Frances Fitzgerald (Fine Gael)

I move amendment No. 8:

In page 4, line 5, after "shall" to insert the following:

"foster competition within the health insurance market and refrain from engaging in any actions which may hinder the operation of competition within the market. It shall also".

The Minister has spoken about the competition issues that arise in the health insurance market. In respect of the previous discussion, I very much support what she said about mechanisms or actions which we can make to support the taking of health promotion measures by individuals and to encourage health insurance companies to support such measures. Does the Minister believe the Bill in its current form addresses competition issues in this area?

The Bill does not specify whether the subsidiary companies will be permitted to cross-sell and tie products to the health insurance products and, hence, further lock in the VHI customer base. The VHI has leveraged a 35% market share of the travel insurance market. The Competition Authority, the HIA and the Barrington report all recommended that the VHI should immediately cease its policy of cancelling members' travel insurance policies should they chose to switch health insurers. However, the VHI has refused to implement this change, further perpetuating the inertia within the market. If there is no positive obligation within the Bill to prohibit the VHI from tying the rest of its new products, it will effectively lock in its 1.6 million members through cross-selling. Does this concern the Minister or does she think this issue needs to addressed?

The VHI has in excess of 75% of the health insurance market and 35% of the travel insurance market. Does the Minister believe that allowing the VHI to expand its commercial business lines to further tie its customers will increase its massively dominant position and continue to distort competition? If the VHI is to be allowed to engage in further commercial activity, should there not also be an obligation to engage in a market share reduction policy in health insurance?

The risk equalisation scheme will mean a convergence of prices between all competitors in the market and, in some instances, will force competitors of the VHI, which must maintain solvency reserves and pay huge risk equalisation payments, to price their products above the VHI. As the Minister is aware, all consumer research to date indicates that the primary factor leading to the customer switching within the market is price differential. Once this price differential is eliminated and the VHI can cross-sell and tie its ancillary business lines, is there not a danger that the VHI will not only maintain its massive market share but will also increase it through the vertical integration and tie-ins in respect of this?

The Bill does not indicate whether the subsidiary companies will be for-profit companies or whether they will simply be required to break even. Furthermore, there is no provision in respect of whether subsidiary companies must make a return to Government on any profits they make. Will the profits be used to subsidise health insurance business and maintain premiums below cost, albeit that the VHI will potentially also receive huge risk equalisation payments from its competitors to bolster its profit margins?

There is also no indication within the Bill about how the money will flow between the products sold by these companies to the VHI, for example, if they were unprofitable or during their start-up phase, and whether funding will be provided directly from the VHI out of the health insurance business. Does the Minister agree that the VHI and subsidiary companies should be required to make some form of return to Government so as not to distort competition within the financial services market? Will she comment on this aspect?

The Bill is broadly drafted in respect of the differing commercial activities in which VHI will be permitted to engage. The previous limited restriction, that the activities be related to health, has been lifted. Permitting the VHI to engage in any activity effectively allows the State to participate in normal markets where previously it had no presence. In addition to the history of State protection of the VHI a differing regime is still being implemented for VHI in a number of markets. Under the terms of the Bill, the VHI will continue to report to the Minister for Health and Children to some extent. The current position of conflict with the Minister is not resolved. The Minister acts as regulator of health insurance through the Health Insurance Authority, owner of the largest health insurer in the country and supplier of the largest part of health insurance product in public hospital services. There is an obvious conflict of interest. The amendment is an attempt to reflect this concern and to deal with the contradictions to which the dominant position of the VHI may lead. Will the Minister support this amendment in order to address these issues?