James Reilly (Dublin North, Fine Gael) | Oireachtas source

The Health Insurance Act 2012 provides the legal framework for the risk equalisation scheme 2013. It has European Union approval. In this decision, the European Commission has concluded that the risk equalisation scheme satisfies the conditions laid down in the 2012 EU framework for state aid in the form of public service compensation. It is, therefore, a scheme which is compatible with the internal market under Article 106(2) TFEU. On the basis of external and internal benchmark calculations, the Commission accepts the Irish authorities' proposal to consider VHI as over-compensated if its return is above 12%. The Deputy's proposal would, therefore, run contrary to what was approved by the Commission earlier this year. Furthermore, independent advice, including that of the Health Insurance Authority, indicates that this is a reasonable percentage.

The Deputy has referred to the fact that I want to drive down costs. That is certainly the case. It is a matter of great concern to me that premia continue to rise year on year and that a medical inflation rate of 9% was accepted for many years, including by the Government of which the Deputy was a member. Since 2009 every other area has been hit by deflation, but the cost of health insurance continues to rise. As stated, there has not been sufficient auditing of the system. Astonishingly, a clinical audit has not been carried out. This means that no one is challenging doctors on why they have certain tests performed on patients. That matter must be addressed. There has been no benchmarking process in respect of what is being paid for. As a result, procedures which now only take 20 minutes to complete are still being paid for at the rate which applied when they took two hours to carry out. Ten or 12 procedures can now be carried out on one day and this would result in individual consultants receiving incomes of €450,000 per year on the basis of working a one-day week. We cannot afford or sustain this and nothing was previously done to address this problem. However, we are now taking steps to tackle it.

The reason we have not been able to deal with it is the relevant contracts will not become renewable until the beginning of next year. We are going to tackle it and we are also going to introduce a clinical audit whereby cardiologists will challenge other cardiologists and surgeons will challenge other surgeons. We are also going to introduce benchmarking and thereby evaluate why we pay what we are paying as opposed to allowing the current position to continue to obtain. What happens when a new procedure is introduced is similar to what occurs when new technology comes into being; it is very expensive at the beginning but as increasing numbers of people buy it and volume increases, costs go way down. Mobile phones used to be the size of bricks and cost a fortune. The most up-to-date models allow a person to do a hell of a lot more than previously and, relatively speaking, they probably cost less. The situation is the same with regard to the matter under discussion. Nothing was done about it in the past, but we are taking steps to tackle it.

I would like the Deputy to consider something. If the risk equalisation scheme were over-compensating in an attractive way, why would new insurers not have the same share of older customers as VHI? He has stated money is being transferred to VHI which has more customers than the other insurers. Let us consider the example of Aviva Health Insurance which has 17% of the market. If it had a reasonable share across all age groups, one would expect that it would also have 17% of those aged 70 to 79 years. That is not unreasonable, is it? However, it only has 9% of those in that category. One would also expect that it would have 17% of those over 80 years of age, but it actually only has 6%. Why is that? GloHealth only has 1% of the market and it has no customers in these age groups. As a result, it is not relevant to this discussion. Laya Healthcare has 22% of the market. As a result, one would expect it to have 22% of those in the 70 to 79 age bracket. However, it only has 12% of these customers. One would also expect it to have 22% of those over 80 years of age, whereas it has only 6%. If risk the equalisation scheme were so attractive, these insurers would surely be advertising in order to try to attract older clients, but we all know that they do not do this. The reason they offer over 256 different policies is to confuse people and facilitate their segmenting of the market. In the next year we are going to put in place legislation that will allow the Health Insurance Authority to beef up its approach, control the market in a much greater way and reduce the number of packages on offer as they are confusing people.

I am very happy to say that the HIA has a website where people can get very good advice on the policies best suited to their individual needs. I advise anybody who is listening or viewing the proceedings to avail of that service. In my view, the myriad of policies is a deliberate cause of confusion. People should take advice also on whether their children require the same level of cover.