Micheál Martin (Cork South Central, Fianna Fail)

I am pleased to speak on the Second Stage of the Health Insurance (Amendment) Bill 2003. This is a short Bill aimed at facilitating the early submission of a draft risk equalisation scheme for approval by the House, as required under the Health Insurance Acts 1994 and 2001. The need for the further provisions set out in the Bill arises from consultations held with the Health Insurance Authority and matters raised in the course of preparing the detailed risk equalisation scheme.

The Bill has two main provisions. One provides a broad immunity from liability for damages for the Health Insurance Authority when discharging its statutory functions in good faith. The other is directed at ensuring that the temporary exemption from risk equalisation, which has as its objective the encouragement of competition, is available only to new entrants to the market. The other provisions of the Bill relate in a minor way to the procedures that will apply under risk equalisation arrangements and to funding advanced for the establishment of the Health Insurance Authority.

The Health Insurance Authority's principal functions include managing and administering risk equalisation. Under the Acts and the proposed scheme, the authority will also have a key role in determining when conditions are considered to warrant the commencement of risk equalisation payments between insurers. I acknowledge the constructive contribution made by the authority since its establishment in February 2001 to the development of proposed arrangements for risk equalisation.

I do not propose to go into great detail about the need for risk equalisation to support the operation of community rating in the voluntary private health insurance market going forward. This has been extensively discussed in the House. I am satisfied that providing for such a measure is warranted and I trust that most Members will support this draft scheme which strikes a balance between maintaining community rating and facilitating competition. A draft scheme, which will be submitted to each House for approval, is the subject of detailed contacts with the European Commission. I will refer to this important dimension to preparations for risk equalisation in more detail later.

At the general level, the objective of risk equalisation is easily appreciated. It follows logically that, in a market where the principles of community rating, open enrolment and lifetime cover apply, there must be a provision to share risk between competing health. These common good principles curb the usual commercial instincts and incentives that insurers have to select good risks and avoid or discourage bad ones. For these principles to be sustainable, they must be supported by a balancing mechanism that enables insurers with worse than average risks to be compensated for the disproportionate level of the sick and elderly in the insured community they must cover.