Mr. Jim Dowdall:

I thank the Chairman and the members of the joint committee for giving us an opportunity to discuss the growing affordability crisis in the health insurance market. I welcome the committee's decision to revisit this subject and hope it will persevere with this issue until we see the reform needed to ensure health insurance is affordable.

The problem of not seeing the warning signs at an earlier stage has been identified as having contributed to the economic collapse of recent years. Similarly, we are now seeing strong warning signs that the health insurance market which serves over 2 million customers is fast approaching tipping point, at which it will become unsustainable. Every month growing numbers of health insurance customers are being forced to give up their cover and fall back on the public health system which is already over-burdened. Critically, most of those who are leaving the market are younger and healthier citizens, the exact people we need to retain if we are to protect the viability of community rating.

The position has been made worse by the mishandling of the establishment of a new levy scheme, with two tiers of levy. This scheme is supposed to protect those customers on the lower level plans. The Minister could not have been clearer when he spoke in the Oireachtas in November. He said he would not make health insurance customers with lower levels of cover pay a higher levy.

However, when the Bill was enacted in December, it transpired that none of the plans in the market qualified as a lower level plan. On the basis of this decision alone, an individual paying €500 for a lower level plan will now pay the same levy as someone who can afford to pay €4,000 for a higher level plan. This is inequitable and wrong. The Department's response to this reneging on a commitment given in the Oireachtas is to shrug its collective shoulders and suggest, in the style of Marie Antoinette, that clarity has been provided and that customers will just have to pay more. According to it, an insurer could tweak a few plans to bring them into the lower tier of levy. Unfortunately, what it considers to be nothing more than tweaking will amount to the removal of significant benefits from those insured under lower level plans. For example, where previously a health insurer would have paid the full cost of an MRI scan, customers will have to pay a significant proportion of this cost. There are many other similar examples. If insurers are forced to reduce benefits to move plans into a lower category, the value of such plans will be reduced and those who purchase them will correctly think again before renewing. For this reason, one can expect many more people to drop out of the market, rather than accept a lower level of cover.

I challenge some of the points often made by those who defend the current regime. Only yesterday the Minister stated the health insurance levy had no overall impact on costs in the market. As the sole shareholder of VHI and sole beneficiary of the health insurance levy, he would say that. Let us be honest, the levy is not cost neutral to the three insurers which are subsidising VHI. By the end of next month the health insurance levy will have more than doubled to €350 for an adult since it was introduced only four years ago. In that period the cost of health insurance has spiralled and we do not need to look far to find the main driver of the price increases. The Department of Health's plan, if unchecked, will result in a family of four paying €940 in levy charges alone from the end of March. Let us be honest in this respect also, the levy is a transfer from the customers of the commercial and regulated private health insurers to VHI. By the Minister's own admission, the cost base of VHI remains unacceptably high, as many examples highlighted recently in the media have shown. Where is the urgency or incentive for VHI to cut its costs and become more efficient when it has a ready-made subsidy available from its competitors?

It is also claimed that the increased cost of health insurance relates to the cost of new medical treatments. I have been involved in the health insurance market for more than a decade and in my experience customers always want and deserve the latest innovations, best treatment and most modern procedures. This desire on the part of customers has not developed in the past three years and is not the primary cause of price increases. What has developed in recent years is a levy system that provides a very expensive prop for the protected and privileged position of the dominant player in the market.

I ask the committee to focus on one simple issue. Younger, healthier policyholders are critical to ensuring the community rated market is sustainable. Retaining and attracting these customers is the only protection that ensures health insurance remains affordable for everyone, but we are losing this battle. The question to be addressed, therefore, is whether the health insurance levy is part of the problem or part of the solution. I am convinced the evidence shows that it is a major part of the problem. I urge the committee to continue its work on this topic by turning over stones and challenging those responsible who confidently state, "Problem? What problem?" They are either oblivious to or, even more worrying, do not care about the impact these costs have on consumers. At a time when people are experiencing serious financial pressures, increasing a self-defeating tax subsidy is counter-productive and plainly wrong.

Before the affordability issue worsens at the end of March, I ask the committee to request that the Minister postpone the intended levy increase as it is simply not appropriate in the current economic environment. The Department of Health must be forced to move from its current approach of protecting VHI from its competitors at all costs, regardless of the serious impact it has on consumers. A priority must be for the Minister and the Department to focus on addressing internal efficiency in VHI, an issue raised by the Minister recently when he stated he was less than satisfied with the company's progress in addressing its cost base. The saving to VHI from greater efficiency could be greater than the levy subsidy received from its competitors. This matter must be addressed before any increase in the health insurance levy is considered.

As the timeframe to intervene is short, I urge the committee to engage immediately with a view to protecting all health insurance customers and ensuring the objective of universal health insurance remains achievable on the back of a viable health insurance market. I thank the Chairman and members for their time.