Paul Connaughton (Galway East, Fine Gael) | Oireachtas source

I welcome the provision of a permanent risk equalisation scheme for private health insurance. It will replace the current interim scheme on 31 December 2012. No one in this Chamber needs to be reminded of the fact that hospitals and other health care service providers throughout the country are facing an extremely difficult task to stay within ever-shrinking budgets while the population expects and deserves a high-quality health care system.

Maintaining an attractive private health insurance system within reach of a large segment of the population is crucial to protecting the public health system from greatly increased volumes. The objective of the Bill is to ensure that private health insurance will remain within the scope of large numbers of people, not just when they are young and healthy but also when they are older and more at risk from illness.

The provisions of this Bill will see insurers compensated for differences in costs that may arise due to the age of their customers. Without the introduction of such a risk equalisation scheme there is a danger that people will pay vast sums for health insurance during middle age, when hopefully they enjoy good health, only to find that as old age approaches and their health difficulties increase, the cost of health insurance increases to a level they can no longer afford.

Without risk equalisation, everyone would face the possibility of being left without health cover in old age. As of December of last year, 47.1% of the population had health cover. It is interesting to note that ten years earlier, in December 2001, that figure was 48.2%. The level of health insurance in this country peaked at 51.7% in December 2008 and has been in steady decline ever since. What the figures do not show are the huge sacrifices being made by many people in an effort to ensure that they retain their private health insurance. For many families that financial burden is becoming increasingly heavy. This risk equalisation measure is vital if we do not want to see private health insurance levels go into free fall, which in turn would greatly increase pressure on the public health and hospital system.

Important provisions in the Bill before the House include open enrolment and lifetime cover. Under open enrolment, all applicants for private health insurance must be accepted, regardless of their risk, age or sex, but subject to waiting periods. Lifetime cover guarantees the right of people to renew their cover irrespective of risk factors, and it is only in very limited circumstances that an insurer can stop or refuse to renew insurance.

I commend the Minister on the timely introduction of the Bill, as it replaces the current interim scheme of age-related tax credits and the associated community rating levy, which is due to expire at the end of the year. It also fulfils an element of the Programme for Government 2011-2016, which committed to introducing a system of risk equalisation for the private health insurance market. The permanent scheme provided for in this Bill differs from the interim scheme in that it extends to cover differences between the healthier members of society and the less healthy. It also strengthens the hand of the Health Insurance Authority in a number of important respects. Health insurers will be required to notify the Health Insurance Authority of new types of contract or changes to existing ones. This Bill also gives the Health Insurance Authority and its officers power to enter premises with a warrant or permission from the owner to secure documentation for inspection and to require the production of books or records.

Under the current Bill, each age band over 60 years receives a tax credit. The cost of an insurance policy for an individual is then reduced by the amount of the tax credit and the insurance company recoups the money from the Revenue Commissioners. Policy holders continue to pay the same amount in a transparent system, and health insurers can also calculate in advance the amount they are to recoup under the new system.

The ramifications of risk equalisation are huge. For example, under the new scheme, a 75-year-old person could expect an annual policy to cost €900, while the real cost of the insurance could be as high as €3,000. The remaining portion of that bill could be recouped by the health insurance company from the Revenue Commissioners. Were the risk equalisation to be removed, how many pensioners could afford to pay almost €3,000, or €243 monthly, for health insurance? The effects of the lack of a risk equalisation scheme would not only be paid for by the elderly. Faced with the prospect of paying high health insurance bills while young and healthy only to be knocked out of the scheme by prohibitive costs when they reach old age, many more will be tempted to drop their health insurance and attempt to save the money towards the cost of health care when they are older.

The Bill is important in creating a fairer society and in incentivising those who can afford to do so to purchase health insurance. I hope it will encourage the 47% of people who currently have health insurance to continue to subscribe to their schemes.

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