James Bannon (Longford-Westmeath, Fine Gael) | Oireachtas source

I commend the Minister for Health on the fine job he is doing. He took over the portfolio at the worst time in history as far as funding is concerned. Funding is still scarce but he is doing a better job than previous Ministers who occupied the post at a time funding was in abundance. One former Minister compared the Department of Health to Angola in the worst period in its history. Morale in our hospitals has greatly improved.

The Minister has given reassurance to health professionals since taking this heavy task on his shoulders.

I welcome the opportunity to speak on this Bill. Private health insurance is of the utmost importance to many people and their families. I am delighted the Government has made changes to the private health insurance system to make it more affordable for older people. With the agreement of the Department of Finance, I understand there is an extra age related income tax credit for insured persons aged 60 and over. This credit, known as risk equalisation, is provided as a tax relief at source, which means the cost of the policy is reduced by the amount of the age-related income tax credit on all insurance policies.

The Health Insurance (Amendment) Bill 2013 sets out to adjust the risk equalisation credits and stamp duty payable so that the risk equalisation of health insurance can be changed. The adjustment is to increase the levy on advanced policies, which cover 94% of insured people. There will be no change to stamp duty on non-advanced policies, covering 6% of insured people. This stamp duty is a levy on health insurers and should not be passed on to consumers, which has been the case in the past. There is no better person to ensure it will not happen than the Minister.

In February, the Joint Committee on Health and Children discussed the health insurance levy and aspects of the risk equalisation scheme. Appearing before the committee, the Health Insurance Authority's industry regulator outlined the level of impact risk equalisation has on market premiums and what determines premiums, stating:

Risk equalisation in itself has no effect on overall market premiums. The determinant of overall levels of premiums is the insurer's cost of providing a service and the greatest element of this is the cost of claims.

I am sure the Minister is examining this topic. There is no foreseeable reason the premium should rise when the risk equalisation levy rises. The Minister has encouraged insurers not to pass on the increase in stamp duty to customers but every time the insurance companies receive a levy, they unnecessarily pass it on to the average person. I have every confidence in the Minister that it will not happen on this occasion.

Risk equalisation schemes promote a fair and balanced health insurance market and ensure older or sick people can access the market on the same basis as others. Risk equalisation is a vital support to community rating, which is at the heart of the Irish private health insurance market. It means everyone pays the same price for the same product, regardless of age or health status. Health insurance should be as affordable as possible for older and less healthy customers. We have an aging population, with more people availing of health services than in the past. It is good that people are living longer, with the age profile having increased. In the risk equalisation scheme, there is a risk equalisation fund where the health insurance company receives credit for each customer deemed to have a higher risk. Risk equalisation credits are paid out to the health insurance companies in respect of the premiums of people aged 50 and over. The amount of the credit depends on the person's age, sex and the type of insurance cover. This credit can vary from €600 in the case of a person aged 60 to 64 years to €2,700 in the case of a person aged 85 or over. The fund is paid for by stamp duty levied on all open market health insurance policies. Risk equalisation is essentially a system that compensates insurers that carry heavy risk by means of payments from other insurers that carry lighter ones.

The HIA has stated that, without risk equalisation, the incentive for the insurer is to insure younger and healthier people while avoiding older and less healthy people. Where insurers have older and less healthy people on their books, the incentive is to sell them a different product in order to charge more. The risk equalisation system protects the right of older people to purchase health insurance at a reasonable rate. Risk equalisation also supports competition. Without it, competition would be distorted in a community-rated market because insurers with the worst risk profile are at a significant disadvantage.

The Department of Health has stated that the changes to the levy are necessary to balance the risks based on data on market participation. The reason for the change is that taking into account such factors has altered the demographic profile of those insured as well as market developments. Since the economic downturn, large numbers of people have dropped their health insurance. Some 50.8% of the population had cover at the peak in 2008 compared to 44.8% at the end of September 2013. The drop in the number of insured is highest among those aged under 50 years of age.

I am concerned at the decline in health insurance numbers as it is an issue for the market. It threatens the balance of health insurance risk in the community rating system. In this system, younger people, on average, make fewer costly claims, subsidising the claims of older insured people. The loss of a number of younger subscribers will upset this balance.

Having said this, a number of policy options have been put forward to support younger people entering or staying in the health insurance market to support the stability of the market. A greatly needed initiative to bring younger people into the market is the introduction of lifetime community rating. This system will make it beneficial for an individual to take out health insurance at a younger age with a cost saving benefit. The most common reason people have dropped their health insurance is cost. More than four in ten of those who have dropped a policy have done so for that reason. The private health insurers need to ease up on people and allow them access to an affordable health plan. At least four or five private insurance companies have entered the Irish market since it was opened up. This was a lucrative business and the companies will take any opportunity to make more money. The levy should not increase premiums but is being used by insurers as an excuse to justify a hike on prices. These measures help to create equality for all age groups as they intend to bring about no overall increase in premiums and to spread the risk more evenly between the healthy, the less healthy, the old and the young.

In our programme for Government we stated that we would introduce a system of risk equalisation for the current insurance market. We are delivering on that promise. I compliment the Minister on that. I am also pleased to note that the Minister is reforming the health services to ensure the financing system is based on incentives that promote fairness and efficiency, while also reducing costs, improving control, and improving quality. That is happening. We are all well aware of the difficulties the Minister is encountering in delivering his reform programme while budgets and staff numbers continue to reduce.

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