Dáil Éireann Debate, Tuesday - 27 November 2012
691. Deputy Seán Ó Fearghaíl asked the Minister for Health the way his new proposed risk equalisation measures differ from those struck down in the Supreme Court in 2008; if he considers them to be more likely to successfully withstand any legal challenge and, if so, the reason; and if he will make a statement on the matter. [52814/12]
View answerThe Risk Equalisation Scheme, which was affirmed by the Oireachtas in 2003 and approved by the European Commission that same year, provided a mechanism for sharing the costs of providing necessary care among the insurers. The Scheme and its supporting regulatory regime were challenged in the courts by BUPA Ireland. These challenges were rejected by the European Court of First Instance and by the High Court in Ireland. However, they ultimately succeeded when, in July 2008, the Supreme Court found that the manner in which the Risk Equalisation Scheme was implemented to be ultra vires.
While the Supreme Court found the Scheme to be ultra vires, it is important to note that the Supreme Court decision did not strike down the principles of community rating, open enrolment and lifetime cover, nor indeed the principle of having a scheme of risk equalisation in place. Following the judgement, there was a need for a prompt response to maintain confidence in the market. It was therefore necessary to introduce measures in order to support community rating and ensure, as far as possible, that market segmentation did not become prevalent due to the introduction of plans aimed at younger, healthier lives. In response the Government introduced a temporary scheme of tax relief/community rating levy in January 2009 which provides a very significant degree of support for the cost of health insurance claims by older people.
The Interim Scheme of Age-Related Tax Credits and Community Rating Levy was introduced initially for the three years from 2009 to 2011 in order to provide direct support to community rating. It achieves this by way of a mechanism which provides for a cost subsidy from the young to the old. The Scheme was extended for a further year in 2012 under the Health Insurance (Miscellaneous Provisions) Act 2011 and improved through the use of tax credits on the basis of 5-year age bands. This provides more precise levels of support for community rating than the 10-year bands which had been in place since 2009.
The Interim Scheme provides that health insurers receive higher premiums in respect of insuring older people, but that older people (in six age bands ranging from 60-64 yrs to 85 yrs +) receive tax credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product. The scheme is designed to be Exchequer neutral and ensures that every customer has the benefit of a community rated health insurance premium.
To support the principle of community rating, the Programme for Government contains a commitment to put a permanent scheme of risk equalisation in place. This is a key requirement for the existing private health insurance market and is designed to keep health insurance affordable for older persons and to maintain the stability of the market. The Health Insurance (Amendment) Bill 2012, to provide for this permanent RES, was published on 18 October, 2012. The Second Stage for this Bill has now been completed and Committee Stage is scheduled for later today, 27th November. The main object of the Bill is to ensure that, in the interests of societal and intergenerational solidarity, the burden of costs of health services be shared by insured persons by providing for a cost subsidy between the healthy and the less healthy, including between the young and the old. The key measures in the Bill are
- the provision of risk equalisation credits (payable from a new Risk Equalisation Fund (REF) administered by the Health Insurance Authority) in respect of
- the payment of private health insurance premiums by insured persons aged 50 years and over, based on age, gender and type of insurance cover.
- each hospital stay involving an overnight stay in a hospital bed in private hospital accommodation
- the payments from the REF to be funded by a stamp duty payable by open market insurers in respect of each insured life covered. The stamp duty will be collected by the Revenue Commissioners and transferred to the REF. There will be four rates of stamp duty, depending on whether the policy provides for advanced cover or non advanced cover and whether the insured life is a child or an adult.
The new RES will be operated prospectively by the Health Insurance Authority (HIA), with funds collected via a stamp duty by the Revenue Commissioners. In terms of financial arrangements, the main difference between this and the current Interim Scheme is that risk equalisation payments will be disbursed by the HIA rather than by the Revenue Commissioners. The rates will be set each year by an Act of the Oireachtas. The mechanism for assessing whether over-compensation has occurred will be the same as the mechanism which has operated successfully under the current Interim Scheme since its introduction in 2009. The new RES will allow for a greater number of risk factors than the existing Interim Scheme, including a measure of health status. One criticism of the Interim Scheme, which has been in place since 2009 and which will finish on 31 December 2012, was that younger people taking out products that provided benefits below the standard level were potentially cross-subsidising standard level benefits taken out by older people. The new RES 2013 will provide for differentiated levels of stamp duty and health credits between higher level (advanced) cover and lower level (non-advanced) cover with a view to addressing this point.
The Government is fully satisfied of the requirement to provide for a permanent Risk Equalisation Scheme. I am confident that the introduction of a permanent Scheme, from 1 January next, along the lines proposed in the Health Insurance (Amendment) Bill, 2012, will be one that is robust, fully operational and functioning soundly and will further strengthen and maintain stability in the private health insurance market, as we move to develop a new system of universal health insurance.
