James Reilly (Dublin North, Fine Gael)
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Question 116: To ask the Minister for Health and Children her views on the recent Supreme Court decision to strike down the risk equalisation scheme enacted by her in view of the fact that it was founded on the basis of an incorrect interpretation of law which is likely to see health insurance premiums soar for older and sicker people; the steps she is taking to stabilise the health insurance market and ensure community rating in order that health insurance remains affordable; and if she will make a statement on the matter. [32675/08]

Mary Harney (Dublin Mid West, Progressive Democrats)
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A primary objective of Government policy in health insurance is that it should be affordable for the broadest possible cross section of the community including older people and those who suffer ill health. This policy objective has been implemented through a substantial body of primary and secondary legislation providing for open enrolment, community rating and lifetime cover.

Although the Supreme Court found the particular risk equalisation scheme to be ultra vires, it did not strike down the principle of risk equalisation or any of the other important elements of the regulatory framework that supports private health insurance in Ireland. However, the decision of the Supreme Court gives rise to some complex issues that now need to be addressed.

I have yet to hear any argument made against the continuing need for community rating. It is a fundamental principle of the health insurance market in Ireland. Following the liberalisation of the market in 1994 every political party and successive Governments have supported the maintenance of community rating. It is an inescapable fact, supported by international evidence, that community rating cannot be sustained without some scheme to support the higher costs of claims of older or sicker people, effectively a risk equalisation mechanism. There may be differences of opinion in how such a mechanism must work, but few dispute the need for one.

I am currently assessing all available options. Since the judgment was delivered, I have engaged in consultations with officials, the Attorney General, advisers, the Health Insurance Authority and with the companies operating in the market. I also received submissions from all the operators in the market and we are in dialogue with them on an ongoing basis. There are complex financial, legal and policy matters involved. It is my intention to bring forward measures to ensure that health insurance remains affordable for older and sicker people at the earliest opportunity. I will be bringing such proposals to Government shortly.

James Reilly (Dublin North, Fine Gael)
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On the last question, HIQA may be empowered to undertake investigations but the reality is that this time it took the Minister to instruct it before it happened.

On this question, this was a mess-up in terms of legislation brought in by the Minister and then misinterpreted. While it is good to hear the Minister say she wants insurance to continue to be affordable to people, particularly the elderly, the consequences of that is that it is likely to cause a rise. I fully support the Minister in the community rating principle. I would have issues with her in the manner in which it was being implemented, the amounts being sought, the percentages and the timing, given that the VHI currently is in good health, so to speak, with €70 million plus in reserves. Specifically, what action is the Minister taking and when does she hope to come to this House with further legislation or to indicate her plan to deal with this issue? More importantly, does the Minister expect more legal challenges?

Mary Harney (Dublin Mid West, Progressive Democrats)
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The legislation that was struck down had its origins in the 1994 Act. It was initiated by the then Government and the Minister was Deputy Brendan Howlin but I am not making an issue of that. I am simply saying that is the factual position. Every Minister for Health who has been in office since 1994 has strongly supported, through legislative measures, risk equalisation. The Supreme Court found that we should have risk equalisation, or community rating, within the plans. Obviously, we must accept the decision of the Supreme Court but if there is a plan that is particularly attractive to young people, particularly young couples who have children, and a different plan involving cataracts and so on that is only attractive to older people, it is difficult to see how we can have community rating within that environment. We must deal with the realities and I would like to find a solution that would be legally sound — I have to take the advice of the Attorney General — and one that would be immune from legal challenge, but I do not believe any of us have that luxury because we have been involved in litigation in this matter for a considerable length of time, both at national and European levels. The advice we are taking currently involves looking at all options as to how we can ensure that younger people support older people.

The VHI is required by law to be authorised by the end of this year. That means it must have a reserve capacity of 40% of its premium income. It currently falls far short of that. That is the position. It is not a question of the amount of profits a company makes, it is a question of whether the company is capable of being authorised on the same basis as all of its competitors. That will be a challenge. The reason it is important that the VHI is regulated on the same basis is to ensure we have a level playing field. It has been a bone of contention, which I understand fully, among the VHI's competitors that they have to put 40% of their premium income into a reserve fund and their competitors do not have to do that. That creates an unequal playing field. To be fair to the VHI, however, it has 68% of the market here and approximately 70% of the over 65 and 60 year olds in the market where most of the costs occur. The only way we can sustain community rating on an affordable basis is by ensuring that younger people support older people.

I hope to bring proposals to the Government in the next few weeks if we can but I must await the advice of the Attorney General and other advices from our actuarial advisers before I can proceed further.