Mary Harney (Dublin Mid West, Progressive Democrats)

The changes contained in the scheme before the House primarily give effect in the risk equalisation scheme to the legislation enacted in February last amending the Health Insurance Acts in order to protect our system of community rating.

In Ireland the policy of community rating means no health insurer can price people out of being able to afford their premiums as they get older and, therefore, more likely to need medical care. This is a fair and equitable approach to take as it eliminates any possible discrimination on the basis of age and health status. Risk equalisation is a necessary feature in a community rated market.

Prior to the enactment of the Health Insurance (Amendment) Act 2007, legislation had allowed new entrants to the market, such as VIVAS Health, to avail of a three-year exemption from the obligation to make risk equalisation payments. The exemption was intended to give bona fide new entrants time to establish themselves and to build up 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 up market share from zero by normal business practices. The risk equalisation scheme reflected this exemption for new market entrants.

The Government's view was that the exemption had to be removed to protect the operation of the community rated market. This removal means related changes have to be made to the risk equalisation scheme. Most of these changes, as set out in the explanatory memorandum, are of a technical nature to reflect the changes in the legislation. As returns are made on a six-monthly basis, covering January to June and July to December each year, it is necessary to make the changes before the next returns are to be compiled and returned to the Health Insurance Authority before the end of July.

I will briefly outline some of the main changes. Having regard to the removal of the exemption, the receipt of the reports on the market and their views on the exemption, the Health Insurance Authority's report having proposed extending the phasing at the end of the three-year exemption over a further three years, and the need to ensure proportionality in the scheme, the payments that arise are being reduced to 80% of the current level. The Government is satisfied the reduction is appropriate.

The zero sum adjustment, a technical mathematical balancing of moneys within the scheme is also being amended. While it was a minor feature in recent criticisms of the scheme, the opportunity is being taken to amend the formula in order that payments by any contributors will be clearly based on their own claims costs.

The amendments in article 11(3) and related changes to the formula and data to be submitted are designed to ensure reported claims data remain consistent in circumstances where an undertaking is running down its business. Some other minor technical amendments are addressed in the explanatory memorandum.

A primary intention of the amended scheme is to balance the twin objectives of promoting competition in the health insurance market while at the same time protecting the integrity of community rating, both of which are to the benefit of the consumer. The Government is satisfied the changes being made to the scheme are in the best interests of consumers and the development of the market.