Dr. Fergal Lynch:

That might be more helpful and needless to say, I will be happy to deal with any subsequent questions. One of the first major issues raised this morning has been in respect of advanced and non-advanced levels of cover, as well as concerns regarding both the existence of advanced versus non-advanced levels of cover and how it is being introduced, the number of plans that will arise and so on. It may be helpful were I to provide a little bit of background to this. In operating the scheme, we are very concerned to ensure that those who buy the most basic plans with lower levels of cover do not effectively subsidise customers who decide to buy plans that offer higher levels of benefit. A disadvantage of retaining a single level of stamp duty is that those on the lower plans would have paid a disproportionate amount of their premium in stamp duty relative to those on higher plans. I am anxious to answer in particular the concerns raised earlier by Deputies Kelleher and Naughten regarding a subsidy in the opposite direction or in other words, from lower value to higher value. In fact, the intention is the opposite, that is, to ensure that the subsidy travels in the opposite direction. The last thing we would want is a subsidy going in the wrong direction. This is the very reason we proposed this year introducing an advanced and non-advanced plan. I think it is important to make this point and I can go into further detail on it later on if that is of assistance.

As I stated, this split was introduced for this very purpose. As for concerns about subsidisation in the wrong direction, I can make a number of points. First, in examining this scheme the European Commission has been very concerned to make sure we do not overcompensate anyone, including a particular insurer, and that we are not unfair to different groups. There is an approach in risk equalisation called top-slicing, which my colleague Mr. Sloyan in the Health Insurance Authority will be able to explain perhaps more clearly than will I. Essentially, however, it means we do not use risk equalisation to attempt to subsidise absolutely everyone right across the board. We take a view on how high or to what level of subsidies this should extend. There already are specific examples in the market, particularly in respect of the VHI, which would itself state that its high cost plans, such as what used to be called plan E and plan D, are pitched at a rate that subsidises the lower level plan. Consequently, I am anxious the joint committee would be clear that there is no intention, and as far as I am aware no actuality, of the subsidy travelling in the wrong direction.

The second area that it may be helpful for me to cover pertains to the hospital bed utilisation charge. Deputy Naughten in particular was concerned about introducing a negative incentive for insurers to find it more financially attractive to take people for a longer period of time. We absolutely agree this is the wrong thing to do and that is the reason, when introducing the H-book as we call it, that is, the hospital bed utilisation credit, we pitched it at a very low level indeed. It simply is €75 per day, which would not meet anywhere near the full cost of treating a patient. Therefore, we do not believe that a charge pitched at such a level creates the sort of incentive raised by Deputies Naughten and Kelleher. However, our ultimate intention is to move to a much more sophisticated version of taking account of different elements of risk. Specifically, we would like to take account of different forms of health status, such as chronic diseases. We think this would be a far more appropriate measure than a €75 payments in respect of the hospital bed utilisation charge. That was simply a starting point and it is important to emphasise that.

A number of members, as well as the insurers themselves, referred to the standard plan and the importance of a standard plan in the Irish market. We absolutely agree and not only did we agree but it is fair to say the Department led on this issue, in terms of driving the initiative to try to put this in place because the consultative forum on health insurance will be meeting in a sub-committee form as early as next week to start the work on this matter. I believe the Department made the first suggestion that this would be put in place. We entirely agree with the insurers that it would be much more appropriate to risk equalise with respect to an agreed standard plan than to attempt to risk equalise right across the board. We are working on this and I wish to put on record my thanks to the consultative forum for its assistance in this matter and in other matters, specifically the Health Insurance (Amendment) Act 2012. It was of significant assistance in helping both the Department and the Oireachtas to develop that legislation. Certainly, we intend to move in that direction in respect of the standard plan as soon as we can.

A number of members and a number of the insurers also spoke about the lifetime community rating and the case for it. Again, we certainly are very open to that, obviously subject to the Minister's final decision. We are conscious, however, that as we move to universal health insurance, where insurance will be compulsory, the issue of lifetime community rating will no longer arise. Lifetime community rating effectively arises only in circumstances in which one has a choice as to whether one joins health insurance. If everyone is insured, one then does not need lifetime community rating. I would however observe that we are open to the argument that at the very least, it would send a certain signal in advance of universal health insurance. We are very open to considering this and it is another element the consultative forum will examine in the coming weeks. Consequently, we would hope to be able to make recommendations to the Minister in that regard. As I stated, the ultimate pathway is towards universal health insurance where one then would not need a lifetime community rating approach of that kind.

A number of members and the insurers raised concerns about the per diem charge in public hospitals and the reason insurers cannot be allowed to negotiate on that basis. At present, that is the current scheme and is the manner in which the funding of hospital services is in part organised. No one would regard this as being ideal. We are particularly conscious, for example, that we do not take account in this charge of the difference between complex and less complex cases. The payment is the same for a particular type of hospital, be it a regional hospital or a county hospital, as they used to be called, and so on. That is not the ideal situation. Last week, we published proposals in respect of money following the patient, which essentially are based on moving to a case-based charge. In other words, charges would then be based not on a per diem or daily charge but specifically by reference to the type of treatment and procedure being given and the case being treated overall and therefore, charges could be differentiated as a result of that. Our intention is to start with public patients in public hospitals and then to move to private patients in public hospitals. I stress that all of this should be in place before universal health insurance. Consequently, the Department is committed, and more importantly, the Minister is committed to moving to this type of approach and away from a per diem charge.

As for the effectiveness of the risk equalisation scheme, a number of Deputies and a number of the insurers raised concerns about this. There is no perfect way to calculate the precise effectiveness of a risk equalisation scheme and certainly, there has been a deal of publicity about our view of how effective is the risk equalisation scheme relative to the VHI. The simple explanation is that it is based on widely differing assumptions used by the VHI relative to the Department. For example, we use costs based across the entire market, whereas the VHI uses its own costs.

VHI used more pessimistic assumptions than we would have regarded as reasonable. We are working with VHI to get a better understanding of the differences between our respective calculations because there is no mathematically perfect formula and it is possible for us to move closer together. The proof of the pudding will be in the eating and the extent of transfers from the risk equalisation fund to VHI and other insurers will become clearer overtime.

Risk equalisation is a market measure and is not specifically designed for VHI. There is a perception that it is specifically aimed at assisting VHI because it has older customers. VHI is a net beneficiary at the moment because it happens to have older customers but if in future years another insurer has a preponderance of older customers it in turn will become a beneficiary. It is unfortunate that comments were made that implied the Department has a particular wish to protect VHI. The Department is concerned with the sustainability of the private health insurance industry as a whole. We have no concern or wish to support one health insurer over another and we are scrupulously honest and fair in our dealings with all insurers.

In regard to universal health insurance, a number of insurers pointed out that they are not represented on the universal health insurance implementation group, which I chair. When the Minister established the group he decided to appoint individuals on the basis of their expertise in specific areas. It is true to say that the group includes people with backgrounds in and an understanding of health insurance. The Minister is open to looking at the membership of the group over time and he has made this clear from the very beginning. In my view, however, the consultative forum on health insurance is the best vehicle to consult insurers on these issues. In a previous meeting I gave a reasonably detailed presentation on universal health insurance and what we have done so far. It is our intention to continue to consult insurers universal health insurance matters affecting them. I hope I have provided a reasonable summary of the Department's current position. I am more than happy to answer further questions.