Richard Bruton (Dublin North Central, Fine Gael)
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Question 198: To ask the Minister for Health and Children if she will make a statement on the effectiveness of her health insurance levy and the effectiveness of the tax credit regime for controlling the growth in health insurance costs to older people, who have experienced increases of more than 25% in the cost of their health insurance. [5579/09]

Mary Harney (Dublin Mid West, Progressive Democrats)
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There is a serious risk that market segmentation would occur in a community rated market in the absence of measures under which insurers would receive compensation for the higher claims costs of older people. As set out in the analysis provided by the Health Insurance Authority, there was a significant risk that this would accelerate following the July Supreme Court decision in the absence of steps to support community rating.

The Government remains convinced that a community rated health insurance market sustained by a risk equalisation scheme is in the best interest of health insurance customers. The Government has asked the Department of Health and Children and the Health Insurance Authority to begin work on designing a new scheme. However this will take some time before it comes into effect. The Government therefore decided that some interim measures must be put into place in order to support community rating. It is anticipated that this interim solution will remain in place for the next three years.

In addition to enhancing the position of older persons in the market, the measures should not, in themselves, lead to an overall increase in private health insurance premiums paid by all consumers as the new levy on health insurance companies will yield approximately the same amount as the enhanced tax relief for those aged over 50. I would still like to make it clear that the levy is not being imposed on the individual policy holder but on the insurance companies. It is a commercial decision for each company whether they pass on any or all of the levy to their customers.

Since I last answered questions on this matter the insurers have announced price increases for customers taking out or renewing policies from 1 January 2009. Quinn Healthcare was due to implement increases at that stage and VHI had not increased its premiums as was usual practice in September 2008, following the Supreme Court judgement. Hibernian AVIVA Health has more recently announced an increase in prices. It is a matter for the individual companies to determine their increases. I believe that if insurance policies were fully risk-rated in the absence of the planned interim tax relief measures, the price increases would be substantially higher.

There are several underlying cost pressures in the health insurance market, including medical inflation, the ageing of the insured population, increased numbers of procedures, and the economic pricing of private and semi-private beds in public hospitals.

As to the effectiveness of this measure, older people are benefiting by the fact that the price of their policies did not rise massively based on their age and risk factors, as they would have if the market had been segmented. The package of measures announced keeps private health insurance affordable for older people. In addition, the introduction this year of lifetime community rating regulations will encourage younger people to continue to take out health insurance. The combined effect of all of these measures is overwhelmingly positive for the health insurance industry and its two and a quarter million customers.