Frank Feighan (Sligo-Leitrim, Fine Gael) | Oireachtas source

May I take this opportunity to congratulate you, a Leas-Chathaoirligh, and Cavan on a wonderful victory last Sunday?I am pleased to have this opportunity to address the House on Second Stage of the Health Insurance (Amendment) Bill 2020. This is a short and technical Bill comprising six sections, all focused on the specific issue of health insurance. This legislation is needed in order to revise the parameters of the risk equalisation scheme, which is a financial mechanism that supports our community-rated health insurance market. It is widely acknowledged that the events of this year have been unprecedented and have affected us all in ways that we could never have imagined. Covid-19 has also had a significant impact on the private health insurance market, particularly the claims experience of insurers this year. This has caused much uncertainty regarding market direction in the year ahead, which is an important additional factor considered in setting the risk equalisation rates for 2021.

I will begin by briefly outlining the purpose of risk equalisation before providing an overview of the process undertaken to set the 2021 rates, and then outlining the specific revised rates that will apply next year. To give some private health insurance background, over 45% of the population in Ireland hold private health insurance. Health insurance in Ireland is provided according to four principles, namely, open enrolment, lifetime cover, minimum benefit and community rating. Our community-rated health insurance market means that the cost of health insurance is shared across all members of the market. In general, everyone, with certain exceptions, can buy the same policy at the same price. Older and sicker people pay much less for health insurance than they would in a risk-rated market. People who are less likely to need healthcare pay more than they would in a risk-rated market.

Our market based on generational solidarity; younger and healthier people effectively subsidise older people who may be less well and need more care. This helps to keep health insurance affordable for older and sicker people, who might otherwise be priced out of the market.

Community rating means health insurers must offer health insurance policies at the same price to everyone, regardless of a person's current or potential health status. Community rating is supported by providing cross-subsidies between insurers with different risk profiles. This is called risk equalisation and is essentially a financial transfer mechanism, whereby money flows from insurers with healthier members to insurers with sicker members. 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.

The risk equalisation scheme was first 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, with all moneys held in the risk equalisation fund. 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 health insurance contracts go to the Exchequer, they are all redistributed from the fund to compensate for the additional cost of insuring older and less healthy people. The risk equalisation fund is managed by the Health Insurance Authority, HIA, the independent regulator of the health insurance market.

Amending legislation is required each year to update the amounts of credits paid to insurers under the scheme and the amounts of stamp duty levied on health insurance contracts to fund the credits. As part of the process, the HIA carries out an annual analysis and evaluation of insurers' market data, focused on the claims costs that every insurer has paid over the preceding year. Based on this examination, the HIA determines the levels of credits to be paid out from the fund and the stamp duties applicable to every contract, for the following year.This evaluation also includes information on market conditions, which are particularly relevant in the current pandemic. The Health Insurance Authority, HIA, consults each of the insurers during the process to ensure the evaluation is thorough and informed. Although the private health insurance, PHI, market has demonstrated resilience and remained reasonably stable among significant uncertainty in 2020, the longer term impact on market profile and membership is yet to be determined. In recommending stamp duty rates and credits to apply to the health insurance market for 2021, the authority had the added consideration that market claims for the first half of 2020 were distorted as a result of the pandemic.

This Bill seeks to amend the health insurance legislation to provide that the amount of stamp duty levy will remain unchanged in respect of non-advanced contracts, at €52 per child and €157 per adult, and for advanced contracts, at €150 per child and €449 per adult; that the level of hospital utilisation credit, HUC, will increase from €100 to €125 per night, payable for overnight stays in hospital, while the level of the HUC for day admissions remains at €75; and a marginal decrease in the risk equalisation credit payable in respect of those over 65 years. For next year, stamp duty rates which are charged on every health insurance policy will remain unchanged from the 2020 levels. In view of market uncertainty at this time, it is considered that sustainability of the market can be aided by keeping stamp duty unchanged in the period ahead. The hospital utilisation credit is a type of risk equalisation credit that is paid to an insurer each time a customer attends hospital for an overnight admission or day case. The credit acts as a proxy for health status as it is paid retrospectively and only when a customer needs treatment. Increasingly, the HUC for overnight stays is intended to improve the effectiveness of the risk equalisation scheme by compensating insurers for that increased risk in providing community-rated health insurance products.

Age-related credits are paid from the risk equalisation fund to insurers and are paid for customers aged over 65. These vary in amount, depending on age, gender and level of cover. This Bill provides for a marginal decrease in the amount of some of the age-related risk equalisation credits payable next year. While this means that insurers will receive lower credits for some older customers, this is balanced with the increase in the hospital utilisation credit, meaning they will receive more credits for the customers who are hospitalised during the year. The HIA has recommended the rates for 2021 and the Ministers for Health and Finance have considered and accepted those recommendations on the basis that these rates will provide stability and some certainty to the market in these unprecedented times. The amendments in this Bill are in line with the policy objective of the scheme to support community rating in the health insurance market so that older and less healthy people can access health insurance at the same price as younger and healthier people.

I will outline the specific sections 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 1 April 2021 as the effective date for revised credits payable from the risk equalisation fund. Section 3 amends Schedule 3 to the principal Act to the effect that from 1 April 2021 the applicable hospital utilisation credits payable from the risk equalisation fund in respect of insured persons are revised. Section 4 replaces Table 2 in Schedule 4 to the principal Act to the effect that from 1 April 2021 the applicable risk equalisation credits payable from the risk equalisation fund in respect of certain classes of insured persons are revised.Section 5 amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates for 1 January 2021 to 31 March 2021 and from 1 April 2021 onwards. Section 6 provides for the Short Title, commencement, collective citation and construction of the Bill.

To reiterate, the Bill allows us to maintain our support for the core principle of community rating which is a long-established and well-supported Government policy for the health insurance market. It is envisaged that the approach being taken now will provide stability for the private health insurance market in the year ahead. I commend the Bill to the House.