I propose to take Questions Nos. 7, 10, 24, 113 and 115 together.
I am very disappointed at the decision of the VHI to increase its prices so significantly from 1 February. There is no doubt that the increases will make it harder for those who benefit most from health insurance to renew their policies.
I want to ensure that everyone is aware of the various alternative health insurance policies on offer.
It is important to stress that customers have a legal right to switch between or within insurers to get better value, including better cover or to reduce their premium costs. It is not open to a company to refuse a customer of another insurer the same level of cover. The Health Insurance Authority (HIA) provide advice on switching by telephone or via the internet and I would urge any consumers with concerns to contact the HIA.
I have asked the HIA to monitor the situation closely to ensure that all customers are given accurate information about their right to switch policies, without penalty. In particular, I am anxious to make sure that customers are not misled by any insurer about the ease with which changes can be made, or about the requirements that must be met before switching. The HIA will play an important role for customers, both in ensuring that they have accurate information, and in monitoring the implementation of the law protecting consumers in relation to health insurance.
I am committed to protecting our community-rated market through risk equalisation.
If there is more than one insurer in the market, as is the case in this country, community rating needs to be supported by a scheme that subsidises the cost of health care for older and sicker people across the entire market. Otherwise, companies would have a clear incentive to attract and retain only healthy customers who were less likely to make claims. This support system is called risk equalisation. A system of risk equalisation is particularly necessary in the Irish market because, for historical reasons, the VHI has a greatly disproportionate share of older customers, as is evident from the fact that is has 80% by value of all claims in the market but only 62% of all customers.
The Government had a risk equalisation scheme in place but following a challenge by BUPA, the scheme was struck down by the Supreme Court in July 2008. In response the Government introduced a temporary scheme of tax relief/community rating levy in January 2009 which provides a very significant degree of support for the cost of health insurance claims by older people.
It allows insurers with additional costs arising from insuring older people, to be compensated for up to, but no more than, 65% of these additional costs. This was increased from a figure of 50% in 2009 and 2010 following advice from the Health Insurance Authority. The Government is also preparing to put in place a risk equalisation scheme that will ‘equalise' risk as far as is possible on age, health status and gender grounds. The scheme is designed to be legally robust and to be fully in accordance with European and Irish law requirements. The Health Insurance Authority has completed its consultation process on risk equalisation and submitted its analysis and recommendations to me on 23rd December 2010. My Department is currently considering this report and I intend to prepare legislation for a transitional scheme which will come into effect in 2012 and a risk equalisation scheme to come into effect at the start of 2013.
The Health Insurance Authority have estimated that the net benefit of the tax credits/levy to VHI in 2011 will be in the region of €70M and the corresponding net cost to Aviva and Quinn will be in the region of €33M and €37M respectively.
The VHI continues to be exempt from prudential solvency requirements arising from a derogation under the 3rd Non-Life Directive. The Voluntary Health Insurance (Amendment) Act 2008 provided for the VHI to acquire sufficient funding in terms of its capital reserves to enable it to make an application to the Financial Regulator for authorisation. The date originally fixed by that Act was 31 December 2008. At the time the original date was fixed, the Supreme Court had not yet ruled in relation to the risk equalisation scheme. Since then I have extended the date by which the VHI must accrue the necessary reserves on five occasions. The date is now 1 January 2012. The Government strategy also provides for disposal of the VHI and I expect advisers to assist in that regard to be appointed next month. It remains my firm conviction that the VHI should be properly authorised and that the derogation should be lifted. The Government is committed to making a substantial capital investment into the VHI to secure its authorisation. The actual amount of capital required will be determined between the Minister for Finance and the Minister for Health and Children in light of expert advice received.
Almost 50% of the population have private health insurance. There were 2.238M people with private health insurance at the end of December 2007. This figure increased by 59,000 to 2.297M at the end of December 2008. There was a reduction of 37,000 in 2009 to a figure of 2.26M at the end of December 2009 and a further reduction of 33,000 up to the end of September 2010 giving a figure of 2.227M at that date, which is the latest information available.