Catherine Byrne (Dublin South Central, Fine Gael) | Oireachtas source

I am pleased to have the opportunity to address the House on the Second Stage of the Health Insurance (Amendment) Bill 2017. This is a short technical Bill comprising seven sections dealing with specific issues of health insurance, in particular the risk equalisation scheme which supports our system of community-rated health insurance. More than 2.1 million people in Ireland hold private health insurance. Health insurance in Ireland is community rated which means, in general, that everyone can buy the same health insurance policy at the same price. Older and sicker people pay the same amount as young and healthier people. Community rating means health insurers must offer health insurance policies at the same price to everyone regardless of the person's current or potential health status. The Health Insurance Acts require all insurers to apply community rating.Older and more sick customers, however, are not shared equally across the Irish market. Some insurers have higher risk profiles than others given that they have a much higher proportions of older members. The number of older customers insured is spread unevenly across individual health insurers, which is a legacy issue arising from the relatively recently arrival of competition. Before that arrival, there was a monopoly market and all customers, young and old, were covered by a single insurer. This is a central issue within Irish health insurance and, in order to support community rating and reduce the incentives for insurers to target or avoid particular groups of people, some form of risk equalisation is required.

Risk equalisation supports community rating by providing cross-subsidies between insurers with different risk profiles. It is essentially a financial transfer mechanism whereby money flows from insurers with healthier members to insurers with sicker members. The overall goal is to channel competition in the health insurance market in a way which benefits everyone who wishes to purchase private health insurance. Risk equalisation reduces insurers' incentives to attract only low-risk consumers or to charge higher prices for products that are marketed to high-risk people.

A permanent risk equalisation scheme was introduced in Ireland in 2013. Under this scheme, credits are paid to all insurers for their older and sicker members. These credits are funded directly by stamp duty levies on all health insurance contracts. In effect, the scheme redistributes funds between insurers to meet some of the additional costs of insuring older people and sicker members. None of the stamp duty on health insurance contracts goes to the Government. It is all redistributed to compensate for the additional costs of insuring older people and less healthy people. In this way the cost of insurance is shared between all insured people and we can ensure that sicker and older people are treated fairly.

Legislation is needed each year to update the amount of credits paid to insurers under the risk equalisation scheme and the amount of stamp duty levied on health insurance contracts to fund the credits. As part of the process, the Health Insurance Authority carries out an evaluation of the market and recommends the level of credits which should apply next year. The Minister has considered and accepted the recent recommendations made by the authority for the rates next year, which were: a general decrease in the amount of risk equalisation credits payable in respect of those aged over 65 based on age, gender and level of cover; the stamp duty to remain unchanged in respect of advanced contracts at €444 per adult and €148 per child; and a reduction of stamp duty in respect of non-advanced contracts to €177 per adult and €59 per child.

Lower levels of risk equalisation credits will be provided to insurers next year. The provision of lower credits is possible because there has been a reduction in the market average claims cost per insured person in the previous 12 months. As the scheme is designed to be self-financing, with the total amount of credits provided matching the stamp duty raised, the main stamp duty levy on health insurance products remains unchanged next year. In addition, the stamp duty for non-advanced contracts is being reduced by 20%.

In previous years it has been necessary to significantly increase the stamp duty on all policies in order to fund the rising cost of an older and less healthy population of insured people. Health insurers have often cited increasing stamp duty rates as contributing directly to increases in insurance premiums. The Minister for Health is therefore pleased that it has been possible this year to maintain the stamp duty at the existing level. Furthermore the credits and levy rates proposed for next year strike a fair balance between the need to sustain community rating and the need to ensure that young people continue to avail of health insurance. Small increases are also proposed to the existing level of hospital utilisation credits provided to insurers under the scheme, increasing to €100 per night for overnight stays, currently €90 per night, and to €50 for day case admissions, currently €30.These utilisation credits are a proxy for health status and will provide additional support in respect of less healthy people. This change will result in a higher proportion of credits being directed to sicker lives than to older lives. This is a step towards improving the health status element of the scheme within the boundaries of the current risk equalisation scheme.

While the changes to the credits will help to maintain levels of support for community rating, further improvements to the scheme are also planned. The Minister is committed to making the risk equalisation scheme as effective as possible in a way that promotes fair and open competition. As the scheme is a state aid, it requires approval from the EU. The current scheme has been approved up to 2020. For the purposes of its further continuation, it is planned to enhance the sophistication of the scheme. This requires a more refined measure of health status. The most appropriate measure is based on diagnosis-related group activity data, which allows for better targeting of credits to everyone who requires a higher level of health care. The Minister has asked his officials to focus on processing this in conjunction with the Health Insurance Authority in the months ahead. A working group has been established to inform the private hospital data collection aspect of this process and any implications arising. Refining the health status measure using diagnosis-related group data will further reduce the incentive for insurers to attract low-risk people and avoid high-risk people.

The Bill makes a number of changes to the lifetime community rating scheme that is in operation in the health insurance market. The scheme was introduced in 2015 to encourage people to take out insurance at a younger age. The clear impact of lifetime community rating can been shown by the increase of over 150,000 in the number of people holding health insurance between January 2015 and January 2017. Earlier this year, the independent Health Insurance Authority reviewed the operation of the lifetime community rating scheme and made a number of recommendations to the Minister. The changes that are being made now will ensure the scheme continues to operate smoothly and in a fair and balanced manner.

Under the existing scheme, people holding health insurance who leave the country to go abroad for work or other reasons may incur loadings on their return. The changes included in the Bill mean that people will be able to work, travel or live abroad without incurring loadings on their return. People will also be permitted to have breaks in insurance cover of at least six months while living in this country without incurring loadings upon the resumption of cover. A change being made to take account of time served working in the Defence Forces or as an EU staff member working in this country will ensure that loadings are not unfairly incurred when people in such groups seek to purchase health insurance with Irish providers. The Minister is ensuring that loadings are payable for ten years only rather than for life, as is currently the case. This is a fairer and more reasonable approach to loadings on health insurance premiums. This Bill provides the basis for these amendments to lifetime community rating. Following the enactment of this legislation, the Minister will make a regulation next year that will set out the specific details of the changes and further enhance the operation of the lifetime community rating scheme.

I will now outline the specific sections of the Bill. Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 amends section 7A of the 1994 Act to expand the Minister's regulation-making powers in respect of the operation of the scheme. It also provides that when increases in unadjusted net premiums apply, they are payable for ten years only.

Section 3 amends section 11C of the 1994 Act to provide for 1 April 2018 as the effective date for revised credits to be payable from the risk equalisation fund. Section 4 amends Schedule 3 to the 1994 Act to provide for the revised amounts payable from the risk equalisation fund in respect of the hospital utilisation credit in the cases of health insurance contracts renewed or effected from 1 April 2018. Schedule 3 contains revised amounts for the provision of inpatient services on an overnight basis and on a day-case basis. Section 5 replaces table 2 in Schedule 4 to the principal Act, with effect from 1 April 2018, such that the applicable risk equalisation credits payable from the risk equalisation fund in respect of certain classes of insured persons are revised. Section 6 amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates for 1 January 2018 to 31 March 2018 and for 1 April 2018 onwards. Section 7 provides for the Short Title, commencement, collective citation and construction of the Bill.