James Reilly (Dublin North, Fine Gael) | Oireachtas source

I welcome that there are now four insurers competing in the Irish market. If our policies were erroneous and misguided further insurers would not be coming into the market. What they value is certainty into the future. Insurers see risk equalisation for what it is. It gives them the sense of certainty they need to compete in that market.

The Health Insurance (Amendment) Act 2012 which I introduced last November provides for the introduction, for the first time in this country, of a permanent risk equalisation scheme in the private health insurance market with effect from 1 January 2013. I was gratified that the legislation was strongly supported on all sides in the Dáil. This support was a clear recognition of the vital part risk equalisation plays in maintaining stability in the private health insurance market. The scheme provides that health insurers receive higher premiums in respect of insuring older people but that older people receive risk equalisation credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product.

The risk equalisation scheme encourages efficiencies as it compensates insurers for only a proportion of the higher costs of insuring older and less healthy people. Insurers should then compete for market share by providing better services rather than competing for younger, healthier lives. The risk equalisation scheme also provides for a cost subsidy from younger, healthier people to older, less healthy people. The compensation is provided in favour of the individual consumer rather than any particular insurance company. A company with a worse than average risk profile and, therefore, higher claims costs, will be a net beneficiary from the scheme while a company with a greater proportion of younger and healthier people will be a net contributor to the scheme but will benefit considerably from having much lower claims costs.

In setting the rates for risk equalisation credits, following consultation with the Minister for Finance I had particular regard to the principal objective of the Health Insurance Act, which is to ensure that access to health insurance cover is available to consumers, with no differentiation between them, in particular as regards the cost of health services based on health risk status, age or sex. I also had regard to the aims of maintaining the sustainability of the market, having fair and open competition in the health insurance market and avoiding the risk equalisation fund having a surplus or deficit from year to year. If the risk equalisation is set at an appropriate rate, it should meet its costs, and no more.

In operating the risk equalisation scheme it is important to ensure that those who purchase the more basic plans, with lower levels of cover, do not effectively subsidise customers who decide to purchase plans that provide higher levels of benefit. With this in mind, the Health Insurance (Amendment) Act 2012 distinguishes between non-advanced and advanced plans. The non-advanced or entry level plans will have a lower rate of stamp duty payable. In addition to avoiding any unintended subsidisation of advanced plans, they also help to make the entry level plans as affordable as possible. I am conscious of the concerns that have been expressed regarding the absence to date of any non-advanced plans which would attract the lower level of stamp duty. It is important to note that the new stamp duty rates will come into effect for policies taken out from 31 March 2013 onwards. While currently there are no non-advanced plans in place, the focus will be on availability of such plans from 31 March, when they can start benefiting from the lower levy.

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