Mr. Dónal Clancy:

I thank the Chairman and the joint committee for giving me the opportunity to be here. I offer apologies on behalf of Dr. David Muiry who was here the last day but cannot attend today. We are joined by super sub Mr. Christian Jaggy from Elips Insurance who is equally versed in the international scene.

The last day we specifically wanted to get the consultation process on the health insurance Bill going. Arising from the consultation that occurred before Christmas, some changes were made which proved the importance of consultation to us. We did not get as many changes as we would have liked, but we must acknowledge there were changes and that it is imperative such consultation moves forward in the manner of co-operation among the industry and the entire market. Laya Healthcare should be involved, as we have mentioned many times. We are not involved in the universal health insurance implementation group which should integrated with the insurance market, as well as with the other parties.

Our primary concern is the sustainability of the market. This is not unlike the conversation we had the last day and we will not go over all of the points we made on universal health care and the arguments Mr. O'Dwyer made about effectiveness. We naturally disagree with the figures he produced to show an effectiveness rating of 50%, as do others in the market. Our position is that consumers must be able to afford cover. In the main, what consumers can afford is not considered. We must have an open and frank discussion on how long the building blocks can continue to rise. We have the recession, the levy and stealth taxes being introduced in the form of public hospital bed designations. On top of this, with young and healthy people leaving the market, there will be more claims because consumers are ageing. All this means is the price spiral will commence again.

There must be an incentive, a matter we discussed the last day, to get young and healthy people to stay in the market. We agree that lifetime community rating is an important feature. However, we have to incentivise people to enter the health insurance market and stay in it. Very simply, if one joins at 25 years of age, one should maintain the rates for the rest of one's time in the market. The same goes for somebody who joins at 55 years of age. It is as simple as that. Someone joining at 55 years of age is on the same rate, irrespective of the fact that he or she is heading down the road that is more high risk.

In regard to the levy, the fundamental issue is, as I said, the building blocks, on which we are reaching a tipping point. I have articulated in the slides presented that we are talking about a figure of circa €60 million. I am talking about our customers specifically; I am making it personal because our members are being asked to pay an additional €60 million this year. That is the net impact. The age related tax relief and the levy mean a €60 million increase for our members which represents a figure of circa 20% year-on-year.

In addition, I agree with having a health status or, as it is called, the hospital bed utilisation charge. However, it is flawed in the manner in which it is being implemented. This hospital bed utilisation charge could incentivise inefficiencies in that it is judged by the length of stay for a procedure. Across the board, it is recognised as not being satisfactory and needs to be rectified quickly because it should be judged on what the status is, not by how long one stays in a hospital bed. Those who least can afford health insurance, those on lower plans, and children pay and will continue to pay the same levy as those staying in hotel-like accommodation.

On the concept of having advanced and non-advanced products, although admirable, the definition has made it such that, for example, all Laya Healthcare plans which provide essential cover fall into the advanced bracket; therefore, there is no benefit whatsoever. That has put us in a position where we are looking at a levy which was set on the basis that 15% of products would be non-advanced, while 85% would be advanced. However, because of the way it has transpired, 100% are deemed to be advanced. Therefore, it is our contention that the levy rate, as set, is incorrect and seriously flawed.

There are some technicalities in regard to the levy which I have outlined on the slides, but there is time to rectify them. Simply put, if I was to downgrade, as many of our members have done, in the same year because I could not afford my current plan, I would have to pay the levy again, given the way the legislation is drafted. That is a mistake and should be rectified in the Finance Bill. There are many nuances around it, corporates, etc., and we have suggested changes which would rectify it the position. One should pay one levy per year, not two or three, or, as it is written, potentially four.

The biggest threat which has yet to be faced by our group or any other is posed by the proposed additional public hospital bed charge. This is definitely the latest threat to affordability for our customers and will directly result in what we understand will be between a 20% and 40% increase. This is the way it is set out. It will build and add to the levy expenses being incurred, the effects of the recession, the cost of claims and everything we have mentioned. It will be the straw that will break the camel's back. It will put another 40% on top of what is in place. The way it is articulated and the way I understand it is that in three years time €250 million will have been added to the pot and it will be game over.

What we are saying is the current market will become a fraction of its size, customer rates will go up, as I have highlighted, and the effect on the Exchequer will be the reverse of the expectation. What will happen is that more people will move into the public system and that the revenues currently extracted from the private sector in the public system will be eroded. As time passes, there will be a clear divide and we will end up being in a solely risk rated market.

There is a price spiral which has not stopped since we last spoke. Lifetime community rating or some equivalent needs to be put in place to ensure the young and healthy will be incentivised to stay in the market. The levy is set too high, with the ratio set, but it can be adjusted. We have to look at the additional implications for consumers of the Finance Bill, as drafted. Risk equalisation, as set, needs to be fair and, while not particularly wanting to redraft everything, the levy needs to be a proportion of what it is now. It needs to be based on a core set of standard benefits. Those on lower plans and children are cross-subsidising those on the higher hotel-type plans. That is the system as we see it.

I genuinely believe we do not understand the impact of what is being said about public hospital bed designation. I honestly think this is a game changer. The system will break down if this happens in the manner proposed.