Alex White (Dublin South, Labour) | Oireachtas source

Deputy Denis Naughten's amendment proposes the deletion of section 83 which provides for the new rates of health insurance levy to pay for risk equalisation credits which were introduced under the Health Insurance (Amendment) Act 2012. These credits replace the previous system of age-related income tax credits which were in place from 2009 to 2012 and which were temporary arrangements. If the rates of health insurance levy provided for in the section were not in place, sufficient money would not be available to fund the risk equalisation credits. That is the reason it is essential that this be done. On that basis, the Minister cannot accept the amendment proposed by the Deputy to delete section 83. However, I propose to deal more generally with the issue of community rating and risk equalisation.

Under the principle of community rating which all sides of the Oireachtas supported when the Bill was introduced - we dealt with it as recently as last week and I have forgotten precisely the stage it is at, but it is at an advanced stage and there is wide support for it in the House - everyone is charged, under such a scheme, the same premium for a particular health insurance plan, irrespective of age, gender and current or likely future state of his or her health. Community rating, therefore, means that the level of risk a particular consumer poses to an insurer does not directly affect the premium paid.

The pricing of risk across the community of insured persons clearly requires robust mechanisms to share costs when there are several insurance companies in the market. The standard transfer mechanism to support community rating is called risk equalisation. Perhaps we might return to the more general background to risk equalisation later in the debate. It is an indispensable requirement in the overall scheme for the funding of health services that we have risk equalisation. The scheme being put in place by the legislation achieves this and I regard it as essential in respect of where we will take health services and their funding. There are many issues we are addressing and that will be required to be addressed in the future, but it seems that risk equalisation and the necessity for it is a settled issue politically across the board. It is an indispensable provision in terms of where we are headed and where we need to go.

In 2012 the age-related income tax credit for insured persons aged 60 years or older was increased significantly in order to keep down the cost of health insurance for older people. Without this support, health insurers would have had a strong financial incentive to segment the market by offering policies targeted at young people to the disadvantage of older customers.

With effect from the end of March 2013, the risk equalisation credits will increase substantially over 2012 levels for higher risk groups, particularly men aged 70 years and above. For example, the risk equalisation credit for a 75 year old male with advanced cover has increased by €400, or 20%, from €2,025 in 2012 to €2,425 in 2013. The risk equalisation credit for an 85 year old male has increased even more.

Each year the Minister for Health makes a recommendation to the Minister for Finance in regard to the stamp duty required to support the scheme. The risk equalisation system is designed to be self-financing. The stamp duty receipts are set at a level to fund the risk equalisation credits. The level of stamp duty required, therefore, is reflective of a number of factors, including market ageing and claims inflation. Claims inflation across the health insurance industry impacts on the cost of increasing risk equalisation credits for older and less healthy insured persons.

The levy increase, effective from 31 March, represents an increase on a non-advanced product of €5 for a child or an adult. In the case of an advanced product, the increase is €25 in the case of a child and €65 in the case of an adult. "Non-advanced cover" means, broadly speaking, health insurance policies for public hospital cover only. "Advanced cover" means policies covering both public and private hospitals. The full definitions of both terms are provided in the Health Insurance (Amendment) Act 2012.

I am conscious of the time remaining, but in fairness, I should deal with the issue Deputy Denis Naughten raised as it is specific.

See this speech in context