Dáil Éireann Debate, Tuesday - 12 February 2013
623. Deputy Alan Farrell asked the Minister for Health his views on the VHI statement that one of the factors that will lead to a 6% increase in premiums is an ineffective risk equalisation scheme; and if he will make a statement on the matter. [6580/13]
View answerI recently expressed my disappointment with the VHI's announcement of a further price increase and I consider an increase of this level unacceptable. I met with the Board of the VHI on 19 December last and with the Chair and CEO last month to voice my concerns and to emphasise the absolute need for VHI to manage its costs. Given VHI’s very significant share of overall costs in the market, I will continue to focus strongly on the need for the VHI to address its costs and to address aggressively the base cost of procedures including professional fees. I have consistently urged the VHI and all health insurers to do everything possible to keep down the cost of health insurance and I am determined to address costs in the sector, in the interests of consumers.
The Government is committed to keeping down the cost of health insurance so that it is affordable for as many people as possible and remains committed to protecting community rating, whereby everyone pays the same price for the same health insurance product, irrespective of age or health status. The Health Insurance (Amendment) Act, 2012 introduced a new permanent Risk Equalisation Scheme (RES) for the private health insurance market with effect from 1 January 2013. An effective and robust RES is required in order to protect affordability for those who need it most. The Scheme is also of benefit to insurers with increased adverse risks, in particular, the VHI.
My officials have had a number of discussions with VHI officials to assist them in understanding the divergence between their calculation of the effectiveness of the new RES and that of my Department. My Department has also conferred with its actuarial advisors who have concluded that the calculation methodology used by VHI understates the effectiveness of the scheme. In addition, the Health Insurance Authority ( HIA) , the industry regulator, has confirmed, based on market average claim costs for prescribed benefits, that the 2013 scheme compensates for 75% of the higher claims costs for those aged in their seventies and compensates for 83% of the higher claims costs for those aged in their eighties. The 2013 scheme has also provided for a measure of health status whereby an amount of €75 per night will be payable from the Risk Equalisation Fund in respect of each hospital stay involving an overnight stay in a hospital bed in private hospital accommodation, including in a designated private bed in a publicly funded hospital. This measure benefits each insurer who pays for a customer to use an overnight hospital bed and also benefits VHI to a significant level given its market share and customer profile.
I should also point out that compensation levels under risk equalisation are based on average claims for the market as a whole rather than on the claims for any particular insurer such as VHI. To do otherwise might be seen as providing an incentive for inefficiencies in claims cost management.
