Liam Twomey (Wexford, Fine Gael)
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Question 87: To ask the Minister for Health and Children her views on the recent Competition Authority report on competition in the private health insurance market; and if she will make a statement on the matter. [6489/07]

Mary Harney (Dublin Mid West, Progressive Democrats)
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I welcome the publication of the Competition Authority's report on competition in the health insurance market and the Health Insurance Authority's companion report published last Friday.

The Competition Authority report makes 16 recommendations. Several are of a very technical nature and require further consideration by the Department and the Health Insurance Authority. Many of the recommendations that require action on my part will be included in the VHI Bill, which I hope to have published before Easter. I fully accept the recommendations designed to increase consumer awareness and to make it easier for consumers to switch from one insurance provider to another.

I have repeatedly restated the Government's commitment to maintaining community rating in the market and to promoting greater competition. I also want to ensure that the regulatory framework does not place unnecessary obstacles in the way of companies seeking to enter the market. For that reason, I have appointed a market review group to examine the rate of return to be earned in the market and associated issues as quickly as possible. When I receive its report before the end of March, I expect to bring proposals to the Government based on its recommendations and those of the Competition Authority and the Health Insurance Authority.

Liam Twomey (Wexford, Fine Gael)
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Essentially, nothing will change until publication of another report at the end of March.

It is important that we ask those who pay private health insurance premia. What will their situation be when the Minister receives the report at the end of March and they face the next general election? VHI, without risk equalisation payments, will increase its premia by between 5% and 10%. The Minister's co-location plan to build private hospitals and move private beds out of public hospitals could add another 5% to 10% to premia. Medical inflation adds between 10% and 15% to premia. Does the Minister agree that VHI premia alone could mean increases of anywhere between 20% and 35% for its 1.5 million customers on top of normal market variations over the next five or six months?

Does she further agree that if VHI has to increase its reserves to the levels held by other insurance providers that could add another 5% or 10% to premia? I would like her to tell me this, since VHI is a semi-State organisation. The CEO has increased premia by 12.5% in each of the past two years. He has made public statements on some of the figures that I am using here to the effect that premia have risen as a result of Government policy and medical inflation. Why has VHI not yet announced how much premia will increase by next year? Has that been subject to political influence because of the approaching general election and because the Government has made such a mess of the private health insurance market that the customer and patients with private health insurance are to be hammered?

The Minister was very unclear regarding the co-location plan and what the Competition Authority and her own group intend. We cannot distinguish fact from rumour, for example, whether VHI is to be broken up. The Minister has said nothing about whether serious plans exist to split the services that VHI provides. The market is incredibly muddled and those getting the rawest deal are private patients. What happened with BUPA was anticipated and has caused untold worry for its customers. What is happening now will do the same for Quinn Direct and VHI private patients. They will be hammered by the cost of premia, since the Government has lost direction and does not know what it is doing regarding the private health insurance market. The Minister should explain to us her exact plans to keep premia down.

Mary Harney (Dublin Mid West, Progressive Democrats)
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I find Deputy Twomey's intervention extraordinary because when BUPA announced that it was to pull out, he stated on the airwaves that the risk equalisation was far too severe.

Liam Twomey (Wexford, Fine Gael)
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That is not what I said. I asked the Minister what could be done about risk equalisation. I too can throw out glib statements, for example, that the Minister did not give a hoot about matters. She knew for a year and a half what was going on, but did nothing about it.

Mary Harney (Dublin Mid West, Progressive Democrats)
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I did a great deal about it. For example, I fought a very successful court case and won. The way the Deputy is going on, one would think that we had lost it.

Liam Twomey (Wexford, Fine Gael)
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It is the private patients who are losing.

Mary Harney (Dublin Mid West, Progressive Democrats)
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For the first time, I have secured a Government decision to put VHI on a commercial footing. The tragedy is that it was not done in 1996, when we legislated for risk equalisation, since it is among the reasons that we do not have a level playing field. VHI does not have to meet its competitors' solvency requirements, a major issue for the latter. The Deputy knows that it is being pursued by the European Union. The regulatory body requires 40% of premium income to be put aside as a reserve, while in the EU generally the figure is 23% or 25%. Our requirements are far too severe and very conservative.

The group that I recently established, led by Mr. Colm Barrington, is specifically tasked with taking on board what BUPA and Vivas have said, namely, that one cannot make a fair return on capital in the Irish market. Its members have enormous experience of insurance and investment and will report by the end of March.

In the meantime, there are real issues to address. We have an exemption under Irish law whereby one can enter the market and provide health insurance for three years without making any risk equalisation payments. That issue must be addressed, and I intend doing so, but there are also other questions. For example, many people do not yet realise that one can switch from one insurance company to another without any penalty. I still find that there is great ignorance among consumers in that regard.

Among the suggestions in the two reports that I have mentioned is that renewal notices be issued up to a month in advance. I believe that the period for car insurance is 15 days and that has had a major impact. At least people then have a chance to shop around. The HIA has recommended that up to a month's notice be given and renewal notices should probably include reference to the fact that one can switch insurers without any penalty.

On the future of VHI, the Government has decided to commercialise the organisation and it is important that this is done as quickly as possible. The Deputy acknowledged on a previous occasion that it could not happen overnight because of the solvency issues. I have not spoken to VHI about price increases, nor would I interfere with its board or executives. I therefore resent very much any suggestion that, because there is an upcoming election, the VHI has been asked to act inappropriately. I would not stand over any Minister being involved in practices of this kind. It would be totally dishonest and the board of the VHI would be reckless if it were to agree to such a request, if put to it.

Liam Twomey (Wexford, Fine Gael)
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Considering the board of the VHI made so many comments during 2006 on the impact of risk equalisation and competition, or the lack thereof, in the Irish private health insurance market, does the Minister not believe it should indicate its planned increases in premiums? It is usually at this time of the year that we are told what they are to be. Given that the board has been saying all along that risk equalisation, medical inflation, the collocation plan and a range of other factors, such as the reserves, have an impact on the cost of premiums, and that 2 million people will be affected next year, would it not be more appropriate for it to make comments on the increases? Some aspects of this matter are outside the Minister's control but quite a few of the health insurance cost drivers are well within her control. In some respects, she has contributed to the costs. Might it not be prudent for the board of the VHI to indicate its planned increases?

Mary Harney (Dublin Mid West, Progressive Democrats)
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On the supply of private facilities or consultants, in most insurance markets companies like to see more suppliers of products and services because this drives innovation and drives down prices. The health insurance industry in Ireland is unique, perhaps because there has mainly been one company, apart from the providers of the ESB and Garda medical schemes, offering insurance in the market since 1957. The view was taken that the fewer the number of private hospitals, the better, but neither I nor patients accept this. Deputy Twomey knows as well as I do that the huge shortages are such that many patients must wait some considerable time for access to a consultant. The private system has not filled the gap, as it would do in other countries.

We need 1,500 more consultants so everybody can gain access to one quickly. If somebody tried to suggest to me that we should limit the stock of private hospitals to keep down the price of medical insurance, I would reply that it would also delay patients' treatment. This is not a solution to any problem.

Collocation has been proposed for a very good reason. The beds involved are ring-fenced for private patients in public hospitals and are funded and staffed by the taxpayer. Everybody should have access to these beds. Equity of access is central to our new contract of employment for consultants. Access to facilities funded by the taxpayer should be on the basis of equity and one group of patients should not be privileged over another. This is why nine hospitals are so interested in collocation.

Collocation provides an on-the-site response. The taxpayer obtains money from the lease or sale of the land in question rather than having it used as a carpark. The public system can procure, if it wishes, services from the private provider, or the private provider can procure services from the public provider. Thus, both sides work in a co-ordinated way, as is the case at St. Vincent's Hospital. This system is preferable to having one in which a plethora of small private hospitals emerge, which are not connected to the public hospital system. If the two are connected, a better service is afforded to patients and we get better bang for our buck.

Community rating and competition are fundamental to my policy and that of the Government. If there is no competition, there can be no innovation or good value. Rather, there would just be a monopoly supplier of services in the market. Obviously there cannot be community rating without risk equalisation because, if one company has all the younger premium holders and another has all the older ones, they could not compete on a level playing field.

I recently met a couple in their 60s who returned to Ireland after having lived in the United Kingdom. They stated that, because of their health condition, their insurance in the United Kingdom cost £12,000. Their health insurance in Ireland, involving one of the better plans, costs in the region of €2,200. That shows the difference. There is no doubt that, without community rating, insurance cover in Ireland would be held by approximately 10% to 12% of the population and certainly not the 54% who hold it at present. Community rating is central to Government policy.

Liam Twomey (Wexford, Fine Gael)
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I have a few points to make.

Séamus Pattison (Carlow-Kilkenny, Labour)
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We must move on.

Liam Twomey (Wexford, Fine Gael)
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If the Minister can make statements——

Séamus Pattison (Carlow-Kilkenny, Labour)
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There are other questions to be answered. We have already spent seven minutes on the question and cannot allow any more time.

Liam Twomey (Wexford, Fine Gael)
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She throws out statements as if she has no connection with this matter.

Séamus Pattison (Carlow-Kilkenny, Labour)
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We must proceed to Question No. 88.

Liam Twomey (Wexford, Fine Gael)
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The fact is that Government policy made the small hospitals spring up around the country. It was when former Minister, Charlie McCreevy——

Séamus Pattison (Carlow-Kilkenny, Labour)
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We have spent double the time allowed on the question.

Liam Twomey (Wexford, Fine Gael)
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——dropped the barrier in respect of beds.

Séamus Pattison (Carlow-Kilkenny, Labour)
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The Chair has called Question No. 88.