Health Insurance (Miscellaneous Provisions) Bill 2008: Committee Stage.

I welcome the Minister for Health and Children, Deputy Mary Harney, and her officials to the meeting. It is proposed, if members are in agreement, that we meet from now until 1.45 p.m. I hope that we can conclude the business in that period. Is that agreed? Agreed.

SECTION 1.

I move amendment No. 1:

In page 3, between lines 24 and 25, to insert the following subsection:

"(3) The Insurance Acts 1909 to 2000 andPart 5 may be cited as the Insurance Acts 1909 to 2009.”.

I propose a technical drafting amendment to this section to reflect the addition of a new Part 5 to the Bill.

Amendment agreed to.

I move amendment No. 2:

In page 3, lines 25 to 36, to delete subsections (3) and (4).

I propose removing the requirement for the making of a commencement order as the provisions of the Bill are to apply in the current year.

Amendment agreed to.

Amendment No. 3, in the name of Deputy Reilly, is out of order as it conflicts with the principle of the Bill.

May I comment?

Briefly.

The justification for this was that the VHI be regulated. It had two deadlines but missed them on both occasions. In order to prevent the taxpayer from picking up a tab for large-scale failings, this Bill should not be entered into law until the VHI obtains solvency, without Government intervention, and is properly regulated. Without a proper incentive this will not happen. I know the Chairman has ruled it out of order but what we are trying to achieve here is that the VHI has been properly regulated and has met its obligations before this new Bill becomes law. That is not an unreasonable——

The Deputy has made the point. Does the Minister wish to respond?

We have passed legislation in this House. I am anxious to see the VHI regulated as quickly as possible but the reality is that no regulator will regulate the VHI unless we have the intergenerational support provided for through the tax mechanism proposed in this Bill. That is the first point. The VHI is not in a position to be regulated because it cannot currently meet the solvency requirement, which in Ireland is very high and very conservative by European standards. It was 50% of premium income. I understand it is in the region of 40% now but by the standards of other countries — in the United Kingdom it is 25% — that is very onerous and very high. If we were to say that the provisions of this Bill were not to apply until the VHI was regulated, the VHI could not be regulated because no regulator would regulate a company that had all the claims exposure the VHI has because of its older membership base, and no transfer payments from others that have a much younger age profile. Second, if we were to force the VHI to be regulated in the morning and it was not regulated, it would go under, with 1.5 million customers, and no one wants to see that happen.

I hope to bring proposals to the Government shortly on the VHI. The VHI requires a capital injection to be regulated. That is the reality. It will not be regulated under its current financial arrangements, and the issue arises as to how that capital injection can be made. If it is to be made by the taxpayers it requires notification to the European Union, which has a long gestation period. If it is to be made from other sources that is a different matter. I would welcome input from the Deputies opposite.

When the market was opened up in the mid-1990s and legislation was first enacted here — I believe it was in 1994 — at that time we should have dealt with the wider issues in regard to what was then the only player in the market. That did not happen. Since then, we have been trying to introduce risk equalisation without success. I know of no country which has community-rated products without a form of support from younger people to older people. That is what we are seeking to do in this Bill. It is for a three-year period. It ceases to have effect from the end of December or 1 January 2012 because by then I hope we will have a risk equalisation system in place that can meet the test put down by the Supreme Court. In the meantime we urgently need this kind of legislation to ensure we protect older and sicker people, and that is what we are trying to do here.

Can I just——

No. We will not have a debate on an amendment that is not in order.

Can we speak on the section?

Amendment No. 3 not moved.
Question proposed: "That section 1, as amended, stand part of the Bill."

To be helpful and for the sake of clarity, who has set the reserve at 40%? Is it not within the gift of the Department to change that if the figure internationally is 25%?

On the section, because I gather we cannot speak on the amendment, as we are talking about the general principles, in preparing for the main Bill — this is an interim Bill — is the Minister considering having a central fund that the risk equalisation would operate within rather than having insurance companies transfer moneys directly to other insurance companies? Such a system is used in other countries. Is the Minister considering that?

I am open to suggestions and we have to do a huge amount of work in regard to this on foot of the Supreme Court decision, even though we won our case in the High Court and in the European court. The idea was that the Health Insurance Authority, HIA, would become the holder of the money and pass it on. I would assume we would probably have a fund that would be collected by the regulator, in this case the HIA, and passed on to the companies that were to be beneficiaries.

To respond to Deputy Reilly, the Irish Financial Services Regulatory Authority is an independent regulator. I take the view that it is far too conservative. When the solvency II directive is enacted it will bring us down to a requirement of 25% to 30%. If we could have that in the morning the VHI would be authorised, subject to the provisions of this Bill being enacted, but unfortunately it is an independent regulatory function and neither I, the Minister for Finance nor the Government have any role in that regard. My officials have made the case on many occasions, as have companies in the market. To be fair to the companies in the market that are regulated, they must provide a very high proportion of their premium income towards the solvency fund for regulation and in my view it is excessive and unnecessary.

Question put and agreed to.
Section 2 agreed to.
SECTION 3.

Amendment No. 4 is in the name of the Minister. Amendment No. 38 is consequential on amendment No. 4. Amendments Nos. 4 and 38, therefore, will be discussed together.

I move amendment No. 4:

In page 4, line 27, to delete "the old" and substitute the following:

"the old and, without prejudice to the generality of that objective, in particular that the old have access to health insurance cover by means of a tax credit".

Amendment No. 4 recognises that specific measures, in this instance a tax credit, are necessary to support the attainment of the principal objective. The Long Title of this Bill is being extended to reflect the principle objective of the Bill, and that is on the advice of the Health Insurance Authority.

Amendment agreed to.

Amendment No. 5 is in the name of the Minister. Amendments Nos. 5 and 6 form a composite proposal and will be discussed together.

I move amendment No. 5:

In page 4, to delete lines 32 to 34 and substitute the following:

"(2) A registered undertaking shall not engage in a practice, or".

These are drafting amendments.

Amendment agreed to.

I move amendment No. 6:

In page 4, line 38, to delete "subsection (1)."." and substitute the following:

"subsection (1).

(3) Nothing in this section shall affect the operation of section 7(5) or 7A.".".

Amendment agreed to.
Section 3, as amended, agreed to.
SECTION 4.

Amendment No. 7 is in the name of the Minister. Amendments Nos. 7 and 8 are consequential on amendment No. 21. Amendments Nos. 22 and 24 are alternatives to amendment No. 21. Amendments Nos. 7, 8, 21, 22 and 24 will be discussed together.

I move amendment No. 7:

In page 5, line 7, to delete "section 7C(1)" and substitute "section 7D(1)".

As the Chairman said these are consequential technical amendments on foot of what we have just agreed.

Amendment agreed to.
Section 4, as amended, agreed to.
SECTION 5.

I move amendment No. 8:

In page 5, line 28, to delete "7C," and substitute "7D, 7F,".

Amendment agreed to.
Section 5, as amended, agreed to.
SECTION 6.

Amendment No. 9 is in the name of the Minister. Amendment No. 10 is related. Amendment No. 11 is a technical alternative to amendment No. 10. Amendments Nos. 9 to 11, inclusive, will be discussed together.

I move amendment No. 9:

In page 5, line 30, to delete "section for section 7:" and substitute the following:

"sections for section 7:

6A.—(1) In this Part, unless the context otherwise requires—

‘age group' means age group as prescribed in regulations made under section 7D;

‘age-related tax credit' has the same meaning as in section 470B(4) of the Taxes Consolidation Act 1997;

‘draft report' has the meaning assigned to it by section 7F(7);

‘net financial impact', in relation to a registered undertaking or former registered undertaking which has furnished one or more information returns to the Authority in respect of a year, means the difference between—

(a) the total amount of the age-related tax credits payable to the undertaking in respect of—

(i) all policies that are effected or renewed by it during that year, and

(ii) all policies that are effected or renewed by another such undertaking during that year in any case where those policies are transferred (by whatever means) to the first-mentioned undertaking, and

(b) the total amount of the stamp duty required to be paid to the Revenue Commissioners by the undertaking (whether or not it has paid all or any part of such amount) pursuant to section 125A of the Stamp Duties Consolidation Act 1999 in respect of—

(i) all policies that are effected or renewed by it during that year, and

(ii) all policies that are effected or renewed by another such undertaking during that year in any case where those policies are transferred (by whatever means) to the first-mentioned undertaking;

‘positive', in relation to the net financial impact on a registered undertaking or former registered undertaking which has submitted one or more information returns to the Authority in respect of a year, means that, for that year and that undertaking, the amount specified in paragraph (a) of the definition of ‘net financial impact’ exceeds the amount specified in paragraph (b) of that definition;

‘relevant financial provisions' means—

(a) section 470B of the Taxes Consolidation Act 1997, or

(b) section 125A of the Stamp Duties Consolidation Act 1999,

or both;

‘relevant market sector', in relation to information returns made to the Authority for any period of 6 months referred to in section 7D(1), means all the registered undertakings or former registered undertakings which have made those returns;

‘relevant period' has the meaning assigned to it by section 7D(1)(b).

(2) Reasonable profit shall be determined under section 7F(4) in accordance with—

(a) Article 18 of the Community framework for State aid in the form of public service compensation (2005/C297/04)1 (the text of which is set out for convenience of reference in Schedule 2), and

(b) any factors that are prescribed as factors that may be taken into account for the purposes of so determining reasonable profit in accordance with the said Article.”.

I am proposing amendment No. 9 which provides, first, for the insertion of a new section 6A. It is to provide for definitions that are relevant in the related sections that follow, including the definition of "net financial impact" of the provisions provided for in this Bill being the difference between the amount of age-related tax credits payable to the undertaking in respect of all policies that are effected or renewed during that year, and the total amount of stamp duty required to be paid to the Revenue Commissioners by the undertaking in respect of all policies that are effected or renewed during the year.

Second, it is to provide that reasonable profit will be determined in accordance with Article 18 of the Community framework for state aid in the form of public service compensation and any factors that are prescribed. These additions to the Bill reflect contacts between ourselves and the European Commission in regard to this Bill. As the Deputies are aware, we notified this proposed legislation to the Commission last November.

I am proposing amendment No. 10 to replace subsection (a) of section 6 of the Bill as published. The amendment provides that contracts shall normally be of 12 months' duration. There is considerable scope for insurers to offer contracts for longer or shorter periods thereby frustrating the principal objectives of the legislation.

Amendment agreed to.

I move amendment No. 10:

In page 5, to delete lines 31 to 39 and substitute the following:

"7.—(1) Subject to subsection (5) and section 7A—

(a) a registered undertaking shall not make an offer to effect a health insurance contract of a particular type—

(i) unless the offer is maintained—

(I) for a period of not less than 31 consecutive days commencing on the day on which the offer is first made, and

(II) throughout that period on the same terms and conditions on which the offer is first made,

and

(ii) unless the offer is to effect that contract for a period of 12 consecutive months except that the offer may be to effect the contract for a shorter or longer period if, and only if—

(I) in all the circumstances of the case, there is good and sufficient reason for doing so, and

(II) the entering into of the contract by the undertaking does not in any way prejudice the achievement of the principal objective specified in section 1A(1),

and".

Amendment agreed to.
Amendment No. 11 not moved.

Amendment No. 12 is in the name of the Minister. Amendment No. 12 is consequential on amendment No. 13, therefore, amendments Nos. 12 and 13 will be taken together.

I move amendment No. 12:

In page 6, line 23, to delete "The" and substitute "Subject to subsection (6), the".

The purpose of these amendments is to clarify that insurers may in the future combine claims by different family members for the purposes of assessing what are commonly known as outpatient claims. The amendment arises as section 7(1)(b) will provide for contracts being in respect of each insured person and the exemption contained in the Health Insurance Acts for cash plan providers who also cover outpatient services being removed. Amendment No. 13 is a consequential drafting amendment.

Amendment agreed to.

I move amendment No. 13:

In page 7, line 13, to delete "undertaking."." and substitute the following:

"undertaking.

(6) Where any person named in a health insurance contract effected by a registered undertaking—

(a) is the spouse, a child or a dependent of a party to the contract, or

(b) is the spouse, a child or a dependent of another person named in the contract,

then the undertaking may aggregate or combine, as it thinks fit, claims in respect of health services, other than in-patient services, for the purposes of calculating payments, other than in-patient indemnity payments, to be made by it pursuant to the contract.".".

Amendment agreed to.
Question proposed: "That section 6, as amended, stand part of the Bill."

I am unhappy that I was not afforded an opportunity to discuss amendment No. 11, which the Chairman ruled out of order because of what had gone before. It is anti-competitive that no promotion should be shorter than 31 days because that means that if the VHI brings out a new product today, none of the competitors can do the same for at least 31 days. The time period is ludicrously long and anti-competitive. It should be shortened considerably. I would have thought three to five working days would be an adequate length of time.

I invite the Minister to respond.

That does not relate to the amendment.

It is a very significant interference in normal commercial practice and cannot be found in any other financial service market in this country.

Does anybody else wish to comment?

I think Deputy Reilly is talking about a later amendment that involves reducing the time from 20 days to ten days.

No, I am talking about section 6. My amendment proposes to delete lines 35 to 37 on page 5. The Bill prevents any sale or promotion for any period shorter than 31 days.

One of the complaints made to me by the competitors of the VHI was that products were being offered for one day. In other words, one would go into company X, which has a very young workforce, offer them the product and give them a day or two days to make up their minds, and that was it. We want to avoid that. The amendment ties in with later provisions addressed by the next set of amendments. We wish to ensure that products are notified to the Health Insurance Authority, HIA, that everybody has an opportunity to participate in those products, and that they are not exclusive to one particular group of individuals.

Yes, but the point here is that——

We have had examples of one-day products.

Yes, I know that, and we have had one-minute products. We want to avoid that. I have no problem with that.

It is easy to have community rating if nobody knows about them.

I would have thought that five working days or a week would have been a far more suitable period than 31 days.

Is it agreed that section 6, as amended, stand part of the Bill?

What is the amendment? Is it that the Minister is fixing 31 days as the minimum period?

Yes. One has to have a sufficient and reasonable time. I do not think it is reasonable to shorten it beyond what is broadly a calendar month.

Question put and declared carried.
SECTION 7.

Amendments Nos. 16 to 18, inclusive, are related to amendment No. 14. Amendments Nos. 15 and 16 are consequential on No. 17. Amendments Nos. 14 to 18, inclusive, will be discussed together.

I move amendment No. 14:

In page 7, line 15, to delete paragraph (a) and substitute the following:

"(a) by substituting the following subsection for subsection (1):

"(1) In this section, ‘insured person' means any person, other than the registered undertaking, who—

(a) is party to or named in the health insurance contract concerned (other than a health insurance contract of a type referred to in section 10(3)), and

(b) is of or over the age of 30 years.”,”.

These are minor amendments to the section. The purpose of amendment No. 14 is to provide for clarification on the definition of an insured person. Amendment No. 15 is a technical drafting amendment relating to an obligation on insurers. No. 17 relates to the ability to continue to apply loadings where they have made a determination to do so. Amendment No. 16 is a related drafting amendment. For the purpose of consistency, amendment No. 18 reduces the duration of the period to that currently prescribed in the existing health insurance regulations, namely, 13 weeks, and clarifies that the subsection applies to a contract with any health insurer provided.

Amendment agreed to.

I move amendment No. 15:

In page 7, paragraph (b), line 16, to delete “following subsection” and substitute “following subsections”.

Amendment agreed to.

I move amendment No. 16:

In page 7, line 17, after "section 7" to insert "but subject to subsection (2A)".

Amendment agreed to.

I move amendment No. 17:

In page 7, line 24, to delete "enacted.", and substitute the following:

"enacted".

(2A) A registered undertaking shall ensure that any requirement it has made under subsection (2) is not withdrawn and otherwise continues to have effect.",".

Amendment agreed to.

I move amendment No. 18:

In page 7, lines 25 to 28, to delete paragraph (c) and substitute the following:

"(c) in subsection (4)—

(i) in paragraph (c), by substituting “13 weeks” for “12 months”, and

(ii) by inserting the following paragraph after paragraph (c):

"(cc) in the period of the 13 weeks preceding the date on which the registered undertaking concerned was requested to effect the health insurance contract, a health insurance contract was in force in respect of which the insured person was a party to or named in the contract and in respect of whom any registered undertaking providing that contract could have required the payment of a net premium that was greater than the unadjusted premium,”,”.

Amendment agreed to.
Section 7, as amended, agreed to.
SECTION 8.

Amendment No. 20 is a technical alternative to amendment No. 19. Amendments Nos. 19 and 20 are related so we can discuss them together.

I move amendment No. 19:

In page 7, line 46, to delete "20" and substitute "10".

The amendment reflects what we discussed earlier. I propose, following representations by the companies, to reduce the number of working days when undertakings must submit a sample of new contracts to the HIA from 20 working days to ten.

Are there any comments?

I am happy with the compromise amendment.

Amendment agreed to.
Amendment No. 20 not moved.
Section 8, as amended, agreed to.
NEW SECTION.

Amendment No. 21 was already discussed with amendment No. 7.

I move amendment No. 21: In page 8, before section 9, to insert the following new section:

9.—The Act of 1994 is amended by inserting the following sections after section 7B:

7C.—(1) A registered undertaking shall, in respect of each health insurance contract that provides for the making of inpatient indemnity payments and that is effected or renewed by it on or after 1 January 2009, make all reasonable efforts to obtain the relevant information in respect of each insured person.

(2) A registered undertaking may, for the purposes of obtaining, in respect of a health insurance contract referred to in subsection (1), the relevant information in respect of each insured person, request in writing the policy holder to furnish the undertaking with the relevant information in respect of each insured person not later than 30 days from the date of receipt of the request.

(3) A request under subsection (2) shall be accompanied by a copy of this section.

(4) The policy holder, the subject of a request under subsection (2), shall comply with that request.

(5) A registered undertaking which has obtained relevant information for the purposes of subsection (1) shall not make use of, or disclose, the relevant information except—

(a) for the purposes of making a claim referred to in section 470(3)(b)(ii) or 470B(6)(b)(ii) of the Taxes Consolidation Act 1997, or

(b) for the purposes of complying with section 125A of the Stamp Duties Consolidation Act 1999.

(6) In this section, ‘relevant information', in relation to an insured person, means—

(a) the name of the person,

(b) the sex of the person,

(c) the date of birth of the person, and

(d) the Personal Public Service Number (within the meaning of section 262 of the Social Welfare Consolidation Act 2005) of the person.

7D.—A registered undertaking or former registered undertaking to which this subsection applies by virtue of subsection (4) shall, not later than 30 days (or such longer period as the Authority may permit in its discretion) after the expiration of each period of 6 months, the first such 6 months period commencing on 1 January 2009, make an information return to the Authority—

(a) in such form as may be prescribed, and

(b) subject to subsections (2) and (5), containing such information concerning the undertaking’s health insurance business or former health insurance business, as the case may be, during the period of 6 months concerned (in this Part referred to as the ‘relevant period’) as may be prescribed.

(2) Subject to subsection (5), the information referred to in subsection (1) which may be prescribed includes—

(a) the total number of persons insured, or a class thereof, with the registered undertaking or former registered undertaking concerned during the relevant period,

(b) the total number of persons insured, or a class thereof, in each age group and the gender profile of each age group in respect of the relevant period.

(c) the total number of persons in each age group, or a class thereof, effecting health insurance contracts during the relevant period,

(d) the total number of persons in each age group, or a class thereof, renewing health insurance contracts during the relevant period,

(e) the in-patient indemnity payments, or a class thereof, made by the registered undertaking or former registered undertaking concerned during the relevant period,

(f) information relating to the health insurance services provided during the relevant period, and

(g) such other information relating to the relevant period, other than personal data, which may reasonably be considered to be information which will enable or assist the Minister or the Authority to perform their respective functions under this Act.

(3) The information concerning a registered undertaking's or former registered undertaking's health insurance business or former health insurance business, as the case may be, to be contained in an information return may include information that came into existence before the enactment of this section.

(4) Subsection (1) applies to each undertaking that was a registered undertaking, but not a restricted membership undertaking, for all, or any part of, the period of 6 months concerned.

(5) The references in subsection (1) to health insurance business and former health insurance business shall not include so much of any such business which is comprised of health insurance contracts to which the relevant financial provisions do not apply, and the references to information in that subsection and subsection (2) shall be construed accordingly.

7E.—(1) The authority shall, for the purpose of enabling the Minister to perform his or her functions under this Act or of enabling or assisting it to perform its functions under this Act—

(a) evaluate and analyse all information returns made to it and, without limiting the generality of the foregoing, having particular regard to—

(i) the average insurance claim payment per insured person made by the relevant market sector during the relevant period for each age group to which the returns relate in respect of the total number of persons insured in that age group, or a class thereof, during the relevant period,

(ii) the average insurance claim payment per insured person made by the relevant market sector during the relevant period in respect of the total number of persons insured, or a class thereof, during the relevant period,

(iii) the age groups of which the average insurance claim payment referred to in subparagraph (i) is in excess of the average insurance claim payment referred to in subparagraph (ii) in respect of the same relevant period,

(iv) in the case of age groups which fall within subparagraph (iii), the extent of the excess referred to in that subparagraph attributable to each such age group, and

(v) the net financial impact on each registered undertaking or former registered undertaking of the relevant financial provisions during the relevant period,

and

(b) as soon as may be after the end of each 6 months period,

12 months period, or longer period, as specified by the Minister by notice in writing given to the Authority (in this paragraph referred to as the ‘specified period'), prepare and furnish to the Minster a report in relation to—

(i) such evaluation and analysis in respect of the information returns which relate to the specific period,

(ii) such matters concerning the carrying on of health insurance business and developments in relation to health insurance generally that the Authority considers ought to be brought to the attention of the Minister,

(iii) The amounts of the age-related tax credits that the Authority considers after having regard to such evaluation and analysis, would need to be afforded, under section 470B(4) of the Taxes Consolidation Act 1997, to persons insured by registered undertakings (other than restricted membership undertakings), having regard to the principal objective specified in section 1A(l) in so far as that objective relates to health insurance contracts that provide for in-patient indemnity payments, and

(iv) if the amounts referred to in subparagraph (iii) were given effect by a statutory provision, the amount of the stamp duty that the Authority considers would need to be paid, pursuant to section 125A of the Stamp Duties Consolidation Act 1999, by registered undertakings (other than restricted membership undertakings) in respect of the persons insured by them in order to meet the cost to the Exchequer of the total of the amounts referred to in subparagraph (iii)

(2) The Minister shall, after having regard to—

(a) the principal objective specified in section 1A(1),

(b) the need to facilitate competition between registered undertakings, and

(c) any report furnished to him or her pursuant to subsection (1)(b),

make recommendations to the Minister for Finance relating to section 470B of the Taxes Consolidation Act 1997 or section 125A of the Stamp Duties Consolidation Act 1999.

(3) The Minister may engage a person whom he or she considers to be competent and qualified to do so to advise him or her and to consult with him or her in relation to the functions of the Minister under this section.

7F.—(1) A registered undertaking or former registered undertaking shall, in respect of each year—

(a) maintain and furnish to the Authority (before 1 April of the next succeeding year), in such form as may be specified by the Authority, separate statements of profit and loss in respect of—

(i) its health insurance business in the State as it relates to all health insurance contracts, and

(ii) its health insurance business as it relates to all those insured persons receiving age-related tax credits,

(b) maintain and furnish to the Authority (before 1 April of the next succeeding year), in such form as may be specified by the Authority, separate balance sheets in respect of—

(i) its health insurance business in the State as it relates to all health insurance contracts, and

(ii) its health insurance business as it relates to those insured persons receiving age-related tax credits,

and

(c) submit to the Authority (before 1 April of the next succeeding year), such other information relating to the year as may be prescribed.

(2) The separate statements of profit and loss and balance sheets referred to in subsection (1) shall, prior to their being furnished to the Authority, be certified by an independent accountant in such form as may be specified by the Authority.

(3) A registered undertaking or former registered undertaking which has furnished the Authority with information under subsection (1) shall provide the Authority with such assistance as is reasonably necessary for the due performance of the Authority's functions under this section in relation to such information.

(4) The Authority shall, as soon as may be after the expiration of each year commencing from and including 2009, determine what would constitute a reasonable profit for a registered undertaking in respect of its health insurance business in respect of the year concerned.

(5) The Authority shall—

(a) evaluate and analyse the information furnished to it under subsection (1) by a registered undertaking or former registered undertaking and

(b) as soon as may be, make a determination as to whether or not the net financial impact of the relevant financial provisions on a registered undertaking or former registered undertaking is positive for the year to which the information relates and, if so, the amount by which the net financial impact is positive.

(6) (a) Where the Authority determines under subsection (5)(b) that there is a positive net financial impact on a registered undertaking or former registered undertaking in respect of a year, it shall make a determination as to whether the undertaking has or has not, in respect of that year, made a profit which is in excess of the reasonable profit determined under subsection (4) in respect of that year.

(b) Where the Authority determines under paragraph (a) that a registered undertaking or former registered undertaking has made a profit which is in excess of a reasonable profit in respect of a year, it shall make a further determination as to—

(i) the monetary equivalent amount of the profit which is in excess of the corresponding monetary equivalent of such reasonable profit in respect of that year, and

(ii) the amount (if any) of such excess profit which is attributable to the positive net financial impact of the relevant financial provisions on the undertaking.

(7) Where, in respect of a year, the Authority has determined under subsection (5)(b) that the net financial impact of the relevant financial provisions on a registered undertaking or former registered undertaking was positive, determined under subsection (6)(a) that the undertaking has made a profit which is in excess of the reasonable profit determined under subection (4), and determined under subsection (6)(b)(ii) that an amount of such excess profit is attributable to such positive net financial impact, it shall prepare a report (in this Part referred to as the ‘draft report’) setting out—

(a) the reasonable profit determined under subsection (4),

(b) the amount determined under subsection (5)(b) to be the positive net financial impact on the undertaking,

(c) the monetary equivalent amount determined under subsection (6)(b)(i) to be the profit of the undertaking which is in excess of the corresponding monetary equivalent amount of such reasonable profit,

(d)the amount determined under subsection (6)(b)(ii) to be the excess profit is attributable to such positive net financial impact, and

(e) the bases on which it made the determinations, and calculated the amounts, referred to in paragraphs (a) to (d).

(8) (a) The Authority shall, as soon as may be after the preparation of the draft report—

(i) furnish a copy of the draft report to the registered undertaking or former registered undertaking the subject of the report,

(ii) invite the undertaking to make representations to the Authority in relation to the draft report before the expiration of 21 days (or such longer period as the Authority may permit in its discretion) from the day on which the undertaking received the report, and

(iii) take into account any such representations made to it within that period before preparing the final report as soon as is practical after the expiration of that period of 21 days.

(b) The determinations of the Authority contained in its final report shall be final and conclusive (including for the purposes of any proceedings concerning the recovery of an amount referred to in subsection (11)).

(c) The Authority shall furnish the final report to the Minister as soon as may be after it has been prepared.

(9) Where the Minister is furnished with a report under subsection (8), the Minister shall, as soon as may be, furnish a copy of the report to the registered undertaking or former registered undertaking the subject of the report together with a copy of this section.

(10) Where a registered undertaking or former registered undertaking is furnished with a copy of a report under subsection (9), it shall, not later than 2 months from the date on which it is given the report, pay to the Exchequer the amount set out in the report pursuant to paragraph (d) of subsection (7).

(11) The Minister on behalf of the Minister for Finance may recover, as a simple contract debt in any court of competent jurisdiction, from the registered undertaking or former registered undertaking by which it is payable, any amount due and owing to the Exchequer pursuant to the operation of subsection (10).

7G.—(1) The contents of information returns shall, in so far as they can be related to individual registered undertakings or former registered undertakings, be disclosed only where necessary for the purposes of the functions of the Minister or the Authority under this Act.

(2) Subject to subsection (1), the Authority may, where it considers it appropriate to do so, disclose aggregate data derived from information returns.

(3) Nothing in this section shall preclude the disclosure of information by means of a report furnished to the Minister pursuant to section 7E(1)(b) or 7F(8)(c).”.”.

I have a question on the section. The Minister has proposed substantial amendments to the Bill, which is unusual, as the contents of the Bill are usually decided by Second Stage. I gather from what the Minister said that she had consulted on the legislation with the European Commission. Will she indicate to what extent these substantial amendments are a consequence of her discussions with the European Commission? Is the Commission now satisfied with the legislation?

I cannot be certain. If further changes arise as a result of the EU determination, which we expect today, they will be forthcoming on Report Stage. Most of the amendments arise from the responses of the Commission. We notified it in November and we got questions in February and further questions in March. As Deputy O'Sullivan is aware, one cannot have state aid, but one can have justifiable state aid. In order for something to be justifiable, the HIA would have to be able to determine that a reasonable profit was made. That is the gist of what we are doing in terms of these amendments in particular, which arise out of our discussions with the Commission.

For clarification, is the Minister expecting a decision today?

We are expecting to be informed today. We expected to be informed two weeks ago but we are hopeful that we will be informed today on the legislation.

Will that information become public knowledge when a decision is made?

Yes, if I am informed of it this morning I will inform the Deputy. We are optimistic but one cannot be certain. We have had a lot of discussions with the Commission.

Is it agreed that the new section be inserted? Acceptance of the section involves the deletion of section 9.

Amendment agreed to.

I move amendment No. 22: In page 9, line 11, after "prescribed" to insert the following;

"and where that information is held by the health insurance business".

Amendment No. 22 was discussed with amendment No. 7. Is it agreed that the amendment be made? No.

Amendment No. 23 is out of order. It is merely declaratory in nature.

What did the Chairman say about amendment No. 22?

It has already been discussed with amendment No. 7, and as I understand it, the amendment has not been agreed to.

Is that the amendment stating, "where that information is held by the health insurance business"? Could I comment on that?

Yes, do.

What is being sought is that insurance companies would get PPS numbers, which is fine if they have them, but if not, how are they supposed to provide that information? The companies will be penalised for not making the information available. That is grossly unfair if they do not have the information, and it puts a burden on them to go chasing for it. I accept there is not a problem where it is possible to get the number but companies might not have the number for historical reasons. It will be fine from this point onwards because companies will have PPSNs for new customers who will be joining, as that information will be collected, but existing customers might not have PPSNs, or at least the company might not have that information. That does not seem just. My amendment seeks to insert the words, "where that information is held by the health insurance business". If they have it, they give it, and if they do not, they should not be penalised.

There is an obligation on them to get that information.

From this point on, but are they going to be penalised for not providing information that they do not have on existing customers? The Bill will be enacted next month.

It applies from January of this year.

If, however, a company has customers who joined last October, it might not necessarily have the PPS number.

When the Bill is enacted it will apply to insurance contracts taken out from 1 January 2009. If companies do not have the information, they are obliged to get it. I did not read the reply available to me because I thought the amendment was broadly acceptable. The Data Protection Commissioner noted that section 4 of the principal Act provides for penalties where provisions of this Act are contravened. There is a requirement to get the information.

Where a company has that information then it can make it available, such as from 1 January this year, but surely companies would be allowed a period of grace? People have entered into contracts. The Bill is not yet law. The Minister wants to make it retrospective to January, and to put an onus on the insurance companies to go back to people and to get their PPS numbers.

We should remember that this is a tax-based proposal. It is a tax credit. Therefore, I am sure our friends in the Revenue Commissioners would have a lot to say if we were not in a position to provide the relevant information. In Ireland we sometimes pretend things are difficult when they are a matter of routine for most citizens. If one applies for a tax credit or a tax benefit these matters are automatic. I do not believe it is onerous.

Amendment put and declared lost.

Amendment No. 23 is out of order.

On amendment No. 23, is there no facility to remove the word "report" and insert the words "details of the report"?

The amendment refers to a report on the report referred to in subsection (3)(b).

What this is trying to address is the fact that it is a long time to wait for a report that is published. The Chairman is quite right to draw attention to the wording "report on the report". That slipped under the radar. It should be "report on the details of the report".

Does the Minister want to make a brief comment?

I am not certain I understand the point being made. The Deputy is suggesting an amendment to the effect that: "The Minister shall provide a report to the Houses of the Oireachtas—

It is out of order.

That is what the Deputy is talking about.

I know it is out of order that we are talking about it.

We are very inclusive here.

Amendment No. 23 states: "The Minister shall provide a report to the Houses of the Oireachtas on the report referred to in subsection (3) (b) within 3 days of its publication.”

The matter is still out of order so let us not labour it.

Amendment No. 23 not moved.

Amendment No. 24 in the name of Deputy Reilly has already been discussed with amendment No. 7. Is Deputy Reilly pressing the amendment?

Yes. I move amendment No. 24: In page 10, to delete lines 28 to 32.

Does the Deputy wish to comment?

Sorry, there are several amendments here.

Does the Minister wish to respond?

I do not understand why any Deputy would not want the Minister to have the advice of a competent and qualified person. What is wrong with getting advice from a competent and qualified person? Surely that is what we should always do. I do not know why we would delete that.

I thank the Minister for reminding me of my point.

Maybe we are all subjective about who is competent and qualified, but that is all that provision does.

Yes, but this is another expense when there is a plethora of advisers in the Department and the HSE and the HIA. Why do we need further advisers at a time when we are all talking about reducing and level of quangos and unnecessary administration?

I support Deputy Reilly on this. There are many people working in the Department. Surely some of them have this level of competence.

I agree with the wording as it is. The important word there is the word "may". I have no doubt that any Minister, no matter what political party he or she belongs to, would use his or her discretion and would not employ consultants unnecessarily.

Thank you, Deputy O'Hanlon, for those words of wisdom.

We do not have any actuaries in the Department of Health and Children. One can imagine what it would cost if we did. The HIA is a regulatory authority. I must be able to consider its recommendations and reports. I clearly need actuarial advice. I do not know whether the Deputy has followed many of the recent court cases. They have been full of actuaries and experts on all sides and have cost an enormous amount of money. The measure we are introducing is a very technical insurance one and will require very competent expertise. I am not a fan of having advisers for the sake of it. Good advice is important for Ministers and for the Deputies opposite. That is why we have various allowances in the Oireachtas, far in excess of what we had when I first came here. It is a very good thing and has hugely improved the standard of debate on both sides of the House. Expertise should be provided where necessary.

The Minister gets advice on a variety of matters but it is not necessarily provided for in legislation. Why is it necessary to put it into the legislation?

My understanding is that it is here because it was also in the 1994 Act.

Amendment put and declared lost.
Section 9 deleted.
Section 10 agreed to.
SECTION 11.

I move amendment No. 25:

In page 11, between lines 33 and 34, to insert the following:

"(c) requiring registered undertakings which supply the contract to provide to the consumer or member a written notice on the expiration of their contract notifying the consumer or member of their right to change to a new health insurance business and including the total value of penalties which may be incurred as a consequence,”.

Does Deputy Reilly wish to comment?

No. The amendment speaks for itself.

This is probably reasonable. I will come back to it on Report Stage.

Amendment, by leave, withdrawn.

I move amendment No. 26:

In page 11, to delete lines 38 to 48 and in page 12, to delete lines 1 and 2.

I was generous in regard to amendment No. 25. I cannot adopt the same attitude here because this reduces the rights of consumers.

Is the Deputy pressing the amendment?

Amendment, by leave, withdrawn.
Section 11 agreed to.
Section 12 agreed to.
NEW SECTION.

I move amendment No. 27:

In page 13, before section 13, to insert the following new section:

13.—Section 17 of the Act of 1994 is amended by substituting the following for subsection (1):

"(1) In this section, ‘assessable amount', in relation to a quarter, means the gross amount received by a registered undertaking by way of premiums in that quarter in respect of the health insurance business of the undertaking in the State on or after the establishment day, but excluding any amount—

(a) so received in the course of or by way of reinsurance, or

(b) so paid in respect of a stamp duty under section 125A of the Stamp Duties Consolidation Act 1999.”.”.

This amendment provides for the exclusion of the amount of stamp duty paid from the amount that is used to determine the liability of insurers for the levy that funds the HIA.

Amendment agreed to.
SECTION 13.

I move amendment No. 28:

In page 15, line 5, after "may," to insert "on notice to the Authority,".

This is a consequential drafting amendment.

Amendment agreed to.
Section 13, as amended, agreed to.
NEW SECTION.

Amendments Nos. 30 and 31 are consequential on amendment No. 29. Amendments Nos. 29 to 31, inclusive, may be discussed together.

I move amendment No. 29:

In page 15, before section 14, to insert the following new section:

14.—Section 20(2) of the Act of 1994 is amended by deleting "the Schedule" and substituting "Schedule 1".".

These amendments provide for the addition of the Schedule setting out the community framework for state aid in the form of public service compensation.

There is quite an extensive Schedule there. It has to do with the EU Commission. Is that a consequence of the Minister's discussions with the Commission? We do not know what will be announced today. If the Commission agrees that we can go ahead with the legislation, I assume there will be no more amendments on Report Stage. However, if the Commission has issues that need to be addressed, will there be a difficulty given that Report Stage amendments should arise out of the Committee Stage debate? Does the Minister foresee any difficulties? I am asking at this stage because these amendments relate to the EU Commission.

The answer to that is "No". Clearly if the Deputy indicates at the end of Committee Stage the areas in regard to which she might want to put forward amendments, that will qualify them for debate on Report Stage. Essentially what we are doing here is providing that if one were to transfer a benefit through a tax credit from one company to another it cannot be for the purpose of excessive profit. There must be reasonable profit. There must be an opportunity for that to be assessed. That is what we are providing for through many of these amendments. In other words, the transfer must be used purely for the purpose for which it was intended, which is to reduce the burden of the costs for older and sicker people of health insurance.

Amendment agreed to.
Section 14 agreed to.
NEW SECTION.

I move amendment No. 30:

In page 16, before section 15, but in Part 2, to insert the following new section:

15.—The Schedule to the Act of 1994 is amended by deleting "SCHEDULE" and substituting "SCHEDULE 1".".

Part 3 relates to the introduction of a new age-related tax credit in respect of private health insurance premiums paid in respect of persons aged 50 and over.

A number of the sections cover technical amendments to the Taxes Consolidation Act 1997 and are necessary for the introduction of the new tax credit. The substantive provisions relating to the new age-related tax credit are contained in section 18. Section 15 is a technical amendment to section 112(a) of the Taxes Consolidation Act 1997 which deals with private health insurance premiums paid by employers on behalf of employees.

Amendment agreed to.

I move amendment No. 31:

In page 16, before section 15, to insert the following new section:

16.—The Act of 1994 is amended by inserting the following new Schedule after the Schedule:

"SCHEDULE 2

COMMUNITY FRAMEWORK FOR STATE AID IN THE FORM OF PUBLIC SERVICE COMPENSATION

(2005/C 297/04)

Section 6A(2) 1.PURPOSE AND SCOPE

1. It is apparent from the case-law of the Court of Justice of the European Communities (1), that public service compensation does not constitute State aid within the meaning of Article 87(1) of the EC Treaty if it fulfils certain conditions. However, if public service compensation does not meet these conditions and if the general criteria for the applicability of Article 87(1) are satisfied, such compensation constitutes State aid.

2. Commission Decision 2005/842/EC of 28 November 2005 on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest (2) lays down the conditions under which certain types of public service compensation constitute State aid compatible with Article 86(2) of the EC Treaty and exempts compensation satisfying those conditions from the prior notification requirement. Public service compensation which constitutes State aid and does not fall within the scope of Decision 2005/842/EC on the application of Article 86(2) of the EC Treaty to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest will still be subject to the prior notification requirement. The purpose of this framework is to spell out the conditions under which such State aid can be found compatible with the common market pursuant to Article 86(2).

3. This framework is applicable to public service compensation granted to undertakings in connexion with activities subject to the rules of the EC Treaty, with the exception of the transport sector, and the public service broadcasting sector covered by the Communication from the Commission on the application of State aid rules to public service broadcasting (3).

4. The provisions of this framework apply without prejudice to the stricter specific provisions relating to public service obligations contained in sectoral Community legislation and measures.

5. This framework applies without prejudice to the Community provisions in force in the field of public procurement and competition (in particular Articles 81 and 82 of the EC Treaty).

(1) Judgments in Case C-280/00 Altmark Trans GmbH and Regierungspråsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH (‘Altmark’) [2003] ECR I- 7747 and Joined Cases C-34/01 to C-38/01 Enirisorse SpA v Ministero delle Finanze [2003] ECR I-14243.

(2) OJ L 312, 29.11.2005, p. 67.

(3) OJ C 320, 15.11.2001, p. 5.

2.CONDITIONS GOVERNING THE COMPATIBILITY OF PUBLIC SERVICE COMPENSATION THAT CONSTITUTES STATE AID

2.1.General provisions

6. In its judgment inAltmark, the Court laid down the conditions under which public service compensation does not constitute State aid as follows:

‘[...] First, the recipient undertaking must actually have public service obligations to discharge, and the obligations must be clearly defined. [...].

[...] Second, the parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner, to avoid it conferring an economic advantage which may favour the recipient undertaking over competing undertakings. [...] Payment by a Member State of compensation for the loss incurred by an undertaking without the parameters of such compensation having been established beforehand, where it turns out after the event that the operation of certain services in connection with the discharge of public service obligations was not economically viable, therefore constitutes a financial measure which falls within the concept of State aid within the meaning of Article 87(1) of the Treaty.

[...] Third, the compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit[...].

[...] Fourth, where the undertaking which is to discharge public service obligations, in a specific case, is not chosen pursuant to a public procurement procedure which would allow for the selection of the tenderer capable of providing those services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with means of transport so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.'

7. Where these four criteria are met, public service compensation does not constitute State aid, and Articles 87 and 88 of the EC Treaty do not apply. If the Member States do not respect these criteria and if the general criteria for the applicability of Article 87(1) of the EC Treaty are met, public service compensation constitutes State aid.

8. The Commission considers that at the current stage of development of the common market, such State aid may be declared compatible with the Treaty under Article 86(2) of the EC Treaty if it is necessary to the operation of the services of general economic interest and does not affect the development of trade to such an extent as would be contrary to the interests of the Community. The following conditions should be met in order to achieve such balance.

2.2.Genuine service of general economic interest within the meaning of Article 86 of the EC Treaty

9. It is apparent from the case-law of the Court of Justice that with the exception of the sectors in which there are Community rules governing the matter, Member States have a wide margin of discretion regarding the nature of services that could be classified as being services of general economic interest. Thus, the Commission's task is to ensure that this margin of discretion is applied without manifest error as regards the definition of services of general economic interest.

10. It transpires from Article 86(2) that undertakings (1) entrusted with the operation of services of general economic interest are undertakings entrusted with ‘a particular task’. When defining public service obligations and in assessing whether those obligations are met by the undertakings concerned, the Member States are encouraged to consult widely, with a particular emphasis on users.

2.3.Need for an instrument specifying the public service obligations and the methods of calculating compensation

11. The concept of service of general economic interest within the meaning of Article 86 of the EC Treaty means that the undertakings in question have been entrusted with a special task by the State (2). Public authorities remain responsible — with the exception of the sectors in which there are Community rules governing the matter — for setting the framework of criteria and conditions for the provision of services, regardless of the legal status of the provider and of whether the service is provided on the basis of free competition. Accordingly, a public service assignment is necessary in order to define the obligations of the undertakings in question and of the State. The term ‘State’ covers the central, regional and local authorities.

12. Responsibility for operation of the service of general economic interest must be entrusted to the undertaking concerned by way of one or more official acts, the form of which may be determined by each Member State. The act or acts must specify, in particular:

(a) the precise nature and the duration of the public service obligations;

(b) the undertakings and territory concerned;

(c) the nature of any exclusive or special rights assigned to the undertaking;

(d) the parameters for calculating, controlling and reviewing the compensation;

(e) the arrangements for avoiding and repaying any overcompensation.

13. When defining public service obligations and in assessing whether those obligations are met by the undertakings concerned, Member States are invited to consult widely, with particular emphasis on users.

2.4.Amount of compensation

14. Theamount of compensation may not exceed what is necessary to cover the costs incurred in discharging the public service obligations, taking into account the relevant receipts and reasonable profit for discharging those obligations. The amount of compensation includes all the advantages granted by the State or through State resources in any form whatsoever. The reasonable profit may include all or some of the productivity gains achieved by the undertakings concerned during an agreed limited period without reducing the level of quality of the services entrusted to the undertaking by the State.

15. In any event, compensation must be actually used for the operation of the service of general economic interest concerned. Public service compensation granted for the operation of a service of general economic interest, but actually used to operate on other markets is not justified, and consequently constitutes incompatible State aid. The undertaking receiving public service compensation may, however, enjoy a reasonable profit.

16. Thecosts to be taken into consideration include all the costs incurred in the operation of the service of general economic interest. Where the activities of the undertaking in question are confined to the service of general economic interest, all its costs may be taken into consideration. Where the undertaking also carries out activities falling outside the scope of the service of general economic interest, only the costs associated with the service of general economic interest may be taken into consideration. The costs allocated to the service of general economic interest may cover all the variable costs incurred in providing the service of general economic interest, an appropriate contribution to fixed costs common to both the service of general economic interest and other activities and an adequate return on the own capital assigned to the service of general economic interest (3). The costs linked with investments, notably concerning infrastructure, may be taken into account when necessary for the functioning of the service of general economic interest. The costs linked to any activities outside the scope of the service of general economic interest must cover all the variable costs, an appropriate contribution to fixed common costs and an adequate return on capital. These costs may, under no circumstances, be imputed to the service of general economic interest. The calculation of costs must follow criteria which have previously been defined and be based on generally accepted cost accounting principles which must be brought to the knowledge of the Commission in the context of the notification pursuant to Article 88(3) of the EC Treaty.

17. Therevenue to be taken into account must include at least the entire revenue earned from the service of general economic interest. If the undertaking in question holds special or exclusive rights linked to a service of general economic interest that generates profit in excess of the reasonable profit, or benefits from other advantages granted by the State, these must be taken into consideration, irrespective of their classification for the purposes of Article 87 of the EC Treaty, and are added to its revenue. The Member State may also decide that the profits accruing from other activities outside the scope of the service of general economic interest must be allocated in whole or in part to the financing of the service of general economic interest.

18.‘Reasonable profit’ should be taken to mean a rate of return on own capital that takes account of the risk, or absence of risk, incurred by the undertaking by virtue of the intervention by the Member State, particularly if the latter grants exclusive or special rights. This rate must normally not exceed the average rate for the sector concerned in recent years. In sectors where there is no undertaking comparable to the undertaking entrusted with the operation of the service of general economic interest, a comparison may be made with undertakings situated in other Member States, or if necessary,in other sectors, provided that the particular characteristics of each sector are taken into account. In determining what amounts to a reasonable profit, the Member State may introduce incentive criteria relating, among other things, to the quality of service provided and gains in productive efficiency.

19. When a company carries out activities falling both inside and outside the scope of the service of general economic interest, the internal accounts must show separately the costs and receipts associated with the service of general economic interest and those associated with other services, as well as the parameters for allocating costs and revenues. Where an undertaking is entrusted with the operation of several services of general economic interest either because the authority assigning the service of general economic interest is different or because the nature of the service of general economic interest is different, the undertaking's internal accounts must make it possible to ensure that there is no over-compensation at the level of each service of general economic interest. These principles are without prejudice to the provisions of Directive 80/723/EEC in cases where that Directive applies.

(1) ‘Undertaking’ is to be understood as any entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. ’Public undertaking’ is to be understood as any undertaking over which the public authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it, as defined in Article 2(1)(b) of Commission Directive 80/723/EEC of 25 June 1980 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings (OJ L 195, 29.7.1980, p. 35. Directive as last amended by Directive 2000/52/EC, OJ L 193, 29.7.2000, p. 75).

(2) See, in particular, the judgment in Case C-127/73 BRT v SABAM [1974] ECR-313

(3) See Joined Cases C-83/01P, C-93/01P and C-94/01P Chronopost SA [2003] ECR I — 6993 3.

OVER-COMPENSATION

20. Member States must check regularly, or arrange for checks to be made, to ensure that there has been no overcompensation. Since over-compensation is not necessary for the operation of the service of general economic interest, it constitutes incompatible State aid that must be repaid to the State, and for the future, the parameters for the calculation of the compensation must be updated.

21. Where the amount of over-compensation does not exceed 10% of the amount of annual compensation, such overcompensation may be carried forward to the next year. Some services of general economic interest may have costs that vary significantly each year, notably as regards specific investments. In such cases, exceptionally, over-compensation in excess of 10% in certain years may prove necessary for the operation of the service of general economic interest. The specific situation which may justify over-compensation in excess of 10% should be explained in the notification to the Commission. However, the situation should be reviewed at intervals determined on the basis of the situation in each sector which, in any event, should not exceed four years. All overcompensation discovered at the end of that period should be repaid.

22. Any over-compensation may be used to finance another service of general economic interest operated by the same undertaking, but such a transfer must be shown in the undertaking's accounts and be carried out in accordance with the rules and principles set out in this framework, notably as regards prior notification. The Member States must ensure that such transfers are subjected to proper control. The transparency rules laid down in Directive 80/723/EEC apply.

23. The amount of over-compensation cannot remain available to an undertaking on the ground that it would rank as aid compatible with the Treaty (for example, environmental aid, employment aid and aid for small and medium-sized enterprises). If a Member State wishes to grant such aid, the prior notification procedure laid down in Article 88(3) of the EC Treaty should be complied with. Aid may be disbursed only if it has been authorised by the Commission. If such aid is compatible with a block exemption Regulation, the conditions of the relevant block exemption Regulation must be fulfilled.

4.CONDITIONS AND OBLIGATIONS ATTACHED TO COMMISSION DECISIONS

24. According to Article 7(4) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 of the EC Treaty (1), the Commission may attach to a positive decision conditions subject to which an aid may be considered compatible with the common market, and lay down obligations to enable compliance with the decision to be monitored. In the field of services of general economic interest, conditions and obligations may be necessary notably to ensure that aid granted to the undertakings concerned does not actually lead to overcompensations. In this context, periodical reports or other obligations may be necessary, in the light of the specific situation of each service of general economic interest.

(1) OJ L 83, 27.3.1999, p. 1. Regulation as amended by the 2003 Act of Accession.

5.APPLICATION OF THE FRAMEWORK

25. This framework will apply for a period of six years from the date of its publication in theOfficial Journal of the European Union. The Commission may, after consulting the Member States, amend the framework before it expires, for important reasons linked to the development of the common market. Four years after the date of publication of this framework, the Commission will undertake an impact assessment based on factual information and the results of wide consultations conducted by the Commission on the basis, notably, of data provided by the Member States. The results of the impact assessment will be made available to the European Parliament, the Committee of Regions and the Economic and Social Committee and to the Member States.

26. The Commission will apply the provisions of this framework to all aid projects notified to it and will take a decision on those projects after the framework is published in the Official Journal, even if the projects were notified prior to such publication. In the case of non-notified aid, the Commission will apply:

(a) the provisions of this framework, if the aid was granted after publication of the framework in the Official Journal;

(b) the provisions in force at the time the aid was granted, in all other cases.

6.APPROPRIATE MEASURES

27. The Commission proposes as appropriate measures for the purposes of Article 88(1) of the EC Treaty that Member States bring their existing schemes regarding public service compensation into line with this framework, within 18 months following its publication in the Official Journal. Member States should confirm to the Commission within one month of publication of the framework in the Official Journal that they agree to the appropriate measures proposed. In the absence of any reply, the Commission will take it that the Member State concerned does not agree.".".

This whole Bill will make insurance more expensive. It has done so already. We have seen VHI premiums shoot up by 23%. We have seen Quinn Insurance premiums jump by 16%. We have seen Hibernian premiums jump by 22%. This will make insurance unaffordable and could result in a contraction of the market by 10%, or 200,000 people. This is all the more likely now, given that we are in a recession and 10,000 people a week are losing their jobs. The levy will significantly increase the cost of employee benefits for companies, for multinationals who make these part of their employment conditions to attract people. It could cost as much as €13,000 for a company with 100 employees. For SMEs it could have a serious impact, costing in the region of €6,500 for smaller companies with 50 or so employees.

It is not clear that the moneys raised are ring-fenced for intergenerational solidarity. The Minister has sought to apply a cap and to protect against excessive profiteering but where is the guarantee that this money will be used for health insurance and not for other activities such as life insurance, travel insurance, Swiftcare clinics, unfairly cross-subsidising other areas of competition?

Another point is that retrospection makes the provisions of the Bill effective from January 2009. That means that health insurers cannot trade into the levy. If they agreed a contract with the consumer on 31 December 2008 they cannot adjust the price to cover the cost of the levy which applies retrospectively from January until the contract expires 12 months later. In some cases it will be December 2009 before new renewal prices come into effect which would factor in the levy. There is the issue of student and child pricing as well. All students will incur a cost of €160. Why are students not being accounted for as children as was the case under the previous Health Insurance Act?

I do not want to add a discordant note but what it comes down to is whether we support the policy of younger people paying more for insurance in order that older and sicker people can have affordable insurance. That is the principle we are trying to enshrine here. We have been trying to have this introduced for many years. Deputy Reilly has advocated The Netherlands model. The Netherlands model has intergenerational support. There is no community rated model in the world that does not have younger people supporting older people. We have not been able to do it through transferring from one company to another, even though we won in the High Court and it was approved by the European Union and in the European Court. It was struck down by the Supreme Court for technical reasons. That is why we are introducing this measure.

There is no earthly way the VHI could be authorised in the foreseeable future, or could survive as an entity, having such a dominant number of older people. Its market share is declining and among the factors that encouraged people to switch is price. People are sensitive to price in every country. There is a very good article on The Netherlands which states that a determining factor in people switching is price, not quality. There is no alternative to the introduction of measures of this kind through the tax system which avoid the legal loopholes we had heretofore. It is for a temporary period of three years until we can introduce a risk equalisation model that will meet the tests set down by the Supreme Court.

Health insurance is expensive but it is less expensive here than it is in the neighbouring jurisdiction where it is not community rated. Somebody in their sixties in the UK with a chronic illness can pay £12,000 to £18,000 a year for health insurance. The equivalent here is from €2,000 to €2,500. I know that from evidence given to me by somebody who lived there recently and has now come back to Ireland. That is the kind of challenge we face in trying to keep insurance affordable for as many people as possible. Health inflation is high even this year with the economy declining by 6% and negative inflation of the order of 4%. Health inflation is running at approximately 3.5%. Health insurance is expensive. In everything we are doing at the moment, we are trying to cut costs, whether it is the cost of medication or of professional fees or the manner in which we provide services to ensure that as much as possible of the money this State can provide through the public health system goes towards treatments and services to patients.

On the private health insurance side we want to keep private health insurance as affordable as possible but I recognise that at a time when unemployment is rising there will be an impact on health insurance. The VHI has lost 40,000 customers this year. I understand the bulk of them have been lost to its competitors. There is no doubt that some people will exit private health insurance. In regard to anything that is voluntary, which health insurance is in Ireland, people will choose from time to time when they are under a great deal of financial pressure to opt out. We want to maintain as many people as possible in health insurance because it is a good principle that those of us who can should make a contribution towards the cost of our health by having health insurance. We cannot delay any longer the introduction of the provisions in this Bill, which are quite basic.

There are some companies which may not, in the short term, be interested in profit. They will be interested in growing the market share and using all the tools at their disposal to do that, whether it is the distribution method they use or the prices they use. I have no problem with that. However, we have to have competition that is fair. That is what we are seeking to protect by the measures we introduce in this legislation.

It is not fair to compare Ireland, which has a big insurance market, with the UK which has the NHS and where very few people bother with insurance. What is particularly unfair is having a market where all the new entrants into it must meet regulation and where the VHI does not. It increases the cost of insurance to everybody.

I agree with Deputy Reilly. I wish we had made provision before the market opened up for the monopoly player, the only player, to be authorised. We did not do that and, to a large extent, we are trying to provide a catch-up solution. I hope that very soon the VHI will be authorised. It will require certain decisions by Government. If the Deputies opposite have ideas, I look forward to hearing them. The VHI in its current capital state is not capable of being authorised without an injection of capital. The issue is who should make that injection of capital.

Amendment agreed to.
Sections 15 to 21, inclusive, agreed to.
SECTION 22.

Amendment No. 32 is a technical drafting amendment. Amendments Nos. 33 and 34 are related. Therefore, amendments Nos. 32 to 34, inclusive, will be discussed together.

I move amendment No. 32:

In page 24, line 23, after "date," to insert "be liable to pay".

This section inserts a new section 125A into the Stamp Duties Consolidation Act 1999. The purpose of the new section is to provide for the collection of an annual levy on health insurance companies based on the number of lives covered by policies underwritten by them. The levy is set at €160 in respect of each adult life and €53 in respect of each child under 18 years of age. The levy is not being imposed on restricted membership undertakings, outpatient general practitioner products or cash plans. The levy is to be paid to the Revenue Commissioners on 30 September in each of the years 2009, 2010 and 2011.

I propose amendments Nos. 32 to 34, inclusive. These are minor drafting amendments that do not affect the substance of the section.

The Minister stated the relevant years. Let us suppose she has the substantial legislation ready before then, can she do this?

Yes. In addition, the industry has made comments to me on the timing of payments and I have some sympathy for the views expressed. I may bring forward an amendment at Report Stage to deal with the issue.

Amendment agreed to.

I move amendment No. 33:

In page 25, line 37, to delete "the" where it secondly occurs.

Amendment agreed to.

I move amendment No. 34:

In page 25, line 55, to delete "the" where it thirdly occurs.

Amendment agreed to.
Question proposed: "That section 22, as amended, stand part of the Bill."

The section is being opposed by Deputy Reilly.

I have made my comments. I believe the Bill is counterproductive.

Question put and declared carried.
NEW SECTION.

Amendment No. 35 is in the name of the Minister. Amendments Nos. 36 and 37 are consequential on amendment No. 35. Amendments Nos. 35 to 37, inclusive, may be discussed together.

I move amendment No. 35:

In page 26, after line 3, to insert the following new section:

PART 5

AMENDMENT OF INSURANCE ACT 1936

23.—Section 3 of the Insurance Act 1936 is amended—

(a) by substituting the following definition for the definition of “premium”:

"the word ‘premium' means any money or money's worth payable or paid to any person who carries on an assurance business and who in consideration of such money or money's worth undertakes any liability under any policy, bond or certificate, except that, for the purposes of calculating the solvency of such business (including any solvency margin or solvency ratio thereof), such word does not include money or money's worth payable or paid by such a person in respect of a stamp duty under section 125A of the Act of 1999;",

(b) in the definition of “the Act of 1909”, by substituting “as amended or extended by any other enactment;” for “as amended or extended by any other enactment.”, and

(c) by inserting the following definition after the definition of “the Act of 1909”:

"the expression ‘the Act of 1999' means the Stamp Duties Consolidation Act 1999.".".

I propose amendments Nos. 35 to 37, inclusive, which insert a new definition of the word "premium" into the Insurance Act 1936. The purpose of the amendment is to allow for the non-inclusion of money or money's worth payable to a person in respect of stamp duty under section 125A of the Act of 1999. I intend to bring forward amendments on Report Stage that were approved by the Government yesterday on the advice of Revenue and others involved with this legislation. I have stated the date on which the levy is to be calculated. The dates on which companies must pay over the levy to the Revenue Commissioners will be changed to reduce the impact on their cashflow position and any unintended additional cost to those companies which purchase health insurance cover for older employees or pensioners as a result of the tax treatment of what are called perks will be removed, in other words, we do not want companies to suffer adversely because of the addition of the levy.

Further amendments arise from the detailed discussions we have had with the health insurance industry. While they are technical, they have important consequences. For example, if a person pays the insurance premium, he or she is not subject to BIK. If one's company pays it, there are BIK consequences. We want to ensure there are no anomalies in that regard. There are a number of amendments to ensure it is clear and consistent as far as companies are concerned how it is to be treated in company accounts for the purposes of corporation tax, in other words, that it is not seen as income.

Amendment agreed to.
TITLE.

I move amendment No. 36:

In page 3, line 8, to delete "1997 AND" and substitute "1997,".

Amendment agreed to.

I move amendment No. 37:

In page 3, line 9, after "ACT 1999" to insert "AND THE INSURANCE ACT 1936".

Amendment agreed to.

I move amendment No. 38:

In page 3, line 15, after "OLD;" to insert the following:

"TO PROVIDE, HAVING REGARD TO THE PRINCIPAL OBJECTIVE OF THE MINISTER FOR HEALTH AND CHILDREN AND THE HEALTH INSURANCE AUTHORITY IN PERFORMING THEIR RESPECTIVE FUNCTIONS UNDER THE HEALTH INSURANCE ACT 1994, FOR TAX CREDITS TO ENABLE THE OLD TO HAVE ACCESS TO HEALTH INSURANCE COVER AND TO PROVIDE FOR A MEANS WHEREBY ANY OVERCOMPENSATION ARISING FROM SUCH TAX CREDITS MAY BE REPAID;".

Amendment agreed to.
Title, as amended, agreed to.
Bill reported with amendments.