in the risk profiles of the insurers is less than 2% of the market equalisation percentage; (ii) risk equalisation transfers can only be commenced with a positive recommendation from the authority where the percentage is between 2% and 10%; and (iii) the Minister is obliged to consult with the authority on a decision to commence risk equalisation where the percentage is greater that 10%.
Furthermore, the scheme provides that, in formulating its recommendation, the authority is to have regard to the best overall interests of health insurance consumers, which concerns both the need to maintain the application of community rating across the market for health insurance and to facilitate competition between insurance undertakings. The authority's first report did not recommend the commencement of transfers, the then market equalisation percentage being 3.7%.
Under the legislative provisions in place, a second report is to be submitted by the authority to me before the end of this month, in relation to its analysis of returns for the period 1 January 2004 to 30 June 2004. Given that the time frame as regards the submission of the authority's report to me is predicated on the level of risk profile differences I can say that the latest report will show a difference of less than 10%. In such circumstances, unless the percentage difference is less than 2%, determination of whether risk equalisation is warranted is a matter, in the first instance, for the authority. The action to be taken by me, if any, would be dependent upon the authority's recommendation.
The question of my Department having discussions with the authority on its recommendation does not arise, given the independent statutory role of the authority.