Simon Harris (Wicklow, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

The Health Insurance (Amendment) Bill 2017 was published on 17 November and concluded its passage through the Seanad last week. I welcome the broad support in that House for the core principle of community rating which is a long-established aspect of Government policy on the health insurance market. This short Bill comprises seven sections dealing with the specific issue of health insurance, particularly the risk equalisation scheme which supports the system of community-rated health insurance. Risk equalisation means that everyone pays the same price for the same product, irrespective of age, gender or health status. In other words, older and sicker people pay the same price as younger and healthier people.

In a community-rated market like ours the risks are shared across the market as a whole, making insurance more affordable for less healthy and older people than it might otherwise be. In risk-rated markets, on the other hand, the premium charged is based on the insurer's estimate of each person's risk, taking into account relevant factors such as age and existing medical conditions. Under this model, healthier people pay low premiums, while sicker people pay high premiums. Moreover, under a risk-rated system, the premium for someone who has held health insurance for many years will rise if his or her health deteriorates.

The Health Insurance Act 1994 requires all insurers to apply community rating. However, older and sicker customers are not shared equally across the Irish insurance market because of the relatively recent arrival of competition.

Community rating is supported by a risk equalisation scheme, where the cost of insuring older and less healthy people is spread across the market through the imposition of a stamp duty levy on every health insurance contract issued. Levies are paid into a fund, out of which risk equalisation credits are paid to insurers in order to reduce some of the additional costs they incur when insuring older, less healthy members. The scheme does not take money from the market, rather it distributes it to subsidise the health insurance costs of older, less healthy people. The aim of risk equalisation is to look at the market as a whole, and to distribute fairly the differences that arise in insurers’ costs due to the differing health status of the insured population as a whole. This is an important point because we often hear insurance companies using this to suggest that somehow or other it takes money from the market; the scheme does not do that at all. It tries to ensure equity and fairness, which I believe is reflected by a societal belief that is held across the State.

The number of people who currently hold private health insurance is more than 2.1 million, with three commercial insurers operating within the market. There is, however, a clear disparity in the membership profile and thus the associated costs being incurred across the various commercial insurers. Community-rated health insurance systems across the world use risk equalisation to share some of the higher costs of older and sicker patients across the whole market. The US, Australia, Germany and the Netherlands are just a few examples of other countries that use risk equalisation to support community-rated health insurance. The overall goal is to channel competition in the health insurance market in a way that benefits everyone who wishes to purchase private health insurance. The benefits of our system of community rating can best be seen as supporting the market as a whole and ensuring that, through the provision of risk equalisation credits for older customers, they can be helped and supported to purchase health insurance at a more affordable price if that is their wish.

Legislation is needed each year to update the amounts of credits paid to insurers under the risk equalisation scheme and the amounts of stamp duty levied on health insurance contracts to fund the credits. As part of the process, the Health Insurance Authority carries out an evaluation of the market and recommends the level of credits that should apply next year, taking into account the changing demographic profile of those insured and market developments including price and product developments. I have considered and accepted the recent recommendations made by the authority for the rates next year. The first is a general decrease in the amount of risk equalisation credits payable in respect of those aged over 65 years, based on age, gender and level of cover. The second is the stamp duty to remain unchanged in respect of advanced contracts at €444 per adult and €148 per child, and a reduction of the stamp duty in respect of non-advanced contracts to €177 per adult and €59 per child. In general, insurers will receive lower levels of risk equalisation credits next year. The provision of lower credits is possible as there has been a reduction in the market average claims cost per insured person in the previous 12 months. Given that the scheme is designed to be self-financing, with the total amount of credits provided matching the stamp duties raised, the main stamp duty levy on health insurance products remains unchanged next year. In addition, the stamp duty for non-advanced contracts is being reduced by 20%.

I am mindful that the risk equalisation rates need to support the sometimes competing aims set out in the legislation and increase the scheme's effectiveness, without substantially increasing stamp duty levels. I am pleased, therefore, that this year it has been possible to maintain the main stamp duty at the existing level. In addition, I believe the revised rates strike the right balance by ensuring that the scheme continues to be as effective as possible and, at the same time, remains robust, transparent, and promotes fair and open competition in the market.

The risk equalisation system currently allows for a small measure of compensation for health status through a payment of €90 for each overnight stay in a hospital and €30 per day case admission. I believe the support for insuring less healthy consumers should be increased and, therefore, small increases are also proposed to the existing level of hospital utilisation credits provided to insurers under the scheme, increasing to €100 per night for overnight stays and to €50 for day case admissions. These utilisation credits are a proxy for health status and will provide additional support in respect of less healthy people. This change results in a higher proportion of credits being directed to less healthy people than to older people. This is a step towards improving the health status element of the scheme within the boundaries of the current risk equalisation scheme.

As a necessary support to community rating, I am committed to making the risk equalisation scheme as effective as possible in a way that promotes fair and open competition. While the changes to the credits will help to maintain levels of support for community rating, further improvements to the scheme are also planned. The scheme is a state aid and requires approval from the EU, with the current scheme approved to 2020. As part of ongoing development, it is planned to further enhance the risk equalisation scheme with the introduction of a more refined measure of health status. The most appropriate measure is based on diagnosis related group, DRG, activity data, which will allow better targeting of credits to all people who require higher levels of health care. I have asked officials to focus on progressing this, in conjunction with the Health Insurance Authority, in the months ahead. A working group has been established to inform the private hospital data collection aspect of this process and any implications arising. Refining the health status measure using DRG data will further reduce the incentive for insurers to attract low-risk people and avoid high-risk people.

The Bill makes a number of changes to the lifetime community rating, LCR, scheme in operation in the health insurance market. This scheme was introduced in 2015 to encourage people to take out insurance at younger ages. This Bill provides the basis for these amendments to LCR. Following enactment, I will make a regulation next year, which will set out the specific details of the changes and further enhance the operation of the lifetime community rating scheme. Since its introduction, LCR has had a positive impact with an increase of more than 150,000 persons holding health insurance between January 2015 and January 2017.

Earlier this year, the independent Health Insurance Authority reviewed the operation of the LCR scheme and made a number of recommendations. The changes being made now are to ensure the continued smooth operation of the scheme in a fair and balanced manner. Under the existing scheme, people holding health insurance who leave the country to go abroad for work or other reasons may incur loadings on their return. The main changes included as part of this Bill mean that people will be able to work, travel or live abroad and will not incur loadings on their return. This change is being made because the main objective of the LCR scheme is to encourage people to take out health insurance at younger ages, rather than penalising people who have spent periods of time outside the country. People will also be permitted to have breaks in insurance cover of at least six months while living in the country, without incurring loadings on resumption of cover. This will be based on having private health insurance for at least three years prior to taking a break in cover. The current LCR scheme provides for breaks in insurance cover for periods of unemployment, to recognise circumstances where individuals were forced to cancel their health insurance. The current legislation, however, does not provide any allowance for breaks in cover for reasons other than unemployment - for example, individuals who are involved in the full-time care of a dependent relative - so I am broadening the approach to provide for such circumstances.

In addition, a change is being made to take account of time served working in the Permanent Defence Force and as a staff member of the European Union working in this country to ensure that loadings are not unfairly incurred when these groups seek to purchase health insurance with an Irish provider. I am also ensuring that loadings are payable for ten years only, rather than for life as is currently the case. This amendment is being made to prevent circumstances arising where the application of loadings is of such magnitude and duration as to act as a disincentive for people taking out health insurance. Taken together, the changes being made to the operation of lifetime community rating will ensure that the scheme involves a fairer and more reasonable approach to loadings on health insurance premiums than has been the situation to date.

I will now outline the specific sections of the Bill. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 amends section 7(a) of the principal Act to expand the Minister's regulation-making powers in relation to the operation of the scheme. This section also provides that, where increases in unadjusted net premiums apply, such increases are payable for ten years only.

Section 3 amends section 11(c) of the principal Act to provide for 1 April 2018 as the effective date for revised credits to be payable from the risk equalisation fund.

Section 4 amends Schedule 3 to the principal Act to provide for the revised amounts payable from the risk equalisation fund in respect of the hospital utilisation credit for health insurance contracts renewed or effected from 1 April 2018. Schedule 3 contains revised amounts for the provision of inpatient services on an overnight basis and for the provision of inpatient services on a day case basis.

Section 5 replaces table 2 in Schedule 4 to the principal Act with effect from 1 April 2018 whereby the applicable risk equalisation credits payable from the risk equalisation fund in respect of certain classes of insured persons are revised.

Section 6 amends section 125(a) of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates for 1 January 2018 to 31 March 2018 and for 1 April 2018 onwards.

Section 7 provides for the Short Title, commencement, collective citation and construction of the Bill. This annual legislation for credits and levies under the risk equalisation scheme also provides an opportunity to reflect on the role of private health insurance within the health service.

One of the first priorities I identified was the need for a long-term consensus on the direction of health policy in Ireland. In this regard, I supported the establishment and continued work of the all-party Oireachtas Joint Committee on the Future of Healthcare. I am committed to working with Members of the Oireachtas and with Government colleagues to make tangible and sustainable improvements in our health services. I believe that the Sláintecare report now provides a framework and a direction of travel in which to do this.

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There is an unprecedented level of consensus and support for the vision and strategic direction outlined in the report that I am determined to harness to work with colleagues across the political spectrum in moving forward with the reform agenda. The Government has given its approval to move ahead with the establishment of a Sláintecare programme office in my Department. The office has been tasked with implementing a programme of reform, as agreed by the Government, arising from the Sláintecare report. The office will be led by a senior programme executive with a strong track record in implementing reform. The recruitment process to fill this position is under way and being managed by the Public Appointments Service. It is essential that we be positioned to attract candidates of calibre to lead what will be a considerable reform programme. An extensive executive search is being undertaken as an important step in the recruitment process.

The majority of additional funding for new health initiatives in budget 2018 has been targeted at areas identified in the Sláintecare report. They include a new primary care fund, additional home care and transitional care beds, a reduction in medicine and prescription charges and targeted funding for waiting list reductions. Further to this, I recently announced the following steps to drive the reform agenda: an impact study of private care in public hospitals chaired by Dr. Dónal de Buitléir which is to report next summer; a public consultation process on the future alignment of hospital groups and community health organisations which will be launched in the coming days and the establishment of a board to oversee the performance of the HSE. I am committed to bringing to the Government before the end of the year a detailed response to the Sláintecare report and a draft programme of reform. It is vital that we do not waste this opportunity for change and real improvement in health services.

In addition to Sláintecare, work on the health service capacity review is progressing within the Department. The review will be more comprehensive than any previous capacity review because it is not just looking at the acute sector but also at aspects of primary and social care capacity. I expect to receive the final report on the capacity review before the end of the year.

Taken together, the Sláintecare report and the capacity review of the Government's ten-year capital plan - particularly the latter - present all of us with a great opportunity to define a clear direction of travel for reform. The current and potential role of private health insurance, both as a source of funding for the health service and as a driver of the model of care people receive, will also be considered as part of ongoing work in this area. In the meantime, by revising the credits and stamp duties required next year, we can continue to provide the necessary support to ensure health insurance costs are shared across the insured population. Unlike previous years when the Bill has been brought before the House, 2018 will see stamp duty levels remain the same or, in some cases, decrease for everybody with or who is taking out a health insurance policy. I commend the Bill to the House.

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