Brian Lenihan Jnr (Dublin West, Fianna Fail)

I will take the Adjournment matter on behalf of my colleague, the Tánaiste and Minister for Health and Children, Deputy Harney. There is widespread support in this country, reflected in the decisions of the Oireachtas, for applying community rating to health insurance. Under community rating, subscribers pay the same amount for similar cover throughout their lives. Numerous references were made to the concept of risk equalisation. In truth, risk equalisation is simply the technical formula for the implementation of the principle of community rating.

Community rating means that individuals can continue to afford health insurance right into those decades of their lives when they are most likely to need it. The position in Ireland, with community rating and lifetime cover in place, is in marked contrast to countries such as the United Kingdom and the United States where risk-rated health insurance products result in older subscribers no longer being able to afford to maintain their insurance cover. That is the fundamental policy here and it is certainly subscribed to by my party. I cannot speak for the party of the Tánaiste. However, as Senator Bradford referred to that issue, it shows how compelling a case can be made for risk equalisation and community rating that the Tánaiste decided as she did.

Risk equalisation is the mechanism that supports a community-rated health insurance market. Provision for risk equalisation has been part of the framework for health insurance since the enactment of the Health Insurance Act 1994. The risk equalisation scheme of 2003, having been affirmed by Seanad Éireann, took effect from 1 July 2003. The scheme had previously been submitted to the EU Commission which, in May 2003, found that the scheme is justified, given the open enrolment, community rating and lifetime cover requirements that apply in our health insurance market.

This is not about taking from a small company and transferring to a large company. It is about maintaining the principles of open enrolment, community rating and lifetime cover in our health insurance market. Risk equalisation involves transferring funds from insurance companies which have a large proportion of young, healthy subscribers to companies which have a larger proportion of older persons who are more prone to illness and therefore more likely to make claims on their health insurance policies. This ensures that younger and older subscribers pay the same amount for similar health insurance cover.

The Health Insurance Authority submitted its report, in accordance with the provisions of the Health Insurance Acts and the risk equalisation scheme, in respect of the period January to June 2005 on 27 October. The authority, the relevant statutory body, recommended the commencement of risk equalisation transfers having analysed returns made by insurers and having considered representations made. The authority's report confirmed a significant divergence in market risk profiles between insurers. Having considered the authority's report, letters containing a proposed determination were sent to the insurers involved on 21 November last.

On 23 December, the Tánaiste made the decision that risk equalisation transfers between insurers in the market is necessary, having carefully considered the report submitted by the Health Insurance Authority and representations made by insurers in the market. The Tánaiste did so in accordance with the provisions set out in the risk equalisation scheme and in the Health Insurance Acts, having regard to the best overall interests of health insurance consumers. Commencement of risk equalisation transfers on foot of a recommendation from the authority is subject to specific statutory processes and considerations. The Tánaiste is satisfied that the decision made was the correct one and the question of reviewing it does not arise.

Senator Bradford refers to the need to defend and promote competition. The Health Insurance Acts specifically provide for taking competition into account. They state that the best overall interests of health insurance consumers include a reference to the need to maintain the application of community rating across the market for health insurance and to facilitate competition between undertakings. Given this obligation, the Tánaiste notes that the York economic report commissioned by the Health Insurance Authority concluded that, "there is no satisfactory case for the non-implementation of risk equalisation payments as long as there is a fundamental commitment to community rating".

The advisory group on the risk equalisation scheme in its report to the then Minister stated: "If the primary policy had been to facilitate and encourage competition and the secondary objective had been the protection of community rating, the Advisory Group would have recommended a scheme of risk equalisation based only on age and gender." The risk equalisation scheme as currently constituted allows the insurance authority to base its calculations on age and gender only, and has been commenced on this basis.

The Tánaiste and the Government are committed to a vigorous community-rated private health insurance market. It is clear that risk equalisation is not in itself inconsistent with a competitive market and it should shift the focus of insurers away from commercial advantage arising from risk selection which is of no benefit to consumers. The Tánaiste is committed to the development of greater competition in the market and has asked the Competition Authority and the Health Insurance Authority to report to her on related measures within six months.