Health Insurance Market: Discussion.

I apologise to delegates but there have been an unprecedented number of votes in the Dáil. We are very sorry to have inconvenienced them in this way. We will proceed as quickly as possible with the business of the meeting and will be joined by other members as we go along.

I welcome Mr. Jimmy Tolan and his colleagues from VHI Healthcare, Mr. Jim Dowdall from Hibernian Aviva Health and Mr. Dónal Clancy from Quinn Healthcare. Before we begin, I draw witnesses' attention to the fact that while members of the joint committee have absolute privilege this privilege does not apply to them. Members are reminded of the long-standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House or an official by name or in such way as to make him or her identifiable.

We will take a five-minute presentation from each of the companies. We have received their detailed presentations and members have studied them in recent days. We will hear from each of the three companies and will then take questions from the members of the committee. To streamline proceedings, we will take all questionsen bloc and come back to the delegates for their answers.

Mr. Jimmy Tolan

I thank the Chairman and the committee members for their invitation. My colleagues are Mr. Declan Moran, director of marketing and business development and Dr. Bernadette Carr, our medical director.

VHI was established in 1957 by an Act of the Oireachtas. VHI Healthcare is medically led and believes that it is in the health care business rather than the insurance business. It is also clear to VHI that it will have to devote far greater financial and medical resources in the critical areas of prevention, non-hospital based chronic condition management services and additional community-based services in the years ahead. We have made progress in this respect in the past year.

VHI Healthcare is continuing to change the way health care will be delivered to its customers to meet their growing health care needs in the years ahead. Our customer base is aging and today we have 280,000 customers over the age of 60, compared to 180,000 ten years ago. We anticipate that we will have between 360,000 and 370,000 by 2019.

We have forwarded a presentation to the members of the committee. I will start with a financial overview, followed by an analysis of our health care expenditure and where it is focused compared to our competitors. We will discuss the current regulatory environment, which is based on a levy and age-related tax relief system. As members will be aware, the goal of a community rating system is that younger members of society support the health care costs of older members of society and this objective was established by the Oireachtas in 1957. We will also compare our operating efficiency to our competitors and discuss our financial position.

In 2009 VHI will generate underwriting losses of more than €80 million in meeting the health care needs of our customers. At the end of the year we will have lost almost 120,000 customers and yet we will have more customers over the age of 60 than we had at the start of the year. In 2009 we will lose €170 million in meeting the health care needs of our older customers. This level of losses is unsustainable in a highly competitive marketplace. Our younger customers have to fund the health care costs of our older members if they remain with VHI Healthcare but they do not have to fund these costs if they move to Quinn or Hibernian.

The presentation contains a number of statistics on health care expenditure in 2008 and an analysis of the health care funding gap between VHI Healthcare and its competitors, which will widen in the years ahead. Health care costs are primarily a function of age and health status. In 2009 our average health care costs per customer will be €900, which is almost double that of our competitors. There is common ground in the sense that we spend more than our competitors.

Our two largest areas of health care expenditure are cancer and cardiac care and demand for these services will continue to increase in the years ahead due to a combination of demographic and technology factors. We spend more on Herceptin, a late-stage breast cancer treatment, than Hibernian spends on cancer care and we believe we spend more on implantable defibrillators than Hibernian spends on cardiac care. Our competitors will want the committee to believe that their lower average health care costs are due to their superior management rather than VHI Healthcare's customer health care needs and that they are tougher on hospitals and consultants. This assertion has no basis and an independent party, preferably the Health Insurance Authority, HIA, should review the actual cost, frequency and complexity of health care for each insurer. Care pathways for health insurance customers requiring care are the same irrespective of who their insurer is. A person who needs treatment for breast cancer is treated by a consultant depending on the stage to which the condition has developed.

In our opinion the current levy and age-related tax relief system is only 38%-40% effective, which means that we do not recover 60%-62% of the additional health care costs of our members. For a community-rated system to be maintained, it will need to be at least 80% effective. Countries such as Switzerland, Germany, South Africa and Holland have support schemes which are 80%-90% effective. They are dynamic, are constantly updated and encourage insurers to move towards prevention strategies.

The market consequences of a scheme which is only 38% to 40% effective are as I will outline. All health insurance companies focus on families, younger lives and proxies for younger lives such as company-paid schemes. This results in competition for these profitable customers and in lower prices for these groups. Historically it was possible to generate margins of between 40% and 50% on younger adults and these margins were used to fund the health care needs of our older customers. This potential profit margin has resulted in new products and special promotions being developed for younger customers, families and companies, which have reduced margins. This loss of margins is ending community rating and a risk-rated market is beginning to emerge. Today, as the HIA has advertised in recent weeks, there are large price gaps between broadly similar products. This reflects a market which is becoming risk rated and is unstable.

Our competitors will describe us as scaremongering when we say that older members will pay more for health insurance and this will not happen as community rating is enshrined in law. The market share in different age groups proves that our competitors act rationally and with the goal of profit. They have, on a combined basis, almost a 40% share of the under-50s market yet have less than 10% of 70-79-year olds and less than 4% of customers over the age of 80. This is how you would expect a rational competitor to behave. Markets are rational.

With regard to operating efficiencies VHI Healthcare had a cost to income ratio of 8% in 2008 compared to 14% for Quinn Insurance, the parent company of Quinn Health — for which I do not have audited accounts — and 28% for Hibernian Insurance, we believe. Those numbers are to be found in the presentation. Our competitors also believe that VHI Healthcare derives an advantage by not being regulated by the Financial Regulator. We view it as an enormous disadvantage that we are not regulated, but we have to be realistic. We have a solvency level of 22% at year end compared to a requirement of 40%. While some of this may be bridged through reinsurance, we require capital in order to be regulated. Notwithstanding the 22%, at the end of 2008 VHI Healthcare's liquid assets exceeded its insurance short-term liabilities by €347 million, and therefore we have a highly liquid balance sheet that can meet the healthcare needs of our customers and ultimately believe VHI Healthcare has greater liquidity than our competitors. Our competitors will argue that VHI's alleged dominance is the real problem and that the small number of health insurance companies in Ireland is evidence that the market is not working. If the committee carefully examines overseas markets, be they community rated or risk rated, this argument is not supported by trends.

For instance there are currently five health insurance companies in Holland accounting for 90% of the health insurance market with the two largest having more than 5 million customers each. The UK has 5 million insured with four insurers of scale and Australia has over 10 million insured with two insurers of scale.

Our competitors also argue that the levy-TRS system is inflationary, notwithstanding that the levy equals the tax relief, is financially neutral and therefore has no inflationary impact across the market. It clearly increases costs for younger customers but reduces them by the same amount for older members. They will argue that the levy age-related TRS system is a transfer from the poor to the rich, notwithstanding that our plans D and E are currently significant net contributors to the healthcare needs of older plan B members and account for 70% of our customer base. I have heard people assert that it is 25% or 30%, but plans D and E account for 70% of our customer base.

As the levy system is only 38% effective we are actively engaged with the Government to try to persuade it that a significantly more robust mechanism is required if we wish to sustain community rating. I was very disappointed that we failed to make progress in the budget, and VHI and its customers hope that there will be significant progress over the next few weeks and months. If no progress is made then the social goal of community rating will not be met and market forces will overwhelm it. This will undoubtedly result in lower prices for younger members of society and in turn must lead to higher prices for older members. That is how markets operate. They are rational and unforgiving. VHI does not want to be undone after 53 years but markets and competition will ensure it happens.

I thank Mr. Tobin. We have given him about nine minutes, so to be fair to everybody we shall now move on to Mr. Dowdall from Hibernian Aviva, who will have approximately the same time. If he finishes within five minutes, that is fine, but he has up to nine.

Mr. Jim Dowdall

I thank the Chairman and the committee for providing us with the opportunity to present the critical issues facing the health insurance market.

I should like to introduce my two colleagues, Ms Siobhán Fay, our finance director and Ms Therese Kelly-Oroz, our legal and regulatory director. Before turning to our submission I should like to address one of the points made by Mr. Tolan. He referred to unsustainable losses incurred by VHI. However, in the year ending February 2008, without any risk transfer scheme or levy payment in place, or any significant difference in the age profile of its customers, VHI made a profit of €112 million. Since then, for the second year in a row, VHI has deferred or delayed its annual price increase, which is necessitated due to medical cost inflation, despite incurring these unsustainable losses. It is clear that VHI is funding the cost of the deferral of medical inflation increases and pricing decisions from its solvency reserves, which have deteriorated further. This is despite the fact that it is statutorily obliged to achieve solvency and the EU is now taking an action against the State and Irish taxpayers as a result of that failure.

We have a responsibility on behalf of 2.3 million customers with health insurance and all members of society depend on an overburdened health system to resolve the real issues which exist in the marketplace. Four years on from a previous committee meeting on health insurance, the same market issues remain. The VHI's dominance continues and it remains unregulated despite the effect on customers. The only significant change since then has been the direct increase in the cost of health insurance because of the levy, which has now resulted in an affordability crisis.

Protectionist policies have never been proven to work. It should be the objective of this committee and everybody involved to stop protecting thestatus quo and urgently drive change and reform in the market. The issues facing the market are immense and are critically important, in particular, for individuals and families who now have lower disposable incomes.

I should like to restate that Hibernian Aviva Health is totally committed to community rating. This is the system we subscribe to and want to protect. However, solidarity is not just about age. Socio-economic solidarity must be considered in conjunction with generational solidarity. Health insurance must not be affordable or accessible for just the wealthy.

To ensure solidarity and protect community rating in Ireland, we must focus on affordability. Effective current policy, whether intentional or not, has forced prices up and it is the single biggest threat to the operation of community rating. Our commitment at Hibernian Aviva Health is to provide the best health care cover for all our customers, irrespective of age. This is demonstrated by the fact that we provide all our customers with access to more hospitals and treatment centres than anybody else and we continue to lead the market on innovation in cancer and cardiac treatments. We are committed to providing the best benefits to our customers that are relevant to their life stages, regardless of whether they are old or young.

There are four factors which, unless addressed, will accelerate significantly the number of customers leaving the health care market, and represent the biggest threat to sustaining affordable health insurance and community rating. The first is that the largest player retains a dominant market share. The continued protection of this dominant market player is restricting existing and new competition and inhibits real price negotiation and innovation with medical providers. Competition, as we know, drives better value, ensures a continued focus on efficiencies and encourages product innovation, which all deliver real choice and value for consumers.

Second, we are all aware that the average age of the VHI customer is older due to its previous monopoly status. However, competition in the market is working across all age bands — as evidenced by the fact that the over-60s are Hibernian Aviva's most growing age band. The proportion of over-60s has increased by 50% this year alone. If there was fair and real competition in the market, all insurers would see their age profile trend towards the norm.

My third point is that the largest player in the market remains unregulated — and there has been a sustained and repeated failure by the VHI to comply with the requirement to become regulated. In the absence of this it is not required to comply with consumer protection regulation or solvency requirements and does not provide the normal protection to customers as defined by the Financial Regulator.

My fourth point, before I finish, is that the levy has succeeded in artificially forcing up the cost of premiums, putting health insurance outside the reach of many people. The levy has increased entry-level health insurance premiums by up to 31% and most of the levy collected is paid directly to the VHI which is not accountable for how it spends it. Health insurance premiums would reduce immediately if this levy was removed.

The impact of all these points is that not only are we depriving people of their right to access private health care, if they so desire, but we are increasing the stresses on the public health system, which we should be trying to alleviate. To conclude, we need to stop having the same debate year after year. The ongoing debate has not resulted in any reforms or customer value. In the interests of everybody involved, and 2.3 million health insurance customers, we need to respond and fix the real underlying problems. The solution can involve restructuring the market, a redistribution of members across all competitors, possibly splitting up the largest player and encouraging new entrants into the market. In the event, this would be a market regulated fairly for all insurers and with a focus on customers at its core. Critically, in the short term, we need to protect all customers and ensure the sustainability of community rating now by removing the health insurance levy to allow premiums to reduce to normal levels, while ensuring that a critical mass of customers retain their cover.

Some 2.3 million customers pay more for their health insurance than they need to. Thestatus quo is no longer acceptable. It is our collective responsibility to ensure we reform the market with immediate effect and ensure the delivery of real consumer value. I thank the Chairman and committee members for their time.

Mr. Donal Clancy

I thank the Chairman and the committee members for their invitation. I would like to introduce my colleague, Mr. Colin Morgan, who is the chief executive officer of Quinn Healthcare. BUPA Ireland was established in 1996 and was acquired by the Quinn group in 2007. It was a fantastic achievement. I was part of BUPA Ireland before it was taken over by the Quinn group, and we currently employ 326 people in Cork. We have 510,000 members at the moment. We absolutely support community rating and lifetime cover. We have a serious reservation about the current market, especially the dominant position of VHI, and we believe that the new levy introduced this year is anti-competitive.

The market is currently contracting and there are a few trends to this. Not alone are there people who are leaving the market, but there are also people in the market who are downgrading. Essentially, the revenue per member is reducing as opposed to increasing. In addition, the cost of public hospital beds has increased by 292% in eight years. We believe that competition between the public system and the private system is getting greater.

A suggestion has been made to make some minor changes in the levy. The levy is currently €160 per adult and €53 per child, and a graduated age related tax relief occurs from €50 and up. Other than failing to address the VHI monopoly, this levy is also a stealth tax that supports the inefficiency of the VHI. It is completely unfair and unaffordable to our customers. It undermines intergenerational solidarity, is anti-competitive and reinforces the VHI's dominant position.

The inefficiencies have been demonstrated against Quinn Healthcare, as opposed to Quinn Insurance. The administration costs of VHI for 2008 was €66 per member, while our costs are 27% less than that. The VHI currently attracts 50% more revenue than we do, especially in its product mix. The claims for the levy use the market claims cost, and this is effectively driven by the VHI. The latest data available to us for that is 2007, where the price is between 30% and 94% higher than our own price. Despite VHI's stated financial position for the past two years, there has been an unchanged price within each 12 month period. This is not sustainable at a commercial level. VHI has a monopoly in the negotiating position between the Government and providers and it seems to use its economies of scale.

It is unfair and unaffordable that a person who has a product for €330 is in the same position as a person who has a product for over €2,000. This is a serious issue for those who cannot afford or can ill afford private health insurance as it currently stands. One could look at this and reasonably say that those who are poor are subsidising those who are rich. We have done some analysis on the lapses and the reasons behind them, and I note the VHI has provided its lapse figure. Our lapse is also significantly higher this year than in previous years, in the region of 70,000. Of those, unaffordability is roughly 40% and unemployment is around 29%. This is disappointing and is very unfair on our customers. In turn, it puts pressure on the public system. It is a vicious circle. The more the price increases, the less affordable it becomes to people. Those who leave the market do so because they are healthy or because they cannot afford it. We must in turn increase the price, and it becomes a vicious circle. It is not equitable to have an absolute fixed amount as a levy. We will propose a solution to this later.

We believe that the levy reinforces the dominant position of the VHI. It drives inefficiencies in the claims cost. If we look at our cost of managing a 70 year old versus the VHI cost for doing the same, our cost is significantly lower. This is driven by some of the market in the way that it operates, but a significant proportion of data is driven by the inefficiencies of the VHI itself. Mr. Tolan referred to the product mix. There is a significant advantage in the product mix of the VHI. We consider 35% of its members to be on what we would deem to be luxury plans. The operating non-medical cost for VHI is €66, whereas our cost is 27% less. The continued postponement of putting the VHI in a regulated market gives it a competitive advantage.

Notwithstanding the fact that the elephant in the room has not been addressed, I believe that a proposed solution should be along the lines of a percentage of revenue rather than an absolute figure. Where revenue is recognised, a standard claims cost is used and there is a standard premium per product. The shortfall of the cost by age band would then be spread out, along with an overhead cost. We believe that these points are clear. We do not understand why a levy would put the market in such jeopardy. An interim solution could put the market at risk, because we have got to make a return. The interim solution leaves the market in such a way that it is difficult to understand where things go from here.

I thank each of the three presenters for putting their case forward so closely. We will take all the questions together, and we will then go back to the witnesses for answers.

I thank all the representatives for attending. This is a matter of major importance to the public interest. Health insurance is becoming more unaffordable for people and we are driving the very people out of the market who we want to keep in, namely, the young and the healthy.

I would like to address a number of questions to Mr. Tolan of the VHI. What is VHI's total number of customers? How many customers in absolute terms does it have who are over 80, rather than in percentage terms? What is the absolute spend on those who are over 80? What is the absolute spend on those who are over 65? How many people over 65 are in the VHI? Mr. Tolan mentioned that 7% of VHI customers are in plans D and E. Can he confirm whether that is 7% of total customer base or 7% of all customers over 65?

Why have the operating costs of the VHI gone up by €8 million when it has lost 120,000 customers? What has been done to push down medical costs? What was the VHI's reserve policy and what was the difference between 2007, 2008 and 2009? Can VHI confirm that last year, on failing to receive any equalisation payments, it is reported through an FOI question to have threatened to segment the health insurance market, and that it offered two alternatives to the Government, namely, that the levy would be put in place or it would begin to segment the market and charge older members for more expensive plans? Can VHI explain whether there has been any cross-subsidisation of its other operations such as dental insurance, travel insurance, Swiftcare clinics or occupational and employee health programmes? Can it explain whether it has placed more money into pensions? As three examples, can VHI explain what are the costs of a hip replacement, a stent insertion and a bypass now and what they were three years ago?

I find it difficult to understand how VHI has lost so much money. It made €112 million in profit for 2008 but this became a €65 million loss for a ten-month period ending 2008. Perhaps that is wrapped up in the other questions I have asked because it just does not stack up in the way the figures are presented.

I do not understand how it can be asserted that there has not been an increase in VHI fees when I understand there was a 23% increase last January. I ask Mr. Dowdall what Hibernian Aviva has done to try to bring down the cost of care. For the benefit of members, we know medical inflation is generally taken at 9% but the reality is that, in the past year, there has been deflation of 6% in the economy and medicine does not act in isolation. I ask the same question of Mr. Clancy. He provided a note to the effect that postponement of the VHI's regulation continues to provide distortion of the market. Will he elaborate on this?

I welcome all the groups and thank them for their presentations. Do they believe there is a future in the health insurance market without reform? Ireland has such a strange health system whereby, by and large, health insurers are not in the primary care area. I ask all the groups what percentage of their product deals with primary care, in particular, GPs' fees. Do they intend to go into this area in the future? My more general concern is to ask, given the current perverse incentives within the health system, whether the witnesses believe the health insurance market can continue in the current climate. Since 2001, my party has been advocating universal health insurance, as has Fine Gael more recently. The Minister indicated she is expecting a report on the financing of health care in either spring or summer of 2010. It seems the companies are operating in a very difficult market and, clearly, there is significant competition. However, can the health care market in Ireland work at all without substantial reform?

The Oireachtas Library and Research Service carried out research for us on this issue. One of the conclusions it came to with regard to the different changes that have happened in the Irish health care market was that the move to change consultant working practices will remove a major reason to have private health insurance, namely, quick access to consultants. The research suggested the market for private health insurance may become more competitive in the future, which is probably true. The point I am making is that the general public, particularly those whose income is dropping, are asking themselves whether it makes sense to have private health insurance. They ask what they are getting from it, particularly when one is entitled to a bed in a public hospital anyway and when, by and large, most of the products do not cover primary care, which is the main cost for people who do not have a medical card. Perhaps that is not the case if one is very sick but for the young people the companies are trying to attract into the market, there is not a great incentive for them to have health insurance. I would be interested to hear the witnesses' views in this regard.

Deputy Reilly asked VHI about three particular procedures. I ask all the companies in regard to those procedures what kind of price they are getting from the hospitals. I am interested to know whether there is a difference in what each of the three companies pays to hospitals to deliver a particular service to their clients.

I want to ask VHI specifically about its reserves. Mr. Tolan referred to its liquid balance sheet but I am not sure what that means. What are its reserves, given that this is an issue around whether VHI will become regulated or not?

The levy is a very crude measure, and it is a temporary measure that was introduced because of decisions on what was in place before. We are expecting legislation in this regard and my view is that this legislation should come as soon as possible. Have the companies been consulted about what should be in the legislation with regard to whatever will replace the levy? What do they think should be in the legislation? In particular, Mr. Clancy made suggestions about what he would like to see in the legislation and what should replace the levy. I would be interested to hear all of the views on that.

I thank the three insurance groups for attending and for their presentations. I might declare an interest in that I am in the age group that uses more of the resources of health insurance companies. I hasten to add that I am 50 years a member and in my younger days I had no difficulty whatsoever in paying the higher premium to ensure that there was community rating. Indeed, any year I did not claim was a good year.

There is an imbalance between the three insurers, and there are good reasons for this. VHI is in operation since 1955 and the other two insurers entered the market more recently so it is natural that the high age groups would be with the older insurer. We received some figures in the Dáil in recent days which show the percentages are extremely high for the older groups — up to 80% in some instances. My interest is to ensure that we maintain community rating with risk equalisation. I do not have any particular hang-up about how that is done. If there are better ways of doing it than the present way, by all means find and implement them. However, it is important that we maintain the community rating. Of course, we have to be conscious of European Union legislation and whatever we introduce by way of legislation has to be acceptable to the European Commission.

What would Hibernian and Quinn wish to see done if they had the customer base of VHI? Have the three insurers met to see if they can find a way forward? There would be some merit to meeting among themselves, having regard to the fact the people want community rating and there obviously has to be some sort of risk equalisation. Have they met to ascertain whether there is a plan they could live with — "be happy with" might not be right term? Is there some way forward whereby we can ensure that the public at all age groups have community rating with risk equalisation, and that everybody gets the same level of care?

I welcome the three groups.

The Labour Party developed a policy in 2001 in respect of universal health care and, as Deputy Jan O' Sullivan observed, Fine Gael has come around to this position as well. I have read all the documentation, both from members' research people and the material supplied by the witnesses. As legislators, members must stand back and consider the three groups before them. Incidentally, for people who are in the care business, I have not detected a great sense of love and endearment this morning, as the competition clearly is sharp and obvious. While that might be what competition is about, which is good, it is peculiar that this should be my first reaction to people in the care business.

I am a member of one of the organisations before the joint committee and having read all the documentation, it is very easy to get sucked into the assumption that the organisations are here, are essential and can offer the best deal. As legislators, members must step back and ask how essential are these organisations. If Ireland had a proper health care system, which organisation present could convince me that I needed private health care? While it does not exist at present, we are working towards a system of health care that will provide access, universal cover and the right to have the type of care one needs when one needs it. Were such a system in place, why would any of the organisations before the joint committee be wanted? Why does the community in a republic need private health cover?

Professor Tom Keane once appeared before the joint committee and gave a very good presentation to members. He stated that he did not wish to hear about private health care, because its absence in Canada meant he did not understand it. This man was brought to Ireland because his system was so good its introduction here was sought. Nevertheless, three organisations are vying for members' attention and asking them to organise legislation in order to allow the health insurers to operate in a better environment. We are paying out €321 million in tax breaks on health care. I should declare my interest by acknowledging that I am a beneficiary. However, it strikes me that the elephant in the room is whether there really would be a need for private health care were a proper health system in place.

The other point that astonishes me is why the young and very healthy might want health cover. Is this part of the illusion? Have they been convinced that they will need health insurance in some fashion or other in the future and that it would be better to begin to pay now? I need to be convinced in this regard. Mr. Dowdall asserted that the dominance of one company in the market is depriving people of the right to health care and that they are upset about this. While I do not perceive people to be upset, they would like not to be obliged to pay twice for their health care. Although they consider having access to a proper health service to be a right, they do not consider being obliged to pay for it twice to be a right. I suggest that were one to go to the market and tell people that health care was available for which one is not obliged to pay twice, they would be jumping for joy. The witnesses should try to convince me that were Ireland to have in place a proper health service, either I or the State would have need of any of their organisations.

I thank Deputy Kathleen Lynch for that great Leeside perspective.

I apologise for being unable to attend for the past hour. I am my party's spokesperson for older people in the Seanad and in 2006, I produced a policy document on a new approach to ageing and ageism. I have just launched an all-Ireland inspirational life award to raise the issue of ageism in our society and to be highly proactive in respect of the discrimination perceived by older people. My document noted that worldwide travel insurance for the over-65s cost €149, while it cost only €49 for the under-65s. While this point pertains to the VHI, the other organisations also may wish to comment. I acknowledge the up-to-date amount is now €139 but I wish to know the reason travel insurance worldwide for a person over-65 costs more. I consider it to be discriminatory that a person who is over-65 must pay the difference between €49 and €149. I tried to resolve this issue two years ago but was unsuccessful. However, I will keep at it.

Members have asked quite a range of questions. They obviously are conscious of the witnesses' perceived need for legislation, as well as the difficulties that are being caused in certain areas of the market in respect of the levy. While all members made key points, I refer to Deputy Jan O'Sullivan's observations on future developments, in which there will be a great emphasis on care in the community. Following on from Deputy O'Sullivan's points, I seek the witnesses' comments on the public policy commitment to developing the primary care strategy and the sophistication of the services that can and hopefully will be delivered at primary care level. On the allied issue of the consultants, as increasing numbers of consultants are put in place, one would anticipate much greater ease of access to them. What are the implications in this regard? As the primary care strategy is rolled out, many consultants will provide their services to the community at primary care level rather than in a hospital setting.

We will continue to take an orderly approach to this meeting and the witnesses should indicate who wishes to start the ball rolling in respect of responding to the questions. Does Mr. Dowdall wish to begin?

Mr. Jim Dowdall

A number of consistent points were made by all members. In respect of community rating, there is a general consensus that it is critical for it be protected. I fully understand Deputy O'Hanlon's point on that subject. My view is that protecting community rating will not be achieved by implementing the current levy system or the risk equalisation system that was put forward previously. There is a need to have available in the market a risk transfer system when it is required. However, that time is not now and the effect of what is being done at present is simply to force up prices artificially. Community rating is something we all have stated that we hold dear. There are different opinions on how we should protect it and my view is that we should do so by ensuring that health insurance remains highly affordable in order that a critical mass of people can afford it.

Deputy Jan O'Sullivan's point about moving forward, quality of care and so on is very interesting. There is an obligation on all health insurers to continue to find ways to innovate and address consumer requirements and to find ways to bring new treatments to the market and to deliver different types of new service. The problem we have today is that innovation is being stunted by the fact that any competitors to the dominant player are being heavily levied and their ability to invest in such innovation and to bring those new treatments to the market is restricted. Were this obstacle to be removed and a competitive market in place, the health insurers would be competing and the only way in which they could be successful would be by addressing the real requirements that exist.

Mr. Jimmy Tolan

As I will endeavour to address the questions in order, I will start with those put by Deputy Reilly. A few of his questions pertained to our customer base and I will start with plans D and E. The aforementioned plans comprise 7% of our entire customer base.

Can Mr. Tolan inform members what is the percentage in respect of the over-65s?

Mr. Jimmy Tolan

We tend to look at the over-60s rather than the over-65s and plans D and E account for approximately 23% of the over-60s.

As for health care expenditure, 52% of our medical expenditure is devoted to the treatment of our older customers. Conditions giving rise to cardiac care or cancer care are diseases of age. The average age of the customers we treat in cardiac care is approximately 61. Although the average age of those in receipt of cancer care differs according to the different types of cancer, the reality is——

I missed the percentage in respect of health care expenditure.

Mr. Jimmy Tolan

It amounts to 52% of our health care expenditure.

When Mr. Tolan says "older", does he mean the over-60s?

Mr. Jimmy Tolan

Yes. Let us look at the critical health care areas, which tend to be cancer, cardiac and orthopaedic care. They are all diseases of age. For example, the average age of patients undergoing cardiac care is over 60 years, but new technology is emerging all the time. Last year, we paid for 50 percutaneous aortic valve replacements to extend the lives of people who could not have been operated on previously. This is a high-tech procedure that costs approximately €50,000. The average age of the patient is probably 76 or 77 years. Some €2.5 million was spent on this procedure last year. The average age of people receiving implantable defibrillators, a constantly moving technology, is in the 70s. We paid for 254 of them last year. Although Deputy Kathleen Lynch was not feeling anything, we are medical-centric. It is our only reason for existing. We are a not-for-profit organisation founded by an Act of the Oireachtas in 1957.

In terms of primary care and care in the community, matters raised by Deputy Jan O'Sullivan, 450,000 of our customers have insurance products with primary care components compared with 200,000 three years ago. Regarding care in the community, prevention and chronic disease management services, there is a collective understanding within the health care system that we will need to devote significantly greater resources into that spectrum of spending instead of waiting for episodic hospital incidents.

Members should consider what we have done and intend to do in this regard. In terms of prevention, we have screened 4,000 of our customers for type 2 diabetes and cardiovascular risk this year. We have set ourselves a goal of 30,000 customers per year by 2011.

In terms of care in the community, we have done a number of things in the past 12 or 18 months. First, we gave the seed capital to facilitate the Dean Clinics to provide psychiatric care in a community setting. They have opened five clinics nationwide, which we enabled through a loan to them. Second, we recently announced a hospital-in-the-home service, a joint venture. Our goal in this regard is to have 1,000 customers treated in a home setting next year, a figure that will rise to 3,000. The service handles four or five conditions that are eminently treatable in a home setting. Third, it is clear that we must do more concerning chronic disease management programmes. Most health care now relates to chronic conditions. Historically, this was not the case. A cohort within society has chronic conditions. Technology emerging in the US can monitor whether someone's weight increase indicates chronic heart failure, for example. We have set ourselves a goal of launching relevant products in the next year and we are in discussions with people in this respect. We want to do far——

What about care programmes for diabetes, high blood pressure and haemochromatosis?

Mr. Jimmy Tolan

I know, but there is also a problem with chronic heart failure. Interesting work in this regard and on treatment in a community setting is under way at St. Vincent's Hospital. We are in discussions with one of its consultants.

Deputy Kathleen Lynch asked whether we were necessary in a universal system. I would say "Yes" and use Holland as the closest analogy. When people refer to universal health insurance systems, what they mean may differ. Holland has a universal health insurance system operated by the health insurance companies. There is a separation between what is commonly known as the payer and provider. The Dutch believe that this separation drives efficiencies.

However, I would not mind seeing some clarity. When people discuss universal health insurance, to what level of cover are they referring? Will it allow people access to private hospitals or public hospitals? Sometimes when I read the literature, I struggle with this question. The separation works because both organisations end up doing what they do best. The health care provider should be focused on health care. The money follows the patient in a clear and unambiguous way, which we view as a positive.

Universal health insurance will be a matter for the Oireachtas, not health insurance companies. Under this system, the payer and provider system would provide efficiencies. The public system's ratio of day case and side room treatment is approximately 1:1, but we are running at a ratio of 5:1 in terms of private care delivery. Even on a community basis, much medicine is capable of being delivered in a day case or side room setting.

Senator Mary White referred to travel insurance, which is living proof of a risk-rated market. For this reason, there is a price differential. That is what is coming to us in health insurance. It is the same as any financial services product. If one buys life assurance, the price one pays will depend on one's age and health status. If one buys house insurance, one's location will dictate the price. The same is true with car insurance. Our society has a fundamental decision to make concerning what type of health care system we want and whether it should have intergenerational solidarity. In VHI's opinion, this solidarity is going.

I thank Mr. Tolan, but people are living for longer and are healthier. The current system is outdated. He and I should discuss this matter further because I do not accept his comments. We discriminate against people hiring cars whereas the US is much more liberal. I do not want to delay the meeting, but it is unfair and wrong to those aged over 65 years that they must pay €149 as opposed to €49.

In our health care system, there is no free breast cancer screening for those aged 64 years or over. However, a woman is seven times more likely to get breast cancer after the age of 65 years. Many discriminatory practices were engaged in because people who had reached 60 or 65 years of age were written off as being too old. I would like to take this matter up with Mr. Tolan again.

I am sure all contributors will address the issue. Deputy Reilly is looking for clarity on some questions that have not been addressed.

I did not get answers to my questions. How many of VHI's customers are over 60 and 80 years of age? Why has its operating costs increased by €8 million when it has 120,000 fewer policy holders?

Mr. Tolan has that list of questions now.

He did not answer my question to all three delegates on what is being done to push down medical costs. What about the reserve policy for 2007, 2008 and 2009? What of cross-subsidisation concerning dental and travel insurance and SwiftCare? The underlining loss is €32 million.

Let us not rehearse all of the questions. We will get the answers.

And the issue of pensions.

Will Mr. Tolan deal with the specific questions briefly?

Mr. Jimmy Tolan

We have 38,000 customers over the age of 80 years.

What about the over-60s?

Mr. Jimmy Tolan

We have 280,000 customers over the age of 60 years.

Does that include those aged over 80?

Mr. Jimmy Tolan

Yes.

Mr. Tolan stated that the spend on those two groups amounted to 53% of expenditure.

Mr. Jimmy Tolan

There are no cross-subsidies. Diversified businesses are cross-subsidising health insurance. They are profitable so cross-subsidisation works in the opposite direction. Our reserves are a function of what is happening in the marketplace. Competition is unforgiving and intense. That is the nature of a highly competitive market. Health insurance has been the most advertised product on television. It is ubiquitous on television at this stage. Our reserves are a function of competition. At the end of the year we believe we will have reserves of €286 million.

What were they last year?

Mr. Jimmy Tolan

They were €40 million higher.

What is the figure?

Mr. Jimmy Tolan

Our reserves will be €286 million at the end of the year. Our operating costs refer to 120,000 customers. That is not the only activity. Our operating costs have reduced by 8%.

Mr. Colin Morgan

Deputy Reilly asked what we have done to reduce health care costs. Since Quinn Insurance entered the market we have taken a proactive approach to reducing health care costs. We have been followed by competitors in some of the measures we took. We call each of our members when we receive a claim to discuss what they have been provided with and to ensure we are paying out for what has been provided. At the end of the day, it is their money. In the past, many claims were paid out where the level of cover billed for was not paid. That is an important innovation in the market.

We have taken an aggressive approach in negotiating with providers of private health care. We cannot change matters on the public side because it is set by the Government. We have made much progress in ensuring we are getting value for money for our members. With the main market player having 75% pricing power, we must follow it to some extent. If the market shares were more even, there would be more pricing power spread among various insurers in the market. We have done a lot in the last two and a half years in addressing medical costs. We can see this in our medical costs by age, which are significantly lower than those of the VHI. A significant part of this is down to our approach.

Universal health insurance and the form of health system we have in the country are matters for the Oireachtas to decide. Currently we have public and private health insurance and when there is private health provision it makes sense to have private health insurance to pay for that. If there was universal health insurance it would be positive to have a competitive health insurance market to back that up. With regard to the approach to negotiating costs with providers and introducing innovation to the market, the more competitive and active the health insurance market, the better the value that will be delivered under the universal health insurance market.

Deputy O'Hanlon asked what we would do with the VHI customer base if we happened to get some of it. We feel we could run it more efficiently on two counts. One relates to reducing claims costs and ensuring we get value for money; the second concerns our overhead costs per member, which is lower than that of the VHI. If we were to have the scale the VHI has, we would reduce this to a more significant degree. We could run that book more efficiently and effectively.

Deputy Lynch asked why young people might want health cover at the moment. We are in a community rated market and without young people in the market, community rating would fall apart. Proposals are being made to have age of entry loadings, whereby the later one joins the market the more one must pay. We support this. Intergenerational solidarity is important so young people joining is positive for the market and should happen.

Senator White asked about ageism. We operate in many different insurance markets and while I understand her frustration that travel insurance costs more for older people, the opposite happens in motor insurance where young people are charged considerably more. As Mr. Tolan outlined, it is a risk-rated market.

Young people have more accidents than older people. That is not a good example.

Mr. Colin Morgan

Older people make more travel insurance claims.

It is a perfectly good example.

Mr. Colin Morgan

As Mr. Clancy outlined, we fully support community rating. We accept there must be a transfer of claims costs to equalise the position for insurers with older books. The current regime is far too crude and in the longer term the risk transfer system must incorporate premiums because the VHI is getting more premium per member. The claims costs of the VHI are higher based on standard claims cost and as a percentage of premium to take account of overhead costs. This methodology should work.

There has been limited consultation with the Department of Health and Children. We have tried to consult the Department more than the Department sought to consult us. We have made detailed proposals in recent years on how this could work better. We have been proactive in that regard.

I asked Mr. Clancy to elaborate on the point that postponement of the VHI's regulation continues to provide distortion of the market.

We are being too flippant about 65 year olds. No one else has focused on this. It is a disturbing issue for older people. At retirement meetings, older people are very disturbed that they must pay €149 for worldwide travel insurance while it is €49 for young people. I am not satisfied. I feel a responsibility to fight this case for older people because it is discriminatory. People are much healthier and the age of 65 is too young. In the United States one can take an early pension at 62 years of age and a full pension at 65. One can stay on in work but in Ireland one must give up at 65. We discriminate against older people, in the North and South of this country. The North will be more proactive on the matter of older people working.

Senator White has made her point.

Mr. Morgan is being dismissive by bringing young people into it. It is not as simple as that.

Those over 65 have a great champion in Senator White. Nevertheless, we are under time pressure. I ask each of the three companies to respond to outstanding questions and make some brief concluding remarks. If other colleagues from the companies want to join in, they may do so briefly.

Mr. Jim Dowdall

In response to the question from Deputy O'Sullivan, there has not been real and meaningful engagement about the way forward. We have requested real debate to find a solution and this needs to happen as a matter of urgency. The current system is not sustainable and it has a significant impact on everyone. I welcome real debate as a matter of urgency to fix this issue.

Regarding Deputy Reilly's question on how we are keeping costs down, we continue to look for opportunities to introduce new features and provide other options to the system that exists today. We cover alternative care centres which provide competition with hospitals. Typically there are opportunities to provide care at a lower cost. We will provide benefits such as cervical cancer vaccination, which were not covered but for which there is a requirement in the market. We will continue to focus on bringing down our operating costs so that we can focus on the benefits to be delivered to customers. When there was competition in the market before the health insurance levy was introduced, medical inflation and the cost of premium increases was approximately 8% per year for several years before this. Since the introduction of the health insurance levy there has been an increase of 23% in the cost of health insurance. That is not necessary and it can be reversed.

On Deputy Reilly's question, I made the point that VHI had foregone an increase in its fees. VHI was expected to implement a medical inflation price increase in January but that has been deferred. This will probably result in losses to VHI of €20 million to €30 million. This means the reserves will run down further, which is a breach of a statutory obligation to reach 40%. Let us not lose the point — 40% is what the Financial Regulator mandated that insurance companies must achieve for solvency and it is not negotiable. We should all be operating to that standard.

When VHI implemented a price increase in January of last year, it was for the core plans that older people typically buy. The price increase was not implemented on company plans, which are typically for younger people, until the second quarter. There is segmentation in the market and there is an issue with regard to whether prices are applied.

Senator Mary White made a point on travel insurance, which is a linked issue as we have a dominant unregulated entity. If, to use Senator White's example, an older person cancels his or her VHI health insurance policy and switches to an alternative insurer his or her travel insurance will be cancelled. This is an issue of regulation and consumer protection that needs to be addressed.

Mr. Colin Morgan

I will sum up for Quinn Healthcare. To address Deputy Reilly's specific point on VHI deregulation, it is reasonably simple in our view: if we have a competitive insurance market everybody should be subject to the same rules. Private health insurers have a huge amount to add to the provision of health care, whether in a universal system or the system at present. Ultimately, competition and innovation will be very good for purchasers of health services; that is, all of us. To do this we need fair competition and long-term appreciation of what the structure of the market will be so that capital can be attracted and committed to the market. While there are significant difficulties and significant reforms are required we remain very committed to the market and feel we can add much through competition. Committee members have seen at this meeting that there is very intense competition in the market and that is good. It is important it is maintained in any future legislation.

Mr. Dónal Clancy

From the consumer's point of view, the interim solution is making it unaffordable and that is unfair. The consumer will be affected by what is happening.

Mr. Jimmy Tolan

The competition keeps saying that to have a functioning community rating system one needs a mechanism that transfers depending on risk. To me, this is the equivalent of hearing two people state they believe in a progressive taxation system and then organise their affairs to pay no tax. A fully-functioning community rated system needs sophisticated risk equalisation. No market place has community rating without sophisticated risk equalisation. I was struck by a comment made by Mr. Morgan who stated he could make the buck work better. To describe people as a buck is an interesting use of terminology and I will leave the committee with that thought.

I suspect we will return to this debate. I thank the witnesses for their presentations.

Sitting suspended at 1.05 p.m. and resumed at 1.10 p.m.

I welcome Mr. Liam Sloyan, Mr. Jim Joyce and Mr. Micheál O'Briain from the Health Insurance Authority. Before we begin, I draw witnesses' attention to the fact that while members of the joint committee have absolute privilege this privilege does not apply to them. Members are reminded of the long-standing parliamentary practice to the effect that Members should not comment on, criticise or make charges against a person outside the House or an official by name or in such way as to make him or her identifiable.

The delegation witnessed the very interesting discussion and exchange with the three providers. I ask Mr. Joyce to make a very brief submission after which we will have a round of questions. I believe some members also want to make all-embracing concluding comments. We will try to use the limited time available to us as best we can.

Mr. Jim Joyce

I thank the Chairman for inviting us to appear before the committee. I have been chairman of the authority since 2006. Mr. Sloyan is the chief executive and Mr. O'Briain is the head of regulatory affairs. Committee members have received our submission which, as requested, focuses on the authority's views on the health insurance market and its future. My presentation will be very short as requested.

The functions of the authority fall broadly into three categories. We have consumer-related functions on informing and assisting consumers; specific statutory functions under the Acts, such as with regard to the tax credit and levy regime; and a general function to monitor the health insurance market and advise the Minister for Health and Children on health insurance issues generally.

As is well known and has been mentioned, for many years the basis of public policy on private health insurance in Ireland, as in many other countries, is community rating. This means that a health insurance product, subject to some conditions, will be available at the same price without regard to age, gender or health status. This involves a major distortion of the normal insurance market where the premium paid varies according to risk. For it to be viable, it must be supported in a number of ways. Two of the main supports are open enrolment and lifetime cover. Another key support is risk sharing, which simply recognises the fact that in a community rated market, some form of risk sharing is required to deal with the various risk profiles of insurers because they are precluded from dealing with various risk profiles by the normal insurance method of charging differential premiums. This is not particular to Ireland and is a universal practice internationally in community-rated markets.

To speak to the present state of the market, it is not yet in a sufficiently stable or sustainable position, largely because of the delay in implementing risk sharing. As the committee may know, the Minister decided on the authority's recommendation to implement a risk equalisation scheme from January 2006, although the particular form of the scheme was challenged and set aside by the Supreme Court late in 2008.

It was not until this year that there has been some risk sharing with the introduction of the tax credit levy arrangement. This arrangement starts with the determination of a graduated tax credit, which is currently designed to compensate for 50% of age-related claim differences, and therefore to reduce the cost of health insurance for people over 50. When the tax credit has been determined, a rate of levy per health insurance contract is then determined such that the system as a whole is revenue neutral. It falls that for the market as a whole, there is no reason the tax credit levy system should raise premiums on average.

The current arrangements represent an important advance in our view but because there is only part compensation for risk differences between insurers, it remains very profitable for an individual insurer to recruit younger, healthier consumers and avoid older and less healthy ones. At the same time, the claims rate rises rapidly with age. We have explained in some detail in our submission how this position is virtually certain to result in segmentation of the market such that older consumers are still likely to find themselves paying more for health insurance than they should and such that less than an optimum balance between price, marketing and efficiency is achieved. In saying that I am not criticising insurers. It would be unreasonable to expect competitive commercial organisations to do other than respond to the incentives and disincentives that face them in the market.

The other feature of the current market to which we have drawn attention in our submission is that for the first time since the authority was established in 2001, total market size has declined this year. The reduction is small in relative terms but if it were to continue and perhaps accelerate, the effect on the market could be more significant. In the long term, as others have mentioned, viability under community rating depends on a regular influx of new, younger consumers. That is what intergenerational solidarity means.

The future market therefore depends on how risk equalisation develops in the medium term and on how the more difficult economic conditions we are experiencing at present impact on market size and profile. A tax credit levy system is an interim solution and the stated intention is that it should be replaced by a comprehensive risk equalisation scheme as soon as practicable. A comprehensive scheme would aim to equalise risk differences better between insurers and cater for all-important risk factors in addition to age and gender.

We also refer in our submission to another market distortion which was referred to earlier, the fact that VHI Healthcare is not designated by the Financial Regulator as an authorised insurer. This is of much lesser impact than the absence of a comprehensive risk equalisation scheme, but it is still a market distortion that must be addressed.

I hope our submission and these remarks will serve to explain to the committee's satisfaction why the authority concludes that the best outcome in the medium term would be the introduction of a comprehensive risk equalisation scheme coupled with the authorisation of VHI as a regulated insurer required to meet all the normal stipulations of the Financial Regulator. This outcome would support community rating within a proper competitive framework and align market incentives with the requirements of sustainability and stability. In our view it would be in the best interests of health insurance consumers.

Will we have an opportunity to ask more questions afterwards or should I ask all questions now? I know the Chairman would like me to finish now.

The Deputy can finish now.

There are two parts to this. We have had a very good discussion with representatives of the insurers and there is also the issue of the Health Insurance Authority and what it does. What has been submitted by the authority is perfectly reasonable and legitimate but there are a number of questions. How many employees are in the HIA? Has it considered the Dutch model of risk equalisation, as it seems to be working there? Why should it take so long for us to implement a new system here? It is not as if we must reinvent the wheel. The Netherlands is not the only place where risk equalisation exists. Could we not consider other models and expedite this to the benefit of the consumer, who is getting hurt in this process?

Why is the figure for the reserve 40% here when in the rest of the Europe it is mostly 25%? VHI is not meeting this requirement while the other insurers must do so, and even leaving aside the levy, that is grossly unfair, unjust and distorts the market. We have seen what the levy has done as it has shrunk the market and is driving the very people we want to retain from the market.

To make a general point, community rating is sacrosanct and there is no party in the Houses which is against it; we want to see it maintained. Currently there appears to be an unfair competitive advantage from it, according to the submissions of insurers other than the VHI. That is having a negative effect on the market, causing shrinkage, and has pushed up the cost of insurance. The Minister has said she does not set prices but that is Jesuitical in so far as she sets the levy, which has an impact on prices in a major way.

This committee should think about asking the Minister to bring the three insurers together with the HIA and thrash this out to expedite a new system. It is hurting our market and reducing the number of people in the insurance market. Therefore, it is having a very negative impact on our public health service as well.

I welcome the representatives of the authority. I am not sure the following is covered in the brief but it must form part of the authority's research. Perhaps I am wrong. At some stage in future, the customer base with regard to age will become level; that is, the customers of the other two insurers in the market will be over 60 as well. There is no polite way of saying that the more elderly customers in the VHI will die at some stage too. When will that happen? Has the authority done any research on the matter? That will put an entirely new complexion on the community rating issue. Will that happen in ten, 20 or 30 years?

I am interested in that we have an authority dealing entirely with health insurance. I do not take away from the work it does, which is necessary. While there are three and possibly more insurers in the market, an authority will be required. That adds to the overall cost for the State. How is the authority funded?

Everybody has spoken about risk equalisation but the levy has been described as a very crude method of addressing the problems and challenges which exist. Will the witnesses comment on that? It is interesting that there is unanimity, including from the VHI, that the VHI should be brought under the remit of the Financial Regulator. Could that be done by way of regulation or is legislation needed to bring about that change?

Mr. Jim Joyce

I will deal with those questions. Deputy Reilly asked about the 40% reserve but I would make it clear that the Health Insurance Authority does not regulate solvency. The 40% standard is established by the Financial Regulator and it is responsible for the issue.

What is the authority's view?

Mr. Jim Joyce

I must declare an interest as I was employed by the Financial Regulator for some years before working here. As I understand it, the figure of 40% applies to general insurance companies in Ireland. There is a variation in practice around Europe. One may argue that in the case of very short-term liabilities such as health insurance the reserve could be lower but that is not my area.

Deputy Reilly also asked whether the community rating principle was sacrosanct and referred to the levy impact on prices. We must be open and frank about this. Given that it is a revenue-neutral operation, as between the levy and the tax credits, there is no reason it should have any effect on overall prices in the market but it will affect the prices of individual insurers and will tend to increase prices for younger subscribers because it subsidises the prices for older subscribers. That is what community rating actually means.

The Deputy also referred to expediting a new system of risk equalisation. The provision for risk equalisation legislation has been there for a number of years and, as I mentioned in the submission, in 2006 there was a decision to introduce it. For various reasons concerning the wording of the legislation, it did not survive a challenge in the Supreme Court but members will see there was every intention to have such a comprehensive scheme issued some years ago.

With regard to the crudity of the levy, it is true the levy only endeavours to equalise a proportion of the risk differences that relate to age. In that sense it is crude. We believe it needs to be replaced with a much more comprehensive system and my understanding is that this is planned by the Minister.

How many people are working in this area?

Mr. Jim Joyce

I will pass the detailed questions to my colleague, Mr. Sloyan.

There are other systems so why should we still——

Mr. Liam Sloyan

First, concerning employees and funding, there are nine employees in the Health Insurance Authority. We are funded by a levy of 0.14% on the industry.

What is the sum?

Mr. Liam Sloyan

It is approximately €2,500,000.

Mr. Jim Joyce

Deputy Kathleen Lynch asked about the Health Insurance Authority adding to costs. We are a quango and, as such, are not terribly popular these days. All I would say in that regard is there are functions to be performed which must be done somewhere. It is a matter for the Legislature to decide whether we should perform them or that another body would perform them better. The Health Insurance Authority has no objection to that.

I have no problem with that. Have the witnesses done any research regarding the timescale?

Mr. Liam Sloyan

One way of looking at it is that there has been more than one insurer in the market since the beginning of 1997, but the risk differences that still exist are stark and very considerable. The Deputy is right that in time this should level out but it will take a long time. When we arrive at a situation where all current insurers have an older population, without a sophisticated system in place, the natural outcome is that another insurer will look on from outside and claim it can join, have a younger age profile and a competitive advantage and the business will continue.

What about the timeline for risk equalisation?

Mr. Liam Sloyan

The current interim scheme is in place until 2012 and the intention is to work on a comprehensive risk equalisation scheme.

I thank the witnesses for dealing with the questions and the members for participating.

The joint committee adjourned at 1.25 p.m. until 3 p.m. on Tuesday, 9 February 2010.