James Reilly (Dublin North, Fine Gael)
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Question 67: To ask the Minister for Health and Children the assessment she has carried out to justify the introduction of recently announced private health insurance measures; the assessment she has carried out to measure the impact of this scheme on the market; if she will publish details of same; her views on the financial impact this move will have on subscribers; if she has had discussions with health insurance companies regarding proposed substantial increases in health premiums which according to media reports may be as much as 60%; and if she will make a statement on the matter. [42892/08]

Mary Harney (Dublin Mid West, Progressive Democrats)
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Immediately after the Supreme Court judgment in July which found the 2003 risk equalisation scheme to be ultra vires, I initiated a comprehensive review of the options which might be open to the Government in the aftermath of the court finding. Since then, I and officials from my Department had meetings with the Health Insurance Authority and the three insurance companies operating in the market. I also had the benefit of advice from the Attorney General and external counsel. At appropriate points, I also had the advice from the Department's consulting actuaries. Following receipt of a related proposal from the Health Insurance Authority, officials from my Department and the Department of Finance explored the potential of the taxation system to meet the long-established policy objectives of successive Governments in regard to private health insurance.

Based on the advice which I have received, I believe the interim arrangements which have been approved by the Government can be objectively justified. They are a necessary and proportionate response to the problems arising in the market for health insurance and have been formally notified to the European Commission as a potential state aid. The assessment undertaken of these measures constitutes part of the notification to the Commission and it would, therefore, not be appropriate to publish it at this time.

The effect of the measures on the premiums charged for particular policies by individual companies is a commercial decision for the companies themselves, as they set both policy benefits and pricing at the same time. However, they should not in themselves lead to an overall increase in the approximately €1.5 billion in private health insurance premiums paid, as the levy will yield approximately the same amount as the cost of the tax relief at source.

The package of measures announced last week will help to keep private health insurance affordable for older people. In addition, the introduction next year of lifetime community rating regulations will encourage younger people to continue to take out health insurance. The combined effect of all of these measures is overwhelmingly positive for the health insurance industry and its 2.25 million customers.

James Reilly (Dublin North, Fine Gael)
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The Minister has told us that, as far as she can foresee, there will be not be any increase in premiums. Will she confirm this to the House? It is important to point out that community rating is still enshrined in law and, therefore, a rise cannot apply in a plan unless it applies across all age groups. Will the Minister admit that younger people will be pushed out of health insurance through the combination of increased premiums, levies and reduced tax benefit apart from those aged over 50? When will the new legislation be introduced? Will the Minister share with us why we remain insistent on a 40% reserve in the VHI when most other places, including the UK, have a reserve of 25%?

Mary Harney (Dublin Mid West, Progressive Democrats)
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To deal with the last issue first, I share the Deputy's view that it is high and out of sync with other countries. However, it is entirely a matter for the independent financial regulator and neither the Government, the Minister for Finance nor I have a role with regard to the reserve requirements set by the regulator in Ireland.

With regard to new EU directives, I hope there can be consistency throughout the European Union on this matter. A company incorporated in another jurisdiction doing business in Ireland would only have to meet the reserve requirement suggested by the Deputy if it were incorporated in the UK.

Tax relief has not been withdrawn from anybody. We all have 20% taken away at source and this has not been interfered with. Last week's announcement was that additional benefits will be given to everybody over the age of 50. This will be a benefit of €200 for those aged between 50 and 59, €500 for those aged between 60 and 69, €950 for those aged between 70 and 79 and €1,175 for those aged 80 and over. This will be deducted from the premiums at source.

It is true the Supreme Court found we must have community rating within a plan. However, the market is segmenting to such an extent that thousands of plans will exist. A company with a young workforce will get a particular plan while another company with a workforce of an entirely different age profile will have a different plan. Within each plan everybody will pay the same. We know many companies introduced plans covering maternity benefits, sports injuries, joining a gym and teeth whitening, but not hip replacements or cataracts. Within a plan everybody pays the same but an older person will not take out a plan offering maternity benefits and a younger person will not take out a plan providing for cataract removal.

The Minister has no function in approving price increases. This was changed a number of years ago. I believe in a highly competitive market and for the first time it will be competitive to attract older people. The introduction of lifetime community rating will encourage younger people to take out insurance.

James Reilly (Dublin North, Fine Gael)
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To correct the point, there was no suggestion on my part that the 20% tax rebate would be removed. However, it has been reduced for higher earners from the top rate to the lower rate and this is another whammy for the young which may well undo what the Minister seeks to do, which is to keep younger people in insurance and make it more affordable for the elderly.

Mary Harney (Dublin Mid West, Progressive Democrats)
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This tax change was made a number of years ago and was made at the suggestion of those who examined the tax system to make it equal between the better off and the less well off, in other words, those who only pay tax at the standard rate and those who pay some tax at the higher rate. Otherwise, better off people would receive twice the benefit of those who are less well off and only pay the standard rate.

The introduction of lifetime community rating in particular will incentivise young people to take out insurance or disincentivise people to wait until they are in their 40s or 50s to do so. This will have a major beneficial impact on keeping young people in the market and attracting others.