Dáil debates

Wednesday, 21 February 2007

Health Insurance (Amendment) Bill 2007: Second and Subsequent Stages


9:00 pm

Photo of Mary HarneyMary Harney (Dublin Mid West, Progressive Democrats)
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I move:

"That the Bill now be read a Second Time."

The Government has decided today that emergency legislation should be introduced in the House today to amend the Health Insurance Acts. This urgent measure is required to support our system of community rating that ensures health insurance is affordable for older and sicker people. It closes any potential abuse of the three-year exemption from risk equalisation payments.

Deputies will be familiar with the regulatory framework which underpins the operation of the private health insurance market in Ireland. The key elements of this framework have been supported by successive Governments. These are community rating, open enrolment and minimum benefits. The adoption of this approach to regulating the market has been part of the reason the level of private health insurance coverage in Ireland is unique in Europe. Approximately 52% of the population has health insurance cover.

There are many reasons why people choose to buy health insurance cover. Many people in Ireland choose to do so because it is affordable. Even more importantly, it remains affordable throughout people's working lives and into retirement. We all know we are more likely to need expensive medical treatment later in our lives rather than earlier. In most countries and as part of a risk rated insurance market, health insurance premiums increase as people get older and as a reflection of the higher risk of claims related to ageing.

In Ireland the policy of community rating means health insurers cannot discriminate against older customers and must offer their various plans to subscribers at the same cost regardless of age or medical history. I believe this is a fair and equitable approach. Apart from keeping health insurance affordable, it is a practical demonstration of intergenerational solidarity whereby the younger and healthier section of the population pays more than would be needed in a risk-rated market but who themselves benefit in later life when they might be expected to pay prohibitive premiums if their higher risk were to be reflected in the price paid.

It is generally accepted that a community rated market cannot operate as intended if insurers in the market have markedly different risk profiles. Some mechanism is required to balance the risks and spread them across the market so the different insurers can offer community rated products. For this reason all community rated markets also have a risk equalisation mechanism of some nature to balance the risks.

New entrants to the market typically tend to attract younger subscribers with a lower than average risk of claiming under their policies. There is plenty of evidence to suggest that existing older health insurance subscribers are reluctant to switch their business to new entrants.

To counteract this phenomenon the Health Insurance Acts have allowed new entrants to the market to avail of a three year exemption from the obligation to make risk equalisation payments that might otherwise be levied on them as a result of their having a more favourable risk profile. The exemption was intended to give new entrants the opportunity to establish themselves and to build a market share. It was clearly the intention of the Oireachtas when the measure was enacted that this exemption should be confined to new entrants coming into the market seeking to build market share from zero by organic growth.

It was recognised that the exemption could be open to abuse by an existing insurer reincorporating itself or establishing an associated company and seeking to secure a second three year exemption by claiming to be a new entrant. Section 12B of the Principal Act — inserted by section 10 of the Act of 2001 — was amended in 2003 to prevent such a move.

However, the amended legislation did not encompass the situation which emerged with the announcement on 31 January by the Quinn Group that it had reached an arrangement with BUPA for a takeover of the latter's Irish operations. This development followed BUPA's announcement on 14 December that it was withdrawing from the Irish market following the dismissal of its High Court challenge to the risk equalisation scheme.

I want to emphasise that the Government and I welcome the Quinn Group's interest in entering this market. It has built a strong reputation and a successful business in the reformed motor insurance market and has been a positive influence on the level of competition in that market. I have not seen the legal agreement between the Quinn Group and BUPA for the transfer of the BUPA Ireland business to the Quinn Group. However, the Attorney General has advised that the potential exists for an incumbent or a non-incumbent to avail of the three year exemption by particular corporate transactions, in essence, acquiring or restructuring the business of an existing player in the market.

In the Government's view the securing of the exemption in this way would constitute a frustration of the intention of the Oireachtas when it passed this measure into law. The Government has been advised that this loophole should be closed as a matter of urgency.

The Government has decided, based on legal advice, that the most effective means of achieving this is to remove the exemption for new entrants in its entirety. The removal will become effective immediately when the Bill now before the House is signed by the President. It will not affect the exemption which VIVAS presently has and which expires in October 2007. Clearly, it does not prejudice the ability of the Government to form policy for the market or the Oireachtas to pass further legislation at any time. On the other hand, not to close the exemption now would have constrained policy development in a significant way.

Section 1 of the Bill contains standard provisions dealing with definitions. Section 2 provides that under existing legislation risk equalisation payments apply to existing undertakings. However, it is considered prudent to put beyond doubt, that should an undertaking no longer be on the Health Insurance Authority Register of Undertakings, it should be liable for risk equalisation payments in respect of contracts written when it was a registered undertaking.

Section 3 is a technical amendment which follows on from section 2. Section 4 repeals the limited three year exemption from risk equalisation for new entrants to the market with immediate effect. The purpose of the exemption was to promote competition in the market by allowing new entrants a period of time during which market share can be built up before risk equalisation payments fall due to be paid. However, the exemption has the potential to be exploited by a company which acquires an existing undertaking or associated company to avoid making risk equalisation payments.

The Government believes it is therefore necessary to enact legislation to prevent such abuse. Section 5 provides for the usual Short Title and collective citation. I have repeatedly restated the Government's commitment to maintaining community rating in this 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 and allows them earn a reasonable return on capital. For that reason I have appointed a market review group chaired by Mr. Colm Barrington to examine whether, having regard to all aspects of the current market here and the need to maintain community rating, it is possible for current and prospective participants in the health insurance market to earn a rate of return on capital employed which would be regarded as adequate for the insurance industry.

When I receive the Barrington report at the end of March I expect to bring it, along with the reports of the Competition Authority and the Health Insurance Authority, together with my recommendations, to the Government in April for a decision. I commend the Bill to the House.

Photo of Liam TwomeyLiam Twomey (Wexford, Fine Gael)
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I wish to share time with Deputy Coveney.

This whole issue about health insurance has been going on since April 2005. Extensive debates have taken place at meetings of the Joint Committee of Health and Children on every aspect of health insurance, with the Health Insurance Authority, VIVAS, VHI, BUPA, the Minister for Health and Children and the Department of Health and Children since April 2005. I want to make clear Fine Gael's position. We fully support competition and community rating. With community rating we fully support risk equalisation, which we want to keep in this marketplace. However, we want to know from the Minister what is going on, why this legislation is so necessary and what exactly she is doing.

This legislation basically abolishes the three year derogation rule for any new entrants to this marketplace. It seems the Minister is only abolishing this derogation because Seán Quinn was going to get away with it. I am sure he is no fan of mine so there is no vested interest in my saying that what the Minister is doing will damage competition in the private health insurance market because she has left this to the last minute as usual. This issue has been bubbling under the surface for at least 12 months and she has left it to the last minute to deal with it, which is a major concern.

What will happen in the sector for private health insurance customers? VHI customers may not pay the price for this mess created by the Government immediately. It may take six or nine months for those customers to see their premiums increase because of this mess, as it might take BUPA that long to exit the market. However, tomorrow morning we may well learn that BUPA customers have again to deal with another unholy mess created by the Government last December. The Minister has rushed through legislation on something she has not fully thought through and she does not know where she is going with it. That is of major concern to Members on this side of the House.

As this side of the House has no access to information the Minister has about how private insurance companies operate in the market, there is speculation that a report which was supposed to have been prepared by the Health Insurance Authority, an agency of the Minister's Department which gives her advice on this issue, states that new insurance companies should be given a financial advantage for seven years instead of the present three years. That report was leaked; it was put on the Minister's desk this month. This legislation removes that derogation. Members on this side of the House have no access to the information the Minister has on this issue. There seems to be contradictions in regard to it, even when account is taken of the Competition Authority's report. The Barrington group will report in March. For an issue that affects 2 million of our citizens, this seems to be an unbelievable mess.

To say that rushed legislation is bad legislation is one thing, but I find it extremely difficult to support this legislation because I am not sure where the Minister is going with it. She has made clear that perhaps this is to get at Seán Quinn, but I am concerned about whether it will affect competition and community rating. Should the Minister in the past 18 months not have been examining ways of tweaking risk equalisation to make the market work? She is probably on the verge of setting the private health insurance market back to where it was in 1995 when the VHI was the only company in this marketplace. When it had a monopoly it provided less of a service at more of a cost. Competition improved that position.

Fine Gael supports competition, community rating and risk equalisation, and wants to see what will happen in the private health insurance market for BUPA and VHI customers. This is such a serious issue that I am sure Members on this side of the House, particularly those in Fine Gael, must oppose this legislation on the basis that the Minister does not seem to know where she is going with it.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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I reaffirm what our health spokesperson has said. Fine Gael supports community rating and the necessity for risk equalisation to support it. Nobody wants to see elderly people being priced out of the private health insurance market. I believe we support what the Minister is aiming to do with this legislation. BUPA is leaving the market and fair-minded people believe that it should be required to pay what it owes under risk equalisation. There is no problem with that issue.

The Quinn insurance group has taken over the BUPA client base, and there is concern about the loophole it aims to take advantage of by not paying risk equalisation payments for three years. I can understand why the Minister would try to close that loophole and we do not have a problem with that principle. The problem is that the strategy the Minister is using to do that has consequences for the health insurance market moving forward. Essentially, it signals there will be no incentive for a company outside Ireland to consider entering the Irish health insurance market and offering a service at a fair price. If an outside company were contemplating entering the Irish market and noted that the VHI and VIVAS, if Quinn Direct decides to leave the market after this decision, are the only operators in it, it could see no financial sense in entering a marketplace with no incentive or no competitive advantage to allow it to settle into that marketplace, which was the reasoning behind the risk equalisation payment exemption for three years. This is an extraordinary decision. The Minister is admitting that we will not invite or encourage any new entrants into the Irish health insurance market, which is a step backward as regards competition in this sector.

Was it not possible for the Minister to consider specifically targeting the Quinn Direct group and the loophole it plans to take advantage of by, for example, aiming to ensure that the incentive of not having to pay risk equalisation payments for three years would not exist for companies taking over an existing client base? Would that not have solved the problem? Why have we got to go the whole hog and ensure that nobody considering entering the Irish market can have the incentive of being exempt for the first three years from risk equalisation payments? This clearly worked in the past in terms of encouraging BUPA to enter the marketplace, but that incentive was not over the top as not too many others have sought to enter the Irish marketplace. Why was that not possible?

I do not believe the Fine Gael Party has a problem with what the Minister is trying to do in this emergency legislation, but we have a big problem with the unforeseen consequences or the by-product of it, which is to remove the incentive to attract new entrants into the Irish health insurance market which could provide more competition and more choice for consumers. That is the problem. That is the reason Fine Gael will oppose this Bill.

Photo of Liz McManusLiz McManus (Wicklow, Labour)
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It is very regrettable that we have been put in this position by the Government. At 6.10 p.m. we were informed by the Minister that legislation would be rushed through the House without us having a chance of ensuring it would undergo proper scrutiny, care and attention, which is the way things should be done. I object to the fact that, in effect, a legislative gun is being put to the head of the Opposition in regard to this legislation.

The Labour Party has and will support risk equalisation and community rating. They are the fundamentals that ensure people are protected and have access to health insurance. I suppose we can be grateful to the Minister that she has not abandoned both community rating and risk equalisation. However, we are extremely concerned at the failure of the Government to safeguard both community rating and risk equalisation in a competitive market where people can have a choice, something which the Minister certainly espoused in the past but has not lived up to. Instead what is being created is a muddle at best and a risk at worse, a risk to jobs and to people who have taken out health insurance who are worried about their future. The most extraordinary thing about this is that it need never have arisen that we find ourselves in this position.

In 2003 legislation was passed by this House. The then Minister for Health and Children, Deputy Martin, put through the Health Insurance (Amendment) Bill and he promised, "The second [provision of the Bill] is to ensure that the temporary exemption from risk equalisation, which has as its objective the encouragement of competition, can be availed of only by genuine new entrants to the market". We were told that was the purpose of the Bill and we accept it in good faith. It is getting to the stage where one cannot believe anything this Government says, but that is what we were promised. He outlined the various sections, including section 6. He stated:

Section 6 is concerned with the arrangements in place to facilitate and encourage the entry of new insurers into the market to provide greater competition and choice to consumers. The legislation provides for insurance undertakings that have not yet commenced business to avail of a three year exemption from risk equalisation.

We know the purpose of this. The provision of the Bill retained the measure of risk equalisation. However, he went on to state:

The main purpose of amending the existing provision is to avoid a possibility that the exemption could be availed of through the creation of a subsidiary or some other form of associated company by an existing undertaking. This approach is considered desirable to remove any possibility of an issue of avoidance arising in the arrangements ... It aims to ensure the exemption will only apply in circumstances where the added value for consumers of private health insurance is a genuine increase in the choice of insurers and greater real competition in the market.

Somebody was looking at the problem, but somebody did not see how far the problem extended. Companies such as Mercers were brought in to advise on this complex matter. Civil servants were also involved. There was no lack of advice to ensure the legislation would encompass measures to deal with the risks inherent in the system. We dealt with one risk and the other was ignored. This was a commitment made by a Minister to guarantee by legislation that there would be competition and that nobody would avoid living up to his or her responsibilities. It was another broken promise and here we are trying to fix the mess.

The Minister said she had not seen the legal agreement between Quinn Direct and BUPA. This raises issues about the extent of what we are facing. If she does not know anything about the legal agreement, what does she know about the future of the 330 jobs in Fermoy? Each worker has been living through a very anxious time in recent months. The workers are mainly young people with mortgages who do not know where they stand. What will happen to them now? That is one practical outcome, even though we have not been asked to look at all the implications.

What is the future for competition? It is hard to envisage any future for it. If a three-year derogation on risk equalisation was designed to assist new insurers to come into the market, what will happen when there is no derogation? The Bill will get rid of derogations; therefore, the tender plants will not even have a chance to grow. The Minister is in effect stating we will not see competition. The chairperson of the Competition Authority made a statement to the Joint Committee on Enterprise and Small Business, in which he specifically recommended that VHI's exemption from prudential regulation should be brought to an end as soon as possible in order that it would become subject to the legal solvency requirements and corporate structuring rules applying to other health insurers. This is a cause of great complaint from the competitors of VHI. A timeframe was set out, but the Competition Authority is clearly indicating that such a timeframe is not acceptable. I would like the Minister to respond to this.

If the Bill is signed into law by the President after midnight, when will it become law under the Interpretation Act? Will it become law from midnight or from midnight tomorrow? My party cannot support the Government when it pushes through emergency legislation without any chance of ensuring it is robust. There are real risks and I have no doubt that the Bill will be challenged in the courts. Risk equalisation has already been the subject of court action and the Minister is right to say she succeeded in the courts following the BUPA challenge. However, that will not stop future court challenges, especially when situations such as this could have been avoided.

There was a clear concern expressed about the difficulties with derogation during the debate on the 2003 Bill. However, there seemed to be no ability within the Department or the ministerial team to do anything. Of course, the then Minister's advisers never read a brief, just like the Minister himself; perhaps, therefore, we should not be surprised. Nonetheless, they touched the surface and dealt with one loophole, but they did not deal with this one and we are now trying to play catch-up in an area worth millions of euro. Derogation is worth millions and any company will try to ensure it can hold on to a derogation to avoid the levying of a large bill. That is what companies do and one should not expect them to do anything other than this. We are talking about huge amounts of money, yet the Government has failed to recognise and acknowledge that what should have been done in 2002 was not done. We are now being given a Bill at the last minute and asked to accept it in good faith without going through it in detail. Frankly, we cannot do this. We must remember that there are individuals taking out insurance who will be affected by this and that there are hundreds of people working today who thought the crisis had passed. Their concerns need to be foremost in our minds tonight.

Photo of John GormleyJohn Gormley (Dublin South East, Green Party)
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I am sharing my time with Deputy Ó Snodaigh and Deputy Connolly.

This is a complete mess and not the way to legislate. I was in my constituency this evening trying to explain to people the reason for Government confusion about the proposed incinerator when I received a telephone call. I now see its confusion about this issue. Has so-called competition worked? It was suggested that when VHI had a monopoly, prices were much higher. However, in the past six years premiums have increased substantially, by up to 80%. Competition has not worked. In the Canadian model there is a natural monopoly, with one insurer providing universal health insurance. Surely, that is a model we need to examine. If there are a number of insurance companies in the market, we need the community rating model, with risk equalisation. However, what model of risk equalisation is the Minister talking about? Various models have been brought forward. Mr. Seán Barrett and even representatives of BUPA have spoken about sharing the patient load proportionately to ensure every single insurance company has the same proportion of high risk patients.

Under EU directives, one company can have a monopoly if there is universal health insurance. We know VHI is trying to increase its reserves as it is fattening itself up for privatisation at some future date. What we have is false competition. There is no real competition in the market. The bottom line is what is best for the patient. That is what we, as policy makers, need to ask ourselves. If we continue along these lines, the two-tier health service will continue.

Many people have told me stories about private primary care services. My next door neighbour dislocated his shoulder and was told that it would be fine if he paid €200. The situation whereby people who have health insurance continue to have a significant advantage over those who are uninsured cannot continue. We need to engage in a detailed examination of the manner in which we are proceeding. We are introducing legislation at 10 p.m. to close a loophole, but we will have to revisit this matter on many occasions to sort out this mess. The Tánaiste needs to examine the system thoroughly. On that basis, I cannot support this legislation.

Photo of Aengus Ó SnodaighAengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Tonight's developments raise further significant questions about the Government's inept handling of the health care system. Private health insurance in Ireland has been a fiasco from the outset. Sinn Féin will not oppose this legislation because to do so would hurt normal taxpayers, who have to scrimp and save to try to compensate for the failure of successive Governments to put in place a decent public health care system. Approximately 50% of the population have been driven into the clutches of health insurance companies as a result of the Government's failures. I do not want to contribute to any further draining of the resources of people who are suffering because of those failures. Sinn Féin, which believes that health care is fundamentally incompatible with the market, is in favour of free health care at the point of delivery. It should be based on need rather than on ability to pay.

The fiasco involving BUPA Ireland, Quinn Direct and VHI exposes the fundamental contradiction within the two-tier system, which is that many people have to pay twice — they make PRSI contributions and then spend more money to meet expensive private health insurance costs. The Government needs to answer many questions on how it handled the fall-out from the sale of BUPA Ireland. It is obvious that many people have questions about the Government's handling of the MRSA crisis and the ongoing problems with accident and emergency services. There is no area of the health service in which delivery matches the type of service that is required. The Minister, Deputy Harney, needs to answer questions about this proposal, about which Members were informed at a late stage. When did she receive the legal advice on which this Bill is based? If she was given that advice when it was announced that BUPA Ireland had been sold, why did she delay the legislation until now? If this proposal is so important, why have we not been given more time in which to discuss it?

Paudge Connolly (Cavan-Monaghan, Independent)
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The pace with which this Bill is being brought through the House this evening reminds me of a hurricane or a tornado that is sweeping all opposition out of its path. As an earlier speaker said, rushed legislation is not good or safe. What impact will this Bill have on Quinn Direct's decision to purchase BUPA Ireland? I presume Quinn Direct will not touch BUPA Ireland with a barge pole after this move. Risk equalisation seems to be an imperative for all entrants to the health insurance market. This Bill was triggered by the acquisition of BUPA Ireland, which entered the health insurance market in 1997 to offer a greater variety of products. BUPA Ireland built up a customer base of 450,000 people, which was quite a significant achievement. BUPA Ireland argued that the risk equalisation scheme would have caused it to spend more than twice its annual profits on subsidising its competitor. I do not believe it could have tolerated such a position. When it threatened to pull out of the Irish market many people thought it was bluffing, but we now know it was not. Despite the fact that VHI has 80% of this country's health insurance market, BUPA Ireland was also compelled, under the Health Insurance (Amendment) Act 2001, to pay an unspecified sum to the ESB staff scheme.

I was delighted when I heard that BUPA Ireland had been bought by Quinn Direct and I was looking forward to the arrival of that company in the Irish market. I thought the company would be a breath of fresh air in the health insurance market just as it was in the car insurance market, in which it handled and settled claims in a unique manner. Quinn Direct would have brought real competition to the health insurance sector, but it is likely that we will lose a real competitor, tragically. The third health insurance provider, VIVAS, is also enjoying a grace period of three years before it will become subject to the risk equalisation rules. I wonder if its honeymoon will be cut short by this legislation. Before Quinn Direct tried to enter the health insurance market, over 450,000 Irish consumers had been disenfranchised of their right to opt for the private health insurer of their choice.

The Government and VHI have vigorously argued that risk equalisation is essential if community rating is to be maintained. There is no evidence — merely some suggestions — that BUPA Ireland and VIVAS have engaged in risk selection, or cherry-picking, that would undermine community rating. Quite simply, community rating, which is mandatory, is not merely an end in itself — it is a means to the end of ensuring that private health insurance remains affordable for the older population. We should think twice about this legislation, which is being rushed in an unhealthy manner, because it will drive competition out of the market.

Photo of Mary HarneyMary Harney (Dublin Mid West, Progressive Democrats)
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They say a week is a long time in politics, but it is clear that a couple of hours is a long time in politics. I accept that Deputies had to reflect after this afternoon's briefing on this legislation. I want to repeat the comments I made when I spoke frankly and honestly at the briefing. I was asked when the Department became aware of this difficulty. The possibility that there may be a loophole of this nature arose sometime last summer, during the court case that BUPA Ireland took against the State. When we sought legal advice, we were told we should not amend the legislation until the court issued its judgment, which took place at the end of last year.

Quinn Direct did not acquire BUPA Insurance, which is the company that is authorised to offer health insurance in Ireland, or BUPA UK. It acquired BUPA Ireland, which is a customer service company that is authorised to do such business here. When the legislation was amended in 2003, this was not envisaged. When risk equalisation was introduced in 1996 by the parties opposite, it received the support of all parties in the House. When we were opening up the health insurance industry, everybody recognised that if one company had older members and another company had younger members, community rating could not be maintained without a system of risk equalisation. VHI has three younger members for every older member, whereas BUPA Ireland has 18 younger members for every older member. It is clear that if we have community rating, companies cannot compete on a level playing field in such circumstances.

The Health Insurance Authority report recommended that there should be a longer phase-in period. It recommended that the relevant companies should pay 25%, rather than 50%, in the first year and that it should be phased in over four years. I intend to bring proposals to the Cabinet in April, based on the Health Insurance Authority report, the Competition Authority report and the report of the Barrington group. I established the Barrington group, which comprises three well-respected people who know about the world of investment and insurance, because BUPA Ireland has maintained that it cannot make a fair return on capital, whereas VHI does not have to make a return on capital. Like everybody else, I know that companies will not join the market if they cannot make a return on capital. I have asked the Barrington group to examine any issues which need to be addressed in the context of community rating.

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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Does that mean the Minister could vary the formula?

Photo of Mary HarneyMary Harney (Dublin Mid West, Progressive Democrats)
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I want community rating and competition, above all else. My colleagues in Government and I will do whatever it takes to have both. I have been advised by legal personnel and others who are experts in this area that as long as there is a three year holiday, which does not exist in other countries which have risk equalisation, one will never be certain that a company will not exit after three years. A company could come in, grow a business, make some money and leave after three years when the holiday is over. For example in a situation where a company paid no tax for three years, why should it do something different in year four? I am strongly advised that if we want certainty and competition it is uncompetitive to have the three year holiday. When the legislation was introduced it was an 18-month period which was subsequently increased to three years. BUPA was in Ireland for ten years before risk equalisation applied.

On the question of my reason for taking this action tonight, I explained to the Deputies opposite that the Quinn Group cannot be authorised before 28 February 2007 when IFSRA will meet and the group must then be registered by the Health Insurance Authority. VIVAS has contacted the Department and informed it that if the Quinn Group is going to use this legal loophole then it certainly does not intend to start paying risk equalisation this year and it will use a similar vehicle. Unlike the Quinn Group, VIVAS did not have to go for authorisation as it is already authorised. If it were to go into business with a health insurer in Europe, for example, all it needed to do was walk into the HIA and re-register which it could have done up to 5.30 p.m. this evening. This is the reason it was not possible for me to talk to people before 5.30 p.m. The Cabinet approved this legislation this afternoon in an incorporeal meeting. A sub-committee of the Cabinet which included myself and the Taoiseach, the Minister for Finance, the Tánaiste and the Attorney General worked and prepared this legislation. This is the reason it had to be done this evening. It takes legal effect from midnight tonight so nobody can walk into the HIA tomorrow and use the existing loophole to avoid risk equalisation payments.

As I said to the Deputies opposite, I do not feel good about introducing emergency legislation and presenting people with a couple of hours to discuss it but I had no alternative. I had to act in the public interest in protecting community rating. If we did not do this, there is no doubt that community rating would have collapsed and nobody would be paying risk equalisation before the end of 2010. This would not be an acceptable position.

A number of actions need to be taken. The VHI does not have to meet the solvency requirements of its competitors and this is unsatisfactory. I have already received clearance from the Government to prepare legislation to put the VHI on a commercial footing. I have already given the VHI direction that it must act now in everything it does to prepare for meeting the solvency requirements which are very strict.

The solvency requirements require 40% of premium income to be put aside towards a solvency fund. The figure is 25% in other countries because health insurance, unlike other insurance, has more certainty. I would like to think that our regulatory body could examine the solvency issue because the VHI could be commercialised a lot quicker.

Other issues need to be considered. I have been advised in some reports that we should have lifetime community rating, which means that a person joining when they are 25 would earn a bonus as opposed to a person joining when they are 50. This would encourage young people to join and has been recommended in all the reports. The insurance companies active in the market would also support this initiative and I would like to see this introduced. I would welcome the issue of renewal notices a month in advance and providing information on the notice that a person may switch insurer without incurring a penalty because many people are not aware of this. I also refer to a number of initiatives relating to health insurance in general which I took in my last job.

It comes down to the fact that 52% of the population has health insurance because it is affordable. I recently spoke to an Irish couple in their 60s who had been in the UK for a number of years. Their health insurance in the UK cost £12,000 whereas it is €2,200 in Ireland. This is the reason that only 11% of the population in Britain can afford health insurance.

Health insurance is a good option. The measures being taken tonight will protect the 2 million citizens who have private health insurance by making insurance affordable, particularly when they are sicker and older. I do not agree with Deputy Gormley that we should go back to a monopoly provider. Monopolies in general are never innovative because they do not have to be and they do not give good value for money.

I want to see a competitive market——

Photo of Olivia MitchellOlivia Mitchell (Dublin South, Fine Gael)
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That is where the Minister is going. She is on her way there.

Photo of Mary HarneyMary Harney (Dublin Mid West, Progressive Democrats)
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I asked some of the companies that came knocking on my door recently to explain the reason they did not come into the market before. One replied they thought the Irish market was at saturation point at 37% a number of years and they never envisaged it would grow to 52% of the population. The market has grown by encouraging younger people to join, particularly in times of economic success and health insurance is more affordable. The market can grow further and I want to see more entrants to this market. I am determined to work with the Government to make sure we take all the steps necessary to have competition based on community rating and not based on any other criteria. This requires younger people supporting older people and risk equalisation payments to be made. I am asking the House to pass this legislation tonight to protect this.

Photo of Cecilia KeaveneyCecilia Keaveney (Donegal North East, Fianna Fail)
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As 45 minutes have elapsed since Second Stage, I am required to put the following question in accordance with the amended order of the Dáil of this day: "That the Bill be now read a Second Time.".

Question put.

The Dail Divided:

For the motion: 63 (Michael Ahern, Noel Ahern, Barry Andrews, Seán Ardagh, Niall Blaney, Johnny Brady, Martin Brady, John Browne, Joe Callanan, Pat Carey, John Carty, Donie Cassidy, Michael J Collins, Mary Coughlan, Brian Cowen, John Cregan, Martin Cullen, John Curran, Síle de Valera, Tony Dempsey, John Dennehy, Jimmy Devins, John Ellis, Michael Finneran, Seán Fleming, Pat Gallagher, Jim Glennon, Noel Grealish, Mary Hanafin, Mary Harney, Máire Hoctor, Joe Jacob, Billy Kelleher, Peter Kelly, Tom Kitt, Conor Lenihan, Micheál Martin, Michael McDowell, John McGuinness, John Moloney, Donal Moynihan, Michael Moynihan, Michael Mulcahy, M J Nolan, Éamon Ó Cuív, Seán Ó Fearghaíl, Charlie O'Connor, Liz O'Donnell, John O'Donoghue, Noel O'Flynn, Fiona O'Malley, Tim O'Malley, Tom Parlon, Peter Power, Seán Power, Dick Roche, Mae Sexton, Brendan Smith, Noel Treacy, Mary Wallace, Joe Walsh, Ollie Wilkinson, Michael Woods)

Against the motion: 30 (Bernard Allen, James Breen, Pat Breen, Richard Bruton, Paul Connaughton, Paudge Connolly, Simon Coveney, Seymour Crawford, John Deasy, Jimmy Deenihan, Olwyn Enright, Tom Hayes, Phil Hogan, Paul Kehoe, Pádraic McCormack, Shane McEntee, Dinny McGinley, Paul McGrath, Paddy McHugh, Olivia Mitchell, Gerard Murphy, Denis Naughten, Michael Noonan, Fergus O'Dowd, Jim O'Keeffe, John Perry, Michael Ring, David Stanton, Billy Timmins, Liam Twomey)

Tellers: Tá, Deputies Kitt and Kelleher; Níl, Deputies Kehoe and Gerard Murphy.

Question declared carried.

Photo of Michael WoodsMichael Woods (Dublin North East, Fianna Fail)
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As it is now 11 p.m. I am required to put the following question in accordance with an Order of the Dáil of this day: "That in respect of each of the sections undisposed of that the section is hereby agreed to in Committee; that the Title is hereby agreed to in Committee and the Bill is accordingly reported to the House without amendment; that Fourth Stage is hereby completed and that the Bill is hereby passed."

Question put and declared carried.