Mary Harney (Dublin Mid West, Progressive Democrats)

They say a week is a long time in politics, but it is clear that a couple of hours is a long time in politics. I accept that Deputies had to reflect after this afternoon's briefing on this legislation. I want to repeat the comments I made when I spoke frankly and honestly at the briefing. I was asked when the Department became aware of this difficulty. The possibility that there may be a loophole of this nature arose sometime last summer, during the court case that BUPA Ireland took against the State. When we sought legal advice, we were told we should not amend the legislation until the court issued its judgment, which took place at the end of last year.

Quinn Direct did not acquire BUPA Insurance, which is the company that is authorised to offer health insurance in Ireland, or BUPA UK. It acquired BUPA Ireland, which is a customer service company that is authorised to do such business here. When the legislation was amended in 2003, this was not envisaged. When risk equalisation was introduced in 1996 by the parties opposite, it received the support of all parties in the House. When we were opening up the health insurance industry, everybody recognised that if one company had older members and another company had younger members, community rating could not be maintained without a system of risk equalisation. VHI has three younger members for every older member, whereas BUPA Ireland has 18 younger members for every older member. It is clear that if we have community rating, companies cannot compete on a level playing field in such circumstances.

The Health Insurance Authority report recommended that there should be a longer phase-in period. It recommended that the relevant companies should pay 25%, rather than 50%, in the first year and that it should be phased in over four years. I intend to bring proposals to the Cabinet in April, based on the Health Insurance Authority report, the Competition Authority report and the report of the Barrington group. I established the Barrington group, which comprises three well-respected people who know about the world of investment and insurance, because BUPA Ireland has maintained that it cannot make a fair return on capital, whereas VHI does not have to make a return on capital. Like everybody else, I know that companies will not join the market if they cannot make a return on capital. I have asked the Barrington group to examine any issues which need to be addressed in the context of community rating.

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