Robert Molloy
Ceist:12 Mr. Molloy asked the Minister for Health when he will publish the legislation which will put in place the third non-life EC Directive.
Ceisteanna — Questions. Oral Answers. - Non-Life Insurance Directive.
Jimmy Deenihan
Ceist:19 Mr. Deenihan asked the Minister for Health the proposed structure of the PMI market; and if it is his objective to ensure the structure encourages meaningful competition such that the market will not be dominated by any one company.
I wish to take Questions Nos. 12 and 19 together. It is my intention to bring in legislation early in 1994 which will put the provisions of the Third EC Directive on Non-Life Insurance into Irish law, in so far as they affect health insurance. This legislation will ensure that after 1 July 1994, insurers who wish to operate in Ireland may only sell private medical insurance schemes which provide for community rating, that is, all members pay the same premium per plan, irrespective of age or other risk factors. The legislation will also provide that health insurance schemes must be marketed on the basis of open enrolment and non-termination of cover.
In order to protect community rating I propose, by way of a system of risk equalisation, to remove incentives for insurers to devise means of attracting only low risk subscribers to their membership. Under such a system the cost of certain high risk subscribers is shared between all funds operating in the market. It is likely that all insurers will be required to offer for sale a basic health insurance policy, the content of which will be laid down in regulations. The components of such a policy and of the risk equalisation mechanism have not yet been decided on but a firm of actuarial consultants has been engaged to advise my Department on these matters.
It is a matter for insurers to decide whether they wish to enter the private medical insurance market here after July 1994. However, it is my objective to ensure that an equitable market, based on the arrangements I have described, is available for insurers and insured alike in Single Market conditions from July 1994.
We welcome competition in the area of health insurance. Will the Minister set down a comprehensive list of regulations governing health insurance before next July and will he create a level playing pitch in that regard? He has said already that community rating will be taken into account. Will he give a guarantee in that regard, as it is of fundamental importance to all health insurance subscribers that all elements of the principle of community rating be fully honoured. Will the new premia be tax deductible? In the context of this question will the Minister acknowledge the concern I expressed about the current position of the VHI and indicate how the new arrangements might impact on that body?
The Deputy has asked a series of questions to which I will seek to reply. Regarding the area of health insurance in the open market situation, I intend to regulate that area by way of a Bill I propose to introduce in the next session or, at the latest, before the summer recess. The three principles that will be enshrined in that legislation include community rating, open enrolment, which allows individuals join a health insurance scheme regardless of age, medical condition or other risk factors, and lifetime cover whereby those who provide health insurance may not cancel or refuse to renew membership for those who are covered and wish to maintain cover.
We have considered the application of competitive systems elsewhere. We have considered the dangers the open market will pose and we will be mindful of those in the proposed legislation. We have considered the system of community rating that operates in Australia. A mechanism was used by insurance operators in Australia to cherry pick some of the best risk ventures, notwithstanding the legal requirement for community rating. I must ensure that the law is comprehensive in this regard and I am hopeful it will be before I introduce legislation in this regard. That is the legislative framework in which the open market will operate. Tax deductible premia is a matter for my colleague, the Minister for Finance and, ultimately, a budgetary matter to be decided by Government.
Regarding the future of the VHI, that body is a statutory public company and it must have regard to the new requirements for the open market. For example, it must have reserves of a level which it does not currently have. I propose to establish a working group to examine the workings of the VHI, hopefully within the next few weeks. It will spend three weeks overviewing the operations of the VHI and report to me on other matters that need to be addressed to ensure that we have a viable and healthy VHI operating in the open market next year.
Can the Minister guarantee that under the proposed legislation the Irish market will not be dominated by a major international player, such as the British company, BUPA? If companies such as Blue Shield or Blue Cross made arrangements with BUPA they could monopolise the Irish market to the detriment of the VHI. Will the proposed legislation protect the position of the VHI? Deputy Quill stated that the recent report on the VHI was not positive and does the Minister consider that the VHI is ready for competition at present?
I must operate within the law. The European Union has decided that from 1 July next there will be an open market. That is the position regardless of the views of Members or Ministers here. I will not be able to protect anybody in an open market. The idea behind open markets and open competition is to provide competition that will benefit the consumer and I am sure that view is supported by Deputies opposite. However, I must preserve some fundamentals. The issues we negotiated in regard to the EU regulations are the preservation of the factors of community rating, open enrolment and lifetime cover. We hope they can be regulated and that everyone will be required to compete on the same basis.
A number of international companies, and I will list them if time permits, have already sought information from my Department in relation to the requirements for next year. I suspect a number of companies will operate once there is an open market and that is a basis of law that we must address. It will be my job to enact the law to protect the consumer as best I can and comply with European law.
I welcome the fact that the Minister will introduce regulations to ensure that people are protected. That is an important development. I am aware it is early days and it may be unfair to ask the Minister specific questions. In relation to information to which clients are entitled, will the Minister ensure information is given to people who apply for cover, particularly if those applicants are refused cover? The lack of provision of such information is a major problem in respect of car insurance applications, particularly where cover is refused. There does not seem to be any onus on a company to provide information. The same position applies in respect of medical reports. A medical report may be carried out in respect of an applicant but the applicant has no access to that report. The report becomes the property of the insurance company.
Regarding spreading the load of high risk clients, does the Minister envisage that each company will have a quota that it would be required to fill? How would this matter be regulated to ensure that companies were not avoiding taking on clients who will cost them money?
In relation to the criteria for refusals and medical reports, I have not begun to address these matters yet. I will bear in mind the Deputy's observations when framing the legislation, which we are in the process of doing at present. As to how the risk equalisation mechanism will operate, this mechanism is a fund which will be contributed to by all health insurers with a lower than average risk and out of which insurers with an above average risk will be compensated. The objective is that everybody will be on an equal level. We will have to find a way to ensure that we can do that legally and in accordance with European law.
Will the Minister confer with his colleague on the question of whether premia will be tax deductible? If there is to be fair competition we must create a level playing pitch. The question of whether premia are tax deductible is one element in levelling the playing pitch and should not be left out of the Minister's discussions. Will he confer with his colleague, the Minister for Finance, to ensure that the position is the same for existing and new companies?
The Minister could remove it from the VHI.
On the question of premia being tax deductible, the same regulations will apply to every insurer. In an open market you cannot allow health insurance to be tax deductible for one company and not for another. That matter will be covered.
(Carlow-Kilkenny): Could it be removed for all companies?
In the only budget produced by this Government it did not tamper with health insurance as a tax deductible factor.
As usual, the super rich get the tax breaks.
This is primarily an issue for my colleague, the Minister for Finance, and ultimately for the Government in budgetary discussions.