Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank all of the Senators for their contributions. On Senator O'Brien's precise question about indexation of this new measure, I would be opposed to that because I want to keep control of the cost of tax credits in the hands of the Minister for Finance of the day. I do not want to index this because that would transfer the control of costs totally to the companies and they would just keep ratcheting them up.

A number of assertions were made in the debate which are not factually correct. One is that everybody will give up their health insurance as a result of this measure. Health insurance is very inelastic and does not respond very much to price rises. Despite the fact that prices went up by 86% in the past four years, the number of those insured dropped by only 7.5%. That was mostly due to the recession and people losing their jobs. It is quite an inelastic product and does not respond to price changes very quickly.

Despite the fact that costs have gone up so much, two of the insurance companies, Aviva and Laya Healthcare, have both indicated that they are going to increase their prices by approximately 5% from the start of next year. All of the health insurance companies operating here are profitable. Laya Healthcare is now the second largest insurer and made profits of almost €5 million last year. It has increased membership by 5.5%, from 450,000 to 475,000. VHI recorded an after-tax surplus of €54.3 million last year. However, when once-off credits are excluded, the remaining surplus was €16.1 million for the year. The insurer recorded a €7.2 million loss on its core health insurance business but this was offset by profits made in its dental, travel and international business. Premium income was up by 9% to €1.43 billion, as rising individual premiums more than made up for the 50,000 fall in customer numbers. It was reported earlier this year that Aviva had made an operating profit of approximately €28 million in the first six months of 2013 in Ireland. This was more than double the profits from the same period last year. These figures relate to Aviva's life and general insurance business but are not further broken down to allow examination of profits achieved from its medical insurance offering.

Companies have to make a profit so that they can continue in business.

I am not one of those advocates who object to profitable companies. I need to control the costs of the subsidies for medical insurance, which are being paid by the taxpayer. I think medical costs have gone out of hand and must be controlled. The insurers are in the best position to control them. It is not sufficient for insurance companies to pay consultant fees, which seems high, and when they run short of money raise the premiums at the end of the year. We cannot continue on that basis. I know health insurance is an inelastic product and the companies feel they will maintain their customer base. I ask health insurance companies to control the costs by putting more pressure on the service providers and not automatically pay the bills when they receive them. I advise policyholders to look again at the multiplicity of insurance policies that are now on offer across the companies and see if they can get the same cover for less. A number of constituents have told me that when they examined policies across the companies they were able to get the same for significantly less.

I will now respond to the point made by Senator Barrett. I like to give certainty on policy so I will not be revisiting this next year. As long as I am the Minister for Finance, the cap on tax relief for health insurance will be €1,000 per adult and €500 per child. I need to give certainty to the industry.