Billy Kelleher (Cork North Central, Fianna Fail) | Oireachtas source

I move amendment No. 3:

In page 4, line 15, to delete "12 per cent" and substitute "10 per cent".

The purpose of this amendment is to reduce the relevant figure from 12% to 10%. The rationale behind it is quite simple. Under the provision in the Bill, VHI can make up to 12% profit on its equity before it is deemed to be over-compensated by the fund. Any analysis of the equity and return on investments of insurance companies suggests 10% is a fair and reasonable figure. VHI is already heavily subsidised in the context of risk equalisation as a result of the age profile of its customers. It is over-compensated and over-subsidised. Is this a method by which the calf is being fattened before it is put up for sale? A key issue which must be addressed relates to the fact that VHI is over-compensated by other health insurers as a result of the age profile of its customers and the provisions relating to the risk equalisation fund. Allowing it to make a further 12% on equity is a step too far. A reduction to 10% would oblige it to become more streamlined and efficient. It would also, as the Minister has stated on many occasions, encourage it to drive down its costs. In addition, he has requested that the company bring in various organisations and firms to assist it in this regard. If I was obtaining a 12% return on my money, I would be an extremely happy camper.

Effectively, this over-compensation and over-subsidisation of VHI by other insurers is a hindrance to competition in the market. The hallmark of the Minister's policy is that he wants vigorous competition in the market in order to drive down costs because this would make health insurance more affordable. Again, I return to the simple principle underlying the Minister's policy, namely, that everything that is done runs contrary to what he is saying in the context of escalating private health insurance costs. He must examine this matter, particularly as money is being transferred from other insurers to VHI. As stated, VHI will be allowed to make up to 12% on its equity before it is deemed to be over-compensated by the fund. If the figure was reduced to 10%, the company would obviously not receive as much in compensation.