Mary Harney (Dublin Mid West, Progressive Democrats)

I propose to take Questions Nos. 74 and 93 together.

A primary objective of Government policy in health insurance is that it should be affordable for the broadest possible cross section of the community, including older people and those who suffer ill-health. This policy objective has been implemented through a substantial body of primary and secondary legislation providing for open enrolment, community rating and lifetime cover. Following the liberalisation of the market in 1994 every political party and successive Governments have supported the maintenance of community rating. It is an inescapable fact, supported by international evidence, that community rating cannot be sustained without some scheme to support the higher claims costs of older or sicker people.

Although the Supreme Court found the particular risk equalisation scheme to be ultra vires, it did not strike down the principle of applying risk equalisation or any of the other important elements of the regulatory framework that supports private health insurance in Ireland. However, after the Supreme Court decision, there was a real risk that older people would effectively face significantly higher premium costs than younger people. Accordingly, the Government has decided to introduce two measures on an interim three-year basis to stabilise the health insurance market.

There will be additional tax relief at source for health insurance, starting for people aged 50 and over and increasing for higher age groups. People aged 50 to 59 will get tax relief at source of €200, those aged 60 to 69 will get tax relief at source of €500, those aged 70 to 79 will get tax relief at source of €950 and those aged 80 and over will get tax relief at source of €1,175. Legislation will also be introduced to provide for the introduction of a community rating levy on health insurance companies in respect of all individuals covered by the health insurance policies issued by them, priced at €160 for each adult and €53 for each child under 18. The level of the relief will be reviewed annually.

The effect of the measures on the premiums charged for particular policies by individual companies is a commercial decision for the companies themselves, as they set both policy benefits and pricing at the same time. However, they should not in themselves lead to an overall increase in the approximately €1.5 billion in private health insurance premiums paid, as the levy will yield approximately the same amount as the cost of the tax relief at source.

The implementation of these measures is subject to approval by the European Commission. They have been formally notified to the European Commission as a potential State aid, as had been done with the risk equalisation scheme. Older people will benefit as the price of their policies will not rise significantly based on their age. While supporting the principle of intergenerational solidarity, younger subscribers will benefit from affordable health insurance as they in turn become older. The Government hopes and expects that the health insurance industry will respond to this initiative by continuing to market community rated products which meet the health needs of all segments of the population.

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