Liam Twomey (Fine Gael)

The risk equalisation issue goes back to 2003. I find it surprising that this legislation is necessary in 2009. I was a Member of the Dáil when many of the issues related to risk equalisation cropped up and they were debated at length. The level of corporate knowledge of this issue in the Departments of Health and Children and Finance must be substantial. I do not understand the need for this legislation. The Government should have dealt with the core issue, which is the role of risk equalisation in a community rated private health insurance market. The Bill imposes a levy on private health insurance, which is an easy way out of a difficulty.

This levy will penalise the young families who are hit hardest by the present economic downturn and will further drive people out of the private health insurance market. This will lead to knock-on problems. Of the 2 million people who have private health insurance, approximately 500,000 are over the age of 50. If people under 50 are driven away from private health insurance, what will be done next? The Government will be forced to increase the proposed levy further in years to come. I am not sure the Government is approaching this issue in the right way.

When I was a Member of the Lower House, I debated with the Minister for Health and Children the issue of the 40% reserve which must be kept by private health insurance companies. Four years ago, the Minister, Deputy Harney, and I discussed the fact that 40% seemed an incredibly high reserve for private health insurance. Health insurance is not like insurance against accidents or storm damage. Companies can predict, more or less, what will happen year on year. I do not understand the need for a 40% reserve. A reserve of 25% would seem to be sufficient. Why is this figure not questioned? Is there some reason the figure cannot be lowered to, say, 25%? The VHI reserve has dropped from 35% to 27%. If the Government lowered the required reserve figure there would be no need for such a high levy. I accept the need for a levy if the Government chooses to maintain risk equalisation within the market but I do not accept it should be so high. A household consisting of two parents and three children will be liable for a levy of €500 per year. This is another tax on families.

Consider the example of a person who pays the VHI premium for an elderly parent who is an old age pensioner. Will the full premium now have to be paid in such cases? Such an elderly person will not have tax credits. Will his or her premium be increased by €1,000? Many elderly people, often holding medical cards, have their premiums paid by their families. The Bill will oblige children who pay premiums for elderly parents to pay an additional €1,000 per year, on average, because the elderly person will not benefit from tax credits. I ask the Minister of State to answer that question.

The Minister of State does not appear to know how many children have private health insurance. Does the Department work on the basis of a rough estimate or is the exact figure known? I have heard it said that the Minister of State does not know the exact figure.

We appear to operate on the basis that private health insurance companies are perfect. Let us suppose I have an accident and am taken, unconscious, to hospital, where blood tests, X-rays and so on are taken. If, when I become conscious, I tell the hospital I have private health insurance, the procedures, which have been performed at the taxpayers' expense, will be paid for again by my private health insurer. That anomaly in our public health care system has never been tackled. The Minister for Health and Children appears to have been lulled into a false sense of security regarding the private health market and is convinced it is the only way forward. The way the private element works in public hospitals is wrong. Everyone who stops at a patient's bed and shakes his hand can submit a claim to a private health insurer. There is no control of costs. Sometimes the VHI asks patients to inform the organisation if they see anything wrong with their bills. However, the detail in the VHI bills can be very poor, and I am surprised the VHI puts up with that. None of the private insurance companies on the Continent would put up with the poorly itemised bills that are issued by hospitals to the VHI.

The Minister should pay far greater attention to the costs incurred by the VHI. There are plenty of Members who run businesses and they know that if one is sloppy about one's costs and the cost of one's service, all one can do is front-load those costs onto the customer who is buying the services. One will not get away with that in a normal business environment because a competitor will control their costs better and, therefore, keep the cost of their service down. However, that is not the situation for the VHI. The Government, which is the ultimate beneficiary of the VHI, does not pay much attention to this either. There is scope to deal with this, considering the average cost paid by the VHI for hospital procedures is approximately €900. If it was possible to cut 10% to 15% of that cost, it would have a significant impact on the levy the Government is now charging people under the age of 50, children and young adults, to pay for getting the risk equalisation argument wrong. The Minister must tell us why the Government is failing to deal with this issue.

The cost of the levy should be tiered. Plan D or plan E costs about twice as much as the basic plan B. People who join the VHI at a lower plan level and can only afford plan A or plan B will pay the same Government levy as somebody who has plan D or plan E. That is inequitable. If somebody wishes for and can afford the higher plans, they should also pay a higher levy if the Government genuinely believes that those who earn more should pay more. It should not hit poorer families with the same high levy as better off people. There is a huge difference between the cost of plan D or plan E and the cost of plan A or plan B.

With regard to the derogation the VHI gets from the Government because it does not have sufficient reserves, how long will that last? I understand it will only last until the end of September, although it has been extended a couple of times over the last 15 months. Does the Government have another plan for VHI? If the VHI is short of €100 million to bring its reserves to the level required by current regulation of this market, there is not a hope in hell of it coming up with that amount before the end of September. Will the Government drop the percentage from 40% to 20% or 25% or is it planning to sell the VHI?

When she commented on this recently the Minister, Deputy Mary Harney, seemed to indicate that there are plans to privatise the VHI. Some people would support that while others would not. However, we must be told if that is what the Government plans for the VHI. There is a belief that the Government is fattening up the VHI for sale, and that this is the purpose of the levy. The levy is a high amount. Some people might not think so but it is high. The Minister must be honest and state the Government's future plans for the VHI. If it intends to sell the VHI, I do not believe hard-pressed young families should have to pay this levy under the guise of it being an interim solution for risk equalisation. I do not believe it is an effective interim solution for risk equalisation but I will await the Minister's response to the debate.