Mary Butler (Waterford, Fianna Fail) | Oireachtas source

I thank the Deputy for his contribution and for his proposed amendment. I must, however, reject the amendment. I will outline the reasons for this rejection.

Section 7F of the Health Insurance Act 1994 provides that if a beneficiary of the risk equalisation scheme makes more than a reasonable profit, the excess will be returned to the risk equalisation fund. This legislation was introduced to fulfil the requirements of the European Union state aid rules under the services for general economic interest framework. In 2015, a rate of reasonable profit of 4.4% was agreed with the European Commission under state aid rules.

As the Deputy is aware, a reasonable profit figure of 6% was recommended to the Minister for Health in 2021 by the Health Insurance Authority, the statutory regulator of the private health insurance market. The recommendation was based on a new benchmarking exercise among European and Irish insurers. Significant work was carried out in this regard. Independent advice was obtained from external consultants, namely, Oxera Consulting, which was commissioned with the aim of verifying whether a return on sale of 4.4% was still appropriate for the 2022 risk equalisation scheme. Oxera Consulting's advice was based on comparators with other European insurance companies and reflected recent trends in the profitability of insurance sectors across a range of countries. The Oxera Consulting report concluded that the 4.4% rate for overcompensation did not allow for a reasonable profit and noted an appropriate return on sales in a range between 5.5% and 8.6%. The report concluded that the benchmark should be adjusted to account for the changes in the financial reporting requirements and to ensure the return on sales benchmark did not facilitate excessively high premiums in the market, leading to unnecessarily high levels of profitability.

The Health Insurance Authority's recommended figure of 6% return on sales was on the lower end of the range proposed by Oxera Consulting, which was between 5.5% and 8.6%, and took into consideration the sustainability of the market and the maintenance of fair and open competition. The updated reasonable profit rate of 6% underwent due consideration as part of Ireland's state aid application for approval of the current risk equalisation scheme. I assure the Deputy that, during this process, the proposed rate and the likelihood of overcompensation were thoroughly reviewed. The rate of reasonable profit of 6% received European Commission approval under state aid rules in March 2022. On that basis, I am rejecting the proposed amendment.

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