Máire Hoctor (Tipperary North, Fianna Fail)

I thank the Deputies who have contributed to the debate and will respond briefly to some of the issues raised. A number of Members, including Deputy Tom Hayes, highlighted the benefits that competition can bring. The Government is committed to encouraging greater competition in the market and this Bill will help achieve that objective. Many of the recent reports on the market have highlighted the need to address VHI's legislative provisions.

The position of VHI must be regularised and this Bill provides for this at the earliest opportunity. Deputy Mitchell's support for the application of risk equalisation is welcome. As for the level of transfers that arise, I note that the risk equalisation scheme has never fully compensated VHI for the risk profile of its members as costs associated with higher level plans are capped. In addition, since April payments under the scheme have been reduced by a further 20% following the removal of the exemption for new entrants and Government consideration of the market reports. This is often overlooked as the scale of potential transfers attracts attention. However, the scale of transfers that arises under the scheme simply reflects, albeit not fully, the risk imbalances that exist in the insured populations.

The Minister is satisfied that the advantages, if any, that may have accrued from the derogation no longer apply and VHI's board was instructed to build its reserves to the required level in December 2005. In this regard and noting Deputy Terence Flanagan's comments on authorisation, the position at present is that the board is obliged to maintain reserves and does so to the extent that its reserves are well above the minimum EU requirement, notwithstanding the derogation granted to it under the first non-life directive. Moreover, the derogation can be seen as having hindered the development of VHI. In addition, one must take account of the extent to which the risk equalisation scheme as currently structured does not compensate VHI for its adverse risk profile.

It is important to bear in mind the relative risk profiles of the insurers when commenting on the proportion of the market held by VHI. Given its disproportionate share of the risk, particularly in the older age groups, and the level at which risk equalisation operates, VHI is not in a position to engage in predatory pricing strategy. Similarly, its market share cannot be compared to that held by large companies in other markets given the obligation to provide community-rated cover and to provide it on the basis of open enrolment and lifetime cover. In addition, the Health Insurance Authority is an independent body and is independent of the Minister in the performance of its functions.

A number of Deputies commented on the manner in which the VHI engages in the provision of ancillary services and of travel insurance in particular. The Minister has written to the VHI concerning this issue. VHI's management has engaged with the Financial Regulator on the manner in which it offers the product. The position is that VHI offers travel insurance as an intermediary, having been authorised by the Financial Regulator to so do. Members will also be aware that other insurers are offering special deals on the basis that more than one product is purchased. More generally, the Minister has asked the VHI to behave as if regulated in respect of compliance with the regulator's consumer protection code. As VHI moves to being an authorised insurer, this will become a statutory requirement.

Under the terms of the Bill it also will be the case that VHI will be obliged to form a number of subsidiaries to comply with the requirements for authorisation and to the extent that such subsidiaries would be subject to regulation by the Financial Regulator, they will be. They will also be stand-alone incorporated entities that do not pose a risk to the authorised health insurer. The regulator's requirements regarding freedom on pricing mean that any ministerial involvement in this area would not be permissible. The level of reserves required by the regulator has also been highlighted. While the Minister is of the view that the nature of health insurance and the manner in which it is provided supports the view that a lower solvency requirement should apply, it is a matter for the regulator to determine.

Deputy Neville referred specifically to VHI's failure to provide cover for psychotherapy. I have been advised by VHI that psychotherapy, when provided by a consultant psychiatrist who is appropriately registered with VHI Healthcare, is covered under both the outpatients' and inpatients' scheme. The level of cover depends on the plan held by the individual in question. I also understand that VHI is liaising with Deputy Neville on the issue of cover for psychotherapy as part of a multidisciplinary approach to the delivery of mental health treatment. As for the six-month limit for psychiatric services, it is the same for all hospital stays.

The Deputy also asked the reason psychiatric hospitals were not included in the recent National Hygiene Services Quality Review 2007 carried out by the Health Information Quality Authority, HIQA. Section 7 of the Health Act 2007 sets out the functions of HIQA. It provides that the authority will set standards on safety and quality regarding services provided by the Health Service Executive and service providers in accordance with the Health Acts — except for services under the Mental Health Acts 1945 to 2001, which are the responsibility of the Mental Health Commission — the Child Care Acts 1991 and 2001 and the Children Act 2001.

Deputy Jan O'Sullivan noted that consultants have been retained to provide advice on VHI being authorised by the end of 2008 and the scope of the provisions under section 3(d). VHI is being allowed to pursue a number of options regarding the acquisition of the necessary reserves to maximise flexibility. The consultants' report will assist in the use of the appropriate means and, more generally, on requirements for the submission of a robust application to the regulator.

As for the possible introduction of universal health insurance, many studies have been carried out, both national and international, of different funding mechanisms for health systems and no one mechanism has stood out as the ideal mechanism to be adopted by all countries. All have their strengths and weaknesses. The model adopted in each country tends to be a reflection of its history and social structure.

Following an analysis of the most appropriate method of funding the health system, the 2001 health strategy concluded that no alternative system of funding would deliver significant improvements over the current tax-based method. The World Health Organisation commented in 2005 that no specific health financing mechanism is optimal and recommendable in all settings and that little advantage is discernible in one financing system over another in terms of impact on health outcomes, responsiveness to patients or efficiency.

Any new powers under the Bill do not arise until the authorisation has been achieved. The Minister has no function in regard to the level of reserves that the Financial Regulator would expect any applicant to hold. Many insurance companies have a structure that encompasses a services subsidiary. Any decision on VHI covering services is a matter for the VHI board. This is specifically recognised in section 2 of the 1996 Act. No decision has been taken to privatise the VHI. This Bill facilitates authorisation. The board has not said it is in favour of privatisation in any discussions it has had with the Minister. Since the establishment of the VHI in 1957 it has operated on the basis that it would provide cover for persons who also had public eligibility, thereby contributing to the delivery of acute care to the entire population.

No decision has been taken on the privatisation or break-up of VHI. I commend this Bill as a necessary development of the legislative provisions governing the VHI.

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