Seán Kenny (Dublin North East, Labour) | Oireachtas source

The Health Insurance (Amendment) Bill 2012 provides for a permanent risk equalisation scheme for private health insurance which will replace the current interim scheme that expires on 31 December. The programme for Government commits to introducing a system of risk equalisation in the current insurance market. It also commits to introducing a system of universal health insurance by 2016 and states Exchequer funding for hospital care will be put into a hospital insurance fund to subsidise or pay insurance premiums for those who qualify for subsidies. The programme states the hospital insurance fund will oversee a strong and reformed system of community rating and risk equalisation.

Currently insurers are compensated for differences in costs due to the age profile of their customers. Among other measures, the Bill provides that the risk equalisation system will take account of gender, level of cover and rate of hospital utilisation. A previous speaker used the analogy of car insurance and the no claims bonus, but I would have to disagree on the applicability of the principle of the no claims bonus to a person’s health care needs.

The Bill provides for a permanent risk equalisation scheme to replace the interim scheme of age related tax credits and associated community rating levy provided for in the Health Insurance Acts. Risk equalisation is essentially a method for compensating insurers which carry heavy risk burdens by means of payments from other insurers which carry lighter ones. Its role is to protect the current system of community rating in private health insurance schemes. The interim scheme is a system of tax credits which provides for a cost subsidy from younger age groups to older groups. On current estimates, the scheme will have transferred a net €275 million in 2011 and an estimated €360 million in 2012. VHI has been a net beneficiary of the scheme owing to the age profile of its client base. The scheme is funded through a community rating levy charged to insurers, which amounted to €197 million in 2009, €318 million in 2010 and €343 million in 2011.

The permanent scheme provided for in the Bill differs from the interim scheme in a number of respects. Under the permanent scheme, risk equalisation will be extended to subsidies from the healthy and the less healthy. The Bill provides that, in addition to age, the risk equalisation system will also take account of gender, the level of cover provided by a health insurance policy and the level of hospital utilisation. Risk equalisation credits will replace the tax credits under the interim scheme. The Bill also aims to support the revised risk equalisation scheme and discourage market segmentation by strengthening product change restrictions. Health insurers are required to notify the Health Insurance Authority of new types of insurance contracts and changes to existing ones. The Bill extends the notification period required for these changes. In addition, the authority has considerable additional powers under the legislation, including the power to enter premises and secure documentation for inspection, as well as to require the production of books or records.

There is a long legislative and legal history to the issue of risk equalisation, with a key issue being the impact on market competition. Issues raised by stakeholders include the impact on competition and market entry, health insurance affordability, the effect of the health status measures and the regulation and role of VHI.

The Bill states the principal objective of the Minister and the authority is to ensure access to health insurance cover is available to consumers of health services, with no differentiation. This objective will be given effect by risk equalisation credits, stamp duty or other measures, or any combination of these measures. The Bill now includes the desirability of ensuring the less healthy, including the old, have access to health insurance cover by means of risk equalisation credits. This is done in the interests of social and intergenerational solidarity and regardless of the health risk status, age, gender or frequency of provision of health services for any particular generation.

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