Dáil Éireann díospóireacht -
Thursday, 30 Jun 2005

Vol. 605 No. 5

Health Insurance: Motions.

Tánaiste and Minister for Health and Children (Ms Harney)

I move:

That Dáil Éireann approves the following scheme in draft:

Risk Equalisation (Amendment) Scheme, 2005,

copies of which have been laid in draft form before Dáil Éireann on 15 June 2005.

The purpose of the three sets of regulations is to bring greater clarity to the reporting arrangement required by the health authority regarding insurers. We discussed these matters at last week's committee and most members were in support. One of the regulations is consequential on my extension of insurance cover to persons over 65 years. Up until now insurers in the Irish market were not required to take on people over that age. This cover is subject to a period of two years, or 104 weeks, during which the person will not be able to claim cover except for an accident or something which is inflicted upon them, as opposed to something which might happen by virtue of their age or medical condition. This extension is to be welcomed. As a result of that, the regulation regarding minimum cover is necessary and the first regulation relates to greater clarity.

The purpose of this morning's short debate is to deal with my decision regarding risk equalisation. Community rating, to which the Government is very strongly committed, is maintained under the Health Insurance Acts. I am a fan of community rating, which effectively means that, regardless of age or medical condition, people pay the same amount for the same policies. This has made insurance much more affordable to a large cross-section of the Irish community. Just less than 2 million people in this country have private health insurance.

VHI has 80% of the private health insurance market, BUPA has between 19% and 20%; and VIVAS Health, the new entrant, has approximately 1%. The Minister for Health and Children is required to introduce risk equalisation. In fact, there is no option. The market equalisation percentage, MEP, must reach 10%, and one cannot introduce risk equalisation if the figure is below 2%. The MEP is the difference between what a particular insurer pays for people in different age categories and what the overall insurance market would pay if it had the same percentage of people in different age categories from the total number of people insured.

When the Health Insurance Authority, HIA, reported on two previous occasions the MEP was 3.7% in the first instance and the authority recommended not to trigger risk equalisation. On the second occasion it was 3.5% and again the HIA recommended not to trigger risk equalisation. It was 4.7% on this occasion and the authority recommended that risk equalisation be introduced. However, in its report, the HIA stated that 0.7% of the 4.7% could be accounted for by one-off factors. BUPA does not have many customers who are over 80 years, but the average pay-out for people over that age is €300,000 which the HIA considered to be an unusually high figure. Therefore it might have been a one-off and not representative of the sort of pay-out for people in that category. It could have distorted the figure by 0.7%. This is relevant in respect of court proceedings.

VIVAS Health, a new company to the market, is required to put 50% of its premium income aside for reserves. VHI has no such requirement; it has a derogation, is protected and does not need to meet that market condition. A case is being brought before the Irish courts by BUPA and another case is being brought to the European Court regarding that derogation. Other competitors in the market must meet a reserve requirement which is not required of the VHI. This is an unsatisfactory and untenable situation.

I want to bring a memorandum to the Government in September with a view to moving towards full commercialisation of VHI. It will take some years before companies do not have such reserve requirements and are able to meet the requirements of the Irish Financial Services Regulatory Authority which currently requires a reserve of 50%. This is particularly high when compared to the UK, where it is 20%, and Northern Ireland. We should have, at European level, a common figure for health insurers in terms of the reserve requirement. This factor clearly affects competition in the market, in particular that brought to bear by the new entrant.

I remain a strong fan of risk equalisation and we cannot have community rating without it. It is not a question of whether we will do it but rather when.

I am required by law, when I get a recommendation, to consult all the players in the market. In this instance, the players were VIVAS Health, VHI, BUPA and the ESB, who are part of the risk equalisation scheme. The Garda and prison officers' scheme decided to opt out of risk equalisation when it was introduced. I am required to write a letter in a certain form, which might have led to the impression that I had made up my mind to do it. I am required before making my decision, notwithstanding the recommendation of the HIA, to consider all submissions made to me, which I did. I read them over the weekend and was particularly taken with some of the comments made by VIVAS Health.

With regard to BUPA, if I was to be influenced by a lobby then the largest lobby is that with 1.5 million and not with 400,000. I am a member of VHI and would have had a particular interest. If a lobby was to affect my decision, it would have been the biggest and not the smallest lobby that did so. I was very much influenced by the comments made in the submissions.

BUPA benefits from risk equalisation in Australia, which has 26 insurers for 8 million people. Ireland has 4 million people and 3 insurers. Until we have more insurers and better competition, we will not get the desired rates and innovation. The reality in many markets is that if there are only two players, they tend to track each other.

VHI has some 150,000 more customers than it had before BUPA came into the market. More and more people are getting private health insurance and many joining today might not have considered it in the past but it is now part of their employment package. This is a welcome development because it extends private health insurance to a new category of customer.

The Minister is required to take advice and a number of years ago the Department of Health and Children appointed Mercer, a leading international actuary firm. The advice is always balanced, and there are very strong reasons to do it and also not to do it. Mercer advised me, on balance, not to do it and I am prepared to make its advice available. I also had the advice of the HIA and my own advisors. This is a close call and could go either way. However, we have not even achieved half the rate in terms of the MEP required to make it mandatory to introduce risk equalisation. The Minister has no option when the MEP reaches 10%. We are only at 4.7%, 0.7% of which might be one-off factors.

These are the reasons behind my decision and people should not say there is no link with commercialisation of VHI. Risk equalisation is important to maintain competition and community rating. It is also necessary for all players to have the same reserve requirement. Otherwise the market is distorted. It is clearly unfair if one company must put aside 50% of its premium income into a reserve fund each year and the dominant market player is not required to do so. That is why there is a link with it being necessary for VHI to move towards commercialisation.

VHI has a travel insurance product which is only available to its own members. One cannot join that scheme if one is not a VHI private health insurance subscriber. This is a huge advantage for the 1.5 million people who are able to avail of the product which is not available to its competitors. VHI requires the Minister's approval to go into new areas of business. I want it to have commercial autonomy so it can make whatever decisions it wishes. I want a healthy, vibrant health insurance market in Ireland and we can have it. However, we need more players.

Once triggered, it is impossible to turn back the clock on risk equalisation. If I trigger it, VIVAS Health will have to come into risk equalisation in three years' time, as would any new entrant to the market. They have three free years. Therefore, we must ensure we are getting it right before triggering something that we know will have a major impact on the market. The HIA said in its report that if I did not trigger risk equalisation, that would not have a major adverse effect on the market. If it was not going to cause instability in the market, clearly I would have done it.

VHI made more profit last year — over €77 million — than it did when it operated in the market on its own. That is a fact. We have a healthy insurance market and I want to maintain that. On this occasion I decided not to trigger risk equalisation. However, that does not mean it might not be done in six months or a year from now. The HIA is required to report to me in six months. There is also a case before the courts where some of these issues will be dealt with and that was clear from our discussions last week. The court has stated the Minister for Health and Children could fulfil her obligations but no payment could be made until it determines the outcome of the case. Therefore, even if I had made a determination to trigger risk equalisation, no money could have transferred from BUPA to VHI and the ESB until such time as the High Court had made a determination on the proceedings before it.

Dr. Twomey

I had hoped this debate could have taken place later in the day so other Members could contribute their views, rather than just the main party spokespersons talking about the issue again.

I fully understand that risk equalisation is part of community rating, which is vital for the private health insurance market as it exists in this country at present. However, there is a total lack of clarity in what is taking place. I appreciate the Tánaiste will furnish us with the advice that she received to clarify how she made up her mind on this issue. The Minister for Health and Children is responsible for VHI and the HIA and the latter makes the decision on whether risk equalisation should be activated. Therefore, it is very important that there is transparency and accountability with regard to this, when the Minister has responsibility for both parties, one of which is making the decision and the other is affected by it.

What are we doing to improve competition? That is an issue that has been missed in these discussions. One of the major issues being discussed this week, outside the House, by people who have private health insurance is the future development of the health insurance market and how it will affect them. One of the certainties people know is they are facing far higher costs than those they have been exposed to in the recent past. Since 1997, VHI premiums have doubled for the average customer. Much of that increase can be accounted for by medical and ordinary inflation factors, for which allowances must be made. However, indications are that medical inflation will increase even more dramatically in the future, especially regarding diagnostics, where cost increases will be significant. This means private health insurance will become very expensive unless something changes in the next few years. What is the Oireachtas planning to do about this? What is the Minister for Health and Children planning to do regarding the future and competition in the market? If nothing is done, people will be squeezed out of the private health insurance market, especially elderly people, because they find it most difficult to make premium payments. Usually, it is people over 65 who need health insurance more than others. Yet, when people retire at 65, they lose the benefits of occupational private health insurance and must pay their own premiums. While one can say that with community rating, a person over 65 is paying the same premium as a person who is 35, if the costs get out of control, the person over 65 will simply not be able to afford the payment. This issue must be examined, apart from the issues of risk equalisation and community rating.

Hospital charges are as opaque, in some respects, as Government thinking. When this debate began, several people contacted me. They were not overly concerned with risk equalisation. They were more concerned about the bills they received from hospital, the bills that are sent to VHI. People said that it was almost impossible to figure out for what they were being charged. There is no clarity in the bills that are sent to VHI. It is easy for the hospitals to state the bills reflect their contract with VHI. However, when these bills are analysed and a comparison of the breakdown costs is made with other European countries — a comparison made much easier by the euro — the result is amazing. One can allow for the fact that different health services are cheaper to run. The Tánaiste has often made the point that it is much cheaper to look after people in the United Kingdom than here. Staff are paid differently and there are other variable cost factors at play. However, making a direct comparison of our hospital charges with those in other European countries including the United Kingdom is very enlightening. This is an issue that the Tánaiste should take up, namely the costs to VHI, because rising costs are driving up premiums, as reflected in the bills submitted by hospitals. Every subscriber should demand a detailed breakdown of his or her bill. Then we might see hospitals taking more control of their costs.

Risk equalisation was debated by the Joint Committee on Health and Children. In Australia, risk equalisation only kicks in with regard to people who are over 65. It does not apply to the whole market. As we also know from previous Oireachtas debates, the midpoint in terms of community rating is 40, that is, people who are under 40 are paying for those who are over that age. People in their 40s benefit very little but as they get older, the benefits from community rated private health insurance increase substantially. It is only for those over 65 that risk equalisation applies in Australia and so much of our private health insurance market is based on the Australian model. When VHI was established in 1957, it was based on the model that existed in Australia at that time. We have also followed many of the changes the Australians have made since then.

The Tánaiste should publish the report from the HIA to which she referred. We need clarity as to what is taking place. VHI can make a very strong case for itself, but at the same time, it controls 80% of the market. There is little or no competition in this market. An argument that has been used against BUPA is that while it only has a small percentage of the market, its profits are substantial, running into double-digit percentages. People are saying that BUPA is simply dovetailing VHI charges. Furthermore, when it comes to the charges and products offered by the companies, it is very difficult for customers to work out the benefits of each policy. One company, for example, has almost 30 different products. We should seek more streamlining in this area and this is part of the responsibility of Government. The Government can initiate public information campaigns to help people to cut through all the red tape and it can put pressure on the insurance companies to be more transparent for the benefit of customers so people know what they are buying.

The charge made by VHI against the new entrants to the market is that they are directing their marketing and advertising towards younger people so they can maximise their profits. Companies are making significant charges against each other and the State is getting embroiled in the case that BUPA is taking to the European Court. We need to have a much wider debate and I had hoped for that today.

The Tánaiste is correct about one thing, that is, a substantial number of people are affected by this, given the fact that 1.6 million to 2 million people in this country have some form of private health insurance. A substantial number of people will see costs increase. If the costs increase, the people who most need private health insurance, that is those on marginal incomes and the elderly, will find they cannot afford it. If costs to the markets increase dramatically, then there is no competition and the latter is important to make the system work. We must ask ourselves why, after so many years, there is still only one major new entrant in the market. The other entrant, VIVAS Health, only has 1% of the market and no other company is interested in entering the market. We should find out why that is the case. It is an extremely important issue that demands a much wider debate than that allowed for this morning.

I am concerned about risk equalisation, competition in the market, the costs of the products and the costs to the consumer in the future. I was hoping we could have a much wider debate on these issues in the House but perhaps we can do so at a later date.

Ms McManus

I thank the Ceann Comhairle and the Tánaiste for enabling this short and rather hurried debate. It would have been negligent on the part of the House if it had not afforded the proposal some scrutiny, albeit without proper preparation. This is an important issue precipitated by the lack of decision shown by the Tánaiste and Minister for Health and Children which has concerned and mystified many people. There is a perception that she has capitulated to the strong and over-the-top lobbying from one particular insurer.

This is not the first time risk equalisation has been put on the long finger but it is the first time it has been so starkly rejected. The Minister has clearly decided not to take the best expert advice available through the Health Insurance Authority. The likely effect is increased costs to the subscriber and a certain risk to older subscribers or people looking to take out health insurance who will now become the undesirables in the market. Many older people who are terrified of being left waiting for necessary health care are taking out health insurance to protect themselves and are now looking at their situation with some trepidation. The situation of the care of the elderly since the Tánaiste has taken office has been very disturbing for older people, both in terms of illegal charges and the scandal of conditions in private nursing homes. Now the safeguard which should be in place to protect them is not being provided by the Minister nor is it being explained in any coherent way.

Community rating has been a basic pillar of health insurance along with open enrolment and lifetime cover. The situation in this country is extraordinary in that 50% of the population is covered by health insurance and it is a significant feature of the health service. This is unlike other countries where people take out private health insurance, not because they want to protect themselves and to access care but because they desire the frills. In this country the health service is so defective, underdeveloped and poorly managed that people are protecting themselves by taking out health insurance to this extraordinary degree.

Risk equalisation is a necessary part of the way our health insurance system operates. It provides the necessary balance within the market and it is anti-competitive not to introduce it when it is required of us. This is not a pro-competition argument but it seems to be some kind of ideological position that the Minister for Health and Children has adopted to which I have listened to time and again at the Joint Committee on Health and Children. The Prorgressive Democrats spokesperson on the committee seems to think that anything is better than risk equalisation. It is as if she has a visceral repugnance to the idea of risk equalisation, even to the point where she has argued that older subscribers should be forced to move from their insurer of choice to another insurer. The idea being floated by the Progressive Democrats is that it would somehow be better to force patients and subscribers to move rather than to introduce a measure that has been tried and trusted elsewhere and is part of the way we have approached health insurance for a long time.

The net effect of the failure to introduce this measure when it is required or at least recommended by the authority, is the continuation of a windfall profit for BUPA of approximately €30 million. This is a British multinational which, as far as can be ascertained because it does not provide a great deal of information about its accounts, can ensure its massive Irish profits are transferred to Britain where its profits are not so good because of a different regime.

Risk equalisation was introduced in Ireland in 1996. BUPA entered the Irish market knowing the rules of the game. I find it very difficult to accept any validity in the argument when this is the case that BUPA started talking about pulling out of Ireland altogether. The initial blackmail was that it would pull up its roots and leave. The people working in its office in Fermoy must have been very disturbed by that statement but I suspect they saw it as a blackmail threat without any validity.

Risk equalisation exists for a good reason. It has been recommended by the Health Insurance Authority whose report to the Minister I ask her to publish. I do not accept that Mercer has a higher level of wisdom and knowledge. Mercer is a private consultancy firm advising the Minister and the House should be allowed see the report. The Health Insurance Authority was established by this House, the national Parliament, to act as the supreme body to ensure a decision made by a Minister was an informed one and that the very best advice was being given.

A competitive health insurance market with community rating and open enrolment would be unsustainable without risk equalisation. I know the Minister will say she believes in risk equalisation but it is very difficult to have any belief in that statement. She seems to be asking the House not to worry and to trust her judgment, but this is not really good enough because it has no substance and is ephemeral. One can only judge Ministers by their actions on difficult decisions and we are to understand that this is such a decision. However, it is not good enough to state that risk equalisation may be introduced at some point in the future. At that point there may be real problems created by this long delay. I do not have a problem with the delays in the past but the authority has now made a recommendation and the Minister persists in ignoring it.

I refer to the Minister's press release on the subject. Initially there was a much tighter requirement for risk equalisation and had this original requirement of 2% and more than 2% been maintained, then risk equalisation might have been recommended much earlier. Following consideration and consultation, changes were made which benefited BUPA quite considerably and also helped Vivas Health to set up. In the original legislation the timeframe for the introduction of risk equalisation was much shorter. The Minister has disregarded all this and history began when she took over. She is now taking advice from private consultants in the commercial arena and is disregarding an authority whose remit is to protect the common good.

I have problems with this policy and I challenge it. Even in her own terms of arguing that she stands for competition in the market, she is not able to sustain what she has done. Community rating is a distortion in the market, it is something we all understand and it already exists. Insurers with a large number of older subscribers are at a disadvantage because of community rating. It remains hidden in a monopoly because when there is a monopoly there is only one community. As a result of EU pressure, guidance and encouragement, we have a number of competitors in this area. Once there is community rating and competition, the antidote to the distortion created by community rating must be introduced, namely risk equalisation. For community rating to survive, there are only two situations that are viable. One is a monopoly supplier of health insurance, which will not occur unless the Minister persists on this route and it may well end up that we would have a new monopoly. The other possibility is competition among insurers plus a risk equalisation fund. Risk equalisation benefits any insurer. It is not that it would benefit the VHI, BUPA or VIVAS Health. It benefits any insurer that has a disproportionate number of older subscribers. BUPA has benefited in Australia for that reason. That is what this is all about and it is not the case that anybody has a problem with that.

Where there is community rating and competition but no risk equalisation fund, the market will always move to create a new monopoly. Community rating has survived only because VHI Healthcare has agreed to pass on to its members higher price increases that were warranted by reference to the community as a whole. This situation arose because VHI Healthcare has had a higher age profile of members than BUPA and now VIVAS Health. These higher prices have effectively financed the huge windfall profits for BUPA and this is a national scandal. That is what is happening. It is not that failure to introduce risk equalisation has no effect — significant profits are being generated to one insurer as a result of its preferential status.

BUPA has fought a tremendous fight on this and one could not take from its commitment to destroy and prevent risk equalisation from being introduced. It has been very focused and effective. According to the Minister's public statement in January 2003, Irish authorities formally notified the EU Commission of the risk equalisation scheme. This notification was on foot of a complaint made by BUPA Ireland to the EU Commission that risk equalisation constituted an illegal State aid. The Directorate General for competition at the EU Commission notified the Irish authorities in May 2003 that it decided not to raise objections to the scheme on State aid grounds. It recognised the importance of risk equalisation. It does not see this as an interference in the market but sees it for what it is, namely, a measure to rebalance a distortion in the market that arises because of community rating, which is a protection for the common good, something which is universally subscribed to and supported across this House. The EU Commission understands the importance of risk equalisation. That is further evidence that this issue is not being dealt with fairly and properly in the interests of the common good and the individual subscriber.

The Minister has used the argument about the VHI not needing to have reserves. The EU Commission does not have a problem with that.

Ms Harney

It has not adjudicated on it yet. It is before it at present.

Ms McManus

Until there is some change we have to accept that there is a recognition at European level that health insurance is not like buying a bag of potatoes in a supermarket. Health insurance provides certain safeguards. The provision of health care is treated differently from viewing it in a crude, simplistic way, an approach that comes from the Progressive Democrats whereby everything must be seen in terms of pure competition. They view health care as another commodity. It does not matter to them what we are buying and selling here, what matters is that everybody can get into the market and sell and buy as cheaply as possible. However, health insurance has been recognised for decades by the European Union and other European countries as a central part of health care provision. I would like everybody in this country to have the protection of health insurance because if one can afford to buy health insurance, one is in a much better position to access health care. The system responds and is incentivised to look after subscribers. There are strong arguments to extending health insurance to everybody and enabling people to have the kind of care that currently only private patients are able to access when they need it. There is strong arguments for health insurance as a social measure of health care provision and that is recognised at EU level. If we simply see provision in this regard as buying and selling commodities on the market, the Minister is not getting the message. If she applies rules that do not accept that community rating is a distortion, that risk equalisation is a balancing measure——

An Ceann Comhairle

The Deputy's time is concluded.

Ms McManus

I will conclude on this point. As regards the idea that the corporate status of the VHI will determine risk equalisation, we have been waiting for years for that legislation and according to the Minister's admission we will have to wait more years before it is implemented. Does that mean we will have to wait for years for risk equalisation to be introduced or does it mean there will be a change of heart in terms of meeting the needs of people and ensuring fair play in the health insurance market?

Mr. Sargent

I pass on apologies from Deputy Gormley, our health spokesperson, who has to be in Dublin Castle to meet Commissioner Barroso. I have spoken to him and discussed some of the experience he has had on the Joint Committee on Health and Children which he has asked me to relate. The Green Party believes in community rating and accepts the advice of the regulatory body on risk equalisation, which is supported in name by Government but we have yet to see the action to give effect to that. I heard the Tánaiste relate that she regarded as a good phenomenon that more people were now reliant on private health insurance but I argue that indicates that more people are extremely nervous about depending on the public health system. It indicates the public health system does not meet the standard people expect it to deliver. There is also a growing fear that people will require the services of hospitals and the health system more than they would want and I accept that nobody wants to go to hospital. People read about and experience an increasing incidence of asthma, cancer or other conditions or diseases and they may need to make provision for hospitalisation and health care more than they would otherwise be likely to do.

The problem of a two-tier health system has not been addressed by the Government. The gap is growing between the reliance on private health insurance and the public health system. We need to examine the rising cost of the health insurance premiums. It is often mentioned that medical inflation is some type of runaway phenomenon that is a creature unto itself but that must be addressed. The Tánaiste as Minister for Health and Children has far wider responsibilities than the health insurance companies, the role of which essentially is to service the needs of people who are sick.

We need to see about other factors which may be affecting the cost of the provision of health services, not least health insurance companies. I would instance asthma, for example. Dietary related issues have been mentioned in this House, but have not been given sufficient attention. Obesity, in particular, is one matter which is getting a considerable amount of debate outside this House. Such conditions might be addressed from a multi-disciplinary perspective with a possible role for interdepartmental action. We have seen the difficulties experienced in the Department of Education and Science as regards the provision of physical education facilities, the lack of playgrounds, skate parks etc., which encroached on the responsibilities of other Departments. Basically, the problems most often referred to as obesogenic — environmental problems — will impact on the cost of health premiums because of the demand for health care services.

A far more holistic view needs to be taken as regards the cost of health insurance so that effectively there is not such a burden of cost on the individual citizen, regardless of whether they are taxpayers, when it comes to health matters. I ask the Minister, on the basis that we are accepting risk equalisation, to proceed quickly to ensure that the fund is in place and that there will be practical implementation of the legislation as the current frustrating delay is causing more and more people to find refuge in health insurance. This is because they do not feel confident that either the Government or the public health sector are able to address their needs. Those needs are perceived to be growing, particularly for people who are in need of hospitalisation. Those people are very nervous that if they do not have private health insurance they will be much the poorer in terms of their health as they wait for services which they are entitled to as citizens. They are promised such services in theory, but in practice those promises are not met.

While I welcome this debate and appreciate that the Tánaiste has taken it at short notice, I ask that we proceed very quickly to ensure that risk equalisation becomes a practical reality.

Mr. Morgan

The decision by the Tánaiste and Minister for Health and Children to reject the Health Insurance Authority's recommendation on the introduction of risk equalisation is based purely on her ideological outlook. Risk equalisation is necessary to reflect the older age profile of VHI membership. The Health Insurance Authority recommended the introduction of risk equalisation in light of the damage being done to VHI under the current regime. It concluded that consumers would be better served by the lower premiums that would flow from risk equalisation. Given that the Health Insurance Authority is in place to advise the Minister on these issues, why did she consider it necessary to hire private consultants on this issue? Was it simply because she knew they would give her the results she wanted? I believe so.

The Tánaiste's decision is based on her desire to undermine the VHI. I would be interested to know the extent of the representations made to the Tánaiste by BUPA and Vivas Health on this matter. This is a clear case of the Progressive Democrats rampage against State companies, and the VHI is the victim in this instance. The Tánaiste's actions are likely to lead to an increase in premiums as VHI faces the continued loss of younger members to BUPA. The failure to introduce risk equalisation has the potential to irreparably damage the VHI as it enters a spiral of rising premiums and claims. In the absence of risk equalisation, certain insurers can concentrate on targeting lower risk individuals.

It has been pointed out that the Health Insurance Authority took into account the commercial status of the VHI when arriving at its recommendation that unbalanced risk equalisation should be implemented. This undermines the claims made by the Tánaiste to justify her failure to introduce risk equalisation. Her decision is scandalous and totally unjustifiable. The boom in the numbers of people taking up health insurance is indicative of the abject failure of the Government to reform the health service, ensuring equal and proper access for all. The people of this State already pay over the odds for health care. We pay for it through PRSI and the additional health levy. On top of this we pay for every visit to a GP and 50% of us pay for private insurance as well.

The Tánaiste said that she welcomes this statistic. She should because it is the Government's policy, in particular the long waiting lists, that have driven people into the arms of private insurers. The decision not to implement risk equalisation will only result in a further increase in the cost of health care. Fundamentally my party believes that health care is incompatible with the market. We believe in free health care at the point of delivery based on need, not ability to pay. We believe it is the responsibility of Government to provide health services through the general taxation system. Health care should never be a commodity to be bought and sold. It should be a right. There is no logical reason for the delay in implementing risk equalisation. The Tánaiste has admitted it is inevitable. The delay is purely ideological, facilitating private companies, particularly BUPA, giving it a commercial advantage over VHI. Proper modern facilities provided by the State are the best way to level the private health insurance field.

I acknowledge the opportunity the House has been given to address this motion, however condensed. It is welcome, nonetheless, and I hope the debate goes some way towards highlighting for the public the madness that exists as regards this entire question.

Tánaiste and Minister for Health and Children (Ms Harney)

More and more people have taken out private health insurance. The fact that the figure now stands at 52% or 53% of the population, or 1.9 million taking into account the VHI, BUPA, VIVAS Health and ESB, Garda Síochána and prison officers' schemes, is good. It is a sign of increasing disposable income. That is mainly the reason more and more people have joined.

Everybody, notwithstanding whether they have private health insurance, is fully entitled to all the facilities of the public hospital system. It is Government policy to charge insurers the full economic cost of private beds in public hospitals.

Mr. Morgan

It is not happening.

Ms Harney

It is happening. I increased it by 50% last year in the Estimates and it will be increased again this year. That will add to the cost of insurance, no doubt, but it is the right thing to do. The public hospital system should not have to subsidise private health insurance. It is disingenuous of Deputies to say we introduced legislation in the Oireachtas that said, in effect, if the market equalisation is 10%, risk equalisation must be introduced, if it is below 2% it cannot be introduced and if it is somewhere in between, it is introduced at the recommendation of the HIA, but at the discretion of the Minister. The Oireachtas gave the Minister of Health and Children that function. It did not say the HIA will decide when we introduce risk equalisation. It says the Minister cannot introduce it unless he or she gets a recommendation to do so. However, even if one receives such a recommendation, one is required by law to go through a certain process of consultation with those who will be affected, which I did.

It is not correct that the position with regard to a reserve does not matter. If another Irish company must meet a reserve requirement and put 50% of its premium income into a reserve fund, is it fair that another company, which has 80% of the market, is not subject to the same requirement? Although this matter has not yet been adjudicated on in Europe, regardless of what decision is taken on the matter in Europe, the current position is not fair and distorts the market. If a new company which entered the market recently offering innovative products must put aside 50% of its premium income to meet the requirements of the Irish Financial Services Regulatory Authority, the body which——

Mr. Morgan

The VHI must do that.

Ms Harney

That is not the case. The VHI has a derogation and is protected which is precisely what I seek to end. It will take some time to do so.

I remain a strong fan of risk equalisation, without which one cannot have community rating. It is not a question of whether we will introduce it but when we will do so. I have considered all relevant issues, the submissions made by those affected, the advice of Mercer and the advice of my officials in the Department who advised that there were strong reasons for and against introducing risk equalisation but that, on balance, it should not be introduced on this occasion. As I stated, once we trigger risk equalisation, it is difficult to turn back the clock. These are some of the reasons that, having received advice, I decided not to do so.

The worst that could happen in the health insurance market would be a return to a position of having no competitors. With regard to BUPA, even if the company were to leave the Irish market, I have no doubt it would sell its business to somebody else because 400,000 customers is a considerable business. I never bought into the view that if a particular company decided to exit the market, its customers would not be bought by somebody else given that the prospect of having 400,000 customers is an attractive proposition.

It is also true that BUPA makes substantially more money in the Irish market than in the United Kingdom because we do not yet have real competition. Health insurers generally make in the region of 7% profit, whereas I understand the figure for BUPA's operations here is in the region of 15% to 17%. Profit, therefore, was not among the issues I took into account. These were competition, a strong submission from Vivas Health and the advice I was given. As I stated, the question is not whether we will have risk equalisation but when we will have it. Risk equalisation is inevitable and must in any case be triggered if one reaches the market equalisation percentage, MEP, of 10%. I assure the House I have no plans to change the relevant legislation in this regard.

Question put and declared carried.

Tánaiste and Minister for Health and Children (Ms Harney)

I move:

That Dáil Éireann approves the following regulations in draft:

Health Insurance Act 1994 (Minimum Benefit) (Amendment) Regulations 2005,

copies of which have been laid in draft form before Dáil Éireann on 15 June 2005.

Question put and agreed to.

Tánaiste and Minister for Health and Children (Ms Harney)

I move:

That Dáil Éireann approves the following regulations in draft:

Health Insurance Act 2001 (Open Enrolment) Regulations 2005,

copies of which have been laid in draft form before Dáil Éireann on 15 June 2005.

Question put and agreed to.