Mary Harney (Dublin Mid West, Progressive Democrats)

Immediately after the Supreme Court judgment in July which found the 2003 risk equalisation scheme to be ultra vires, I initiated a comprehensive review of the options which might be open to the Government in the aftermath of the court finding. Since then, I and officials from my Department had meetings with the Health Insurance Authority and the three insurance companies operating in the market. I also had the benefit of advice from the Attorney General and external counsel. At appropriate points, I also had the advice from the Department's consulting actuaries. Following receipt of a related proposal from the Health Insurance Authority, officials from my Department and the Department of Finance explored the potential of the taxation system to meet the long-established policy objectives of successive Governments in regard to private health insurance.

Based on the advice which I have received, I believe the interim arrangements which have been approved by the Government can be objectively justified. They are a necessary and proportionate response to the problems arising in the market for health insurance and have been formally notified to the European Commission as a potential state aid. The assessment undertaken of these measures constitutes part of the notification to the Commission and it would, therefore, not be appropriate to publish it at this time.

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 package of measures announced last week will help to keep private health insurance affordable for older people. In addition, the introduction next year of lifetime community rating regulations will encourage younger people to continue to take out health insurance. The combined effect of all of these measures is overwhelmingly positive for the health insurance industry and its 2.25 million customers.

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