Finian McGrath (Dublin Bay North, Independent) | Oireachtas source

I thank the Leas-Chathaoirleach. It is great to be back in the Seanad.

I am pleased to have this opportunity to address the House on Second Stage of the Health Insurance (Amendment) Bill 2018. This is a short and technical Bill comprising eight sections all focused on the specific issue of health insurance. The amendments outlined in the Bill will ensure the ongoing sustainability of the private health insurance market and seek to keep health insurance policies at an affordable price for all citizens - young or old, sick or healthy.

Health insurance in Ireland is provided according to four principles: open enrolment, lifetime cover, minimum benefit and community rating. Open enrolment means that insurers in Ireland cannot refuse to provide cover to someone who might be a risky customer for them, and there are maximum waiting periods for pre-existing conditions. Lifetime cover means that once a person has health insurance, an insurer cannot stop cover or refuse to renew their insurance, except in very limited circumstances such as fraud. Minimum benefit means that all insurance contracts must abide by regulations issued by the Minister for Health to make sure that everyone who holds health insurance has a minimum level of cover.

Perhaps the most important principle of health insurance in Ireland, and the principle which is the central focus of the Health Insurance Bill each year, is community rating. This has the greatest effect on affordability of health insurance for those who are most likely to need health insurance coverage. Community rating means that health insurers cannot alter their prices based on an individual’s current or potential health status. Instead, insurers set the price for each product according to their overall expected claims costs. This helps to keep health insurance affordable for older and sicker people, who might otherwise be priced out of the market.

Community rating is supported 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. This is called risk equalisation and without it, an insurer with older and sicker members would be required to charge much higher premiums than their competitors to cover their claims costs.

Risk equalisation seeks to level the playing field and encourage insurers to compete on the services they can provide to their customers, rather than simply trying to attract younger people who are less likely to make health insurance claims. The risk equalisation scheme was introduced in Ireland in 2013. Under the 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 written. In effect, the scheme redistributes funds between insurers to meet some of the additional costs of insuring older and sicker members. None of the stamp duties on each health insurance contract goes to the Exchequer.They are all redistributed to compensate for the additional cost of insuring older or less healthy people. In 2017, the risk equalisation fund redistributed approximately €670 million in premiums out of a total of €2.5 billion in premiums paid. The scheme is carefully monitored to ensure that none of the insurers is overcompensated, which would contravene the scheme's approval under the EU state aid regulations. In this way, the cost of insurance is shared between all insured people and we can ensure sicker and older people retain access to affordable private health insurance.

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 independent market regulator, the Health Insurance Authority, carries out an evaluation of the market focused on the claims costs every insurer has paid over the year. Based on that analysis, the authority recommends the level of credits that should apply the next year. The Minister for Health has considered and accepted the recent recommendations made by the authority for the rates next year. I am pleased to announce that this year's Bill will provide for a general reduction in the credits across genders and age groups, and there will be no change in the stamp duty on the contracts. Maintaining stamp duty at the existing level should ensure the health insurers do not increase premiums and that contracts remain at an affordable price for all citizens.

In addition to the technical amendments, this year's Bill provides for a number of amendments to the Acts governing the Health Insurance Authority and the VHI. In short, it is proposed to expand the membership of the Heath Insurance Authority board, to broaden the composition of the VHI board and to enable the VHI to set international healthcare plans directly. I will outline each of these proposed changes in turn.

The Health Insurance Authority was established in 2001, with a provision for five board members to be appointed. Since that time, the health insurance market has become more complex, with insurers adopting innovative marketing and product propositions to expand their client base and improve their risk profile. Further significant changes can be expected as the Sláintecare programme is implemented. The role of private health insurance in our health system could change significantly and the regulator must be able to react to its changing role and advise the Minister appropriately.

Public sector governance obligations have become more prescriptive. The 2016 code of practice for the governance of State bodies places much greater emphasis on accountability of State boards. For the objective and effective discharge of its functions, it is desirable that the authority include a broad mix of skills and experience, and expanding the membership of the board will ensure that it can deliver its strategy and address any challenges it meets.

The Bill contains two amendments to the Voluntary Health Insurance Acts, which comprise the governing legislation for the VHI. The first VHI-related amendment deals with board composition. Currently, the VHI board is restricted to having only two persons who are health service providers. The amendment is to remove this restriction, and it includes a new provision that the Minister will give due consideration to the mix of skills present in the VHI board when making appointments, thus ensuring the highest standards of governance.

The second amendment to the Voluntary Health Insurance Act deals with one specific area of the VHI's business activities. The amendment will permit the VHI to sell international healthcare plans directly not only as an agent, as it is allowed to do currently, and it will remove the requirement for the VHI to seek ministerial approval before selling these plans. This development is consistent with the VHI's current status as an insurer authorised by the Central Bank. The VHI is competing in a highly competitive, regulated marketplace, and the amendment will remove the impediment to its ability to compete with its competitors and thereby allow it to avail itself of potentially significant business opportunities. I will now outline the specific provisions of the Bill.

Section 1 defines the principal Act as the Health Insurance Act 1994. Section 2 amends section 11C of the principal Act to provide for 1 April 2019 as the effective date for revised credits payable from the risk equalisation fund. Section 3 amends Schedule 1 to the principal Act to provide for the expansion of the membership of the board of the Health Insurance Authority from five to seven, and to provide for an increase in the quorum from three to four.

Section 4 replaces table 2 in Schedule 4 to the principal Act with effect from 1 April 2019, whereby the applicable risk equalisation credits that are payable from the risk equalisation fund in respect of certain classes of insured persons are revised.

Section 5 amends section 4 of the Voluntary Health Insurance (Amendment) Act 1996 to provide for a change in the composition of the VHI board. It will remove the existing restriction on the number of healthcare providers on the VHI board, and includes a new provision that the Minister will give due consideration to the mix of skills present on the VHI board when making appointments, thus ensuring the highest standards of governance.

Section 6 amends section 1 of the Voluntary Health Insurance (Amendment) Act 1998 to amend the VHI's current function as solely an agent for the provision of international healthcare plans to permit the VHI to sell international plans directly without an intermediary. It will also remove the requirement for the VHI to seek ministerial approval before selling these plans.

Section 7 amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates initially from 1 January 2019 to 31 March 2019, and thereafter from 1 April 2019.

Section 8 provides for the Short Title, commencements, collective citation and construction of the Bill.

As I said, the Bill allows the Department of Health to maintain its support for the core principle of community rating, which is a long-established and well-supported Government policy for the health insurance market. The amendments to the legislation governing the Health Insurance Authority and VHI are to allow these organisations to plan the future developments in this ever-changing and complex environment. I commend this Bill to the House.