Wednesday, 29 November 2006
Private Health Care Insurance.
I welcome the Minister of State, Deputy Seán Power. I am interested in his views on competition in the health insurance market and, in particular, on the proposed introduction of risk equalisation. If the latter is implemented as proposed, it may well result in the health insurance market returning to a state of total monopoly by one provider.
The Irish health insurance market is unique among European and international models in its domination by one major player. VHI has a near monopoly on the market and had it entirely to itself for almost half a century. BUPA, a relatively new company, and VIVAS, an even newer one, have a limited share of the market between them but may now be obliged to operate according to the constraints of risk equalisation. A decision in the courts last week means that the Government is entitled from a legislative prospective to introduce risk equalisation. Interestingly, the judgment in this case included an observation that risk equalisation, if implemented as currently proposed, could make BUPA's position in the market commercially non-viable.
Given that the State encourages people to avail of private health care insurance, it has an obligation to ensure there is maximum competition in the market. Whether in respect of air or bus transport or any other form of economic activity, the one lesson we have learned beyond doubt in the last 20 years is that competition works and that a deficiency in this regard has negative consequences for consumers. It must be a keystone of health insurance policy to ensure that competition remains in the market. Not only must BUPA and VIVAS be facilitated to remain in the market but other players must be encouraged to offer health services to the public.
There is a convincing body of evidence to support my contention that the concept of risk equalisation, as threatened to be enacted by the Government, will result in the collapse not only of one particular company but of competition in general in the health insurance market. What will the Minister for State do to ensure competition is protected? What will be done to cushion the blow from the introduction of risk equalisation and the subsequent driving out of competition in the market?
I understand a meeting took place last night between the Minister for Health and Children, Deputy Harney, and representatives of BUPA, but I am not aware what transpired. Media reports at the weekend suggested the Minister is considering the introduction of several measures to deal with the greatly unbalanced situation of VHI's strength in the market. There were even suggestions that VHI might be broken down into several companies. These and other issues must be addressed in the interests of protecting competition.
There was an unwillingness on the part of some in the body politic to accept that risk equalisation might drive out BUPA and other health insurance providers. It has dawned on many in recent days, however, particularly in view of last week's court judgment, that risk equalisation, if introduced as proposed, will do just that. BUPA, a mutual society rather than a profit-making company, will be driven out of the market, and other companies will be discouraged from entering it.
Rather than facilitating a monopoly situation, we must ensure there is competition. Risk equalisation, however, is the greatest threat to competition. Its introduction in the context of the already distorted health insurance market in this State must be urgently reviewed and reversed. I look forward to the engagement of the Minister of State and the Minister, Deputy Harney, on this issue in the next crucial weeks. I await the Minister of State's response with interest.
I am responding to this Adjournment matter on behalf of the Minister for Health and Children, Deputy Harney. Private voluntary health insurance is an integral part of the Irish health care system, a service of which more than half the population avails. It has, for almost 50 years, played a major role in the financing of our health services and in offering choice to the public. There is widespread support for Government policy establishing community rating as a fundamental principle of the health insurance market. This principle, together with lifetime cover and open enrolment, guarantees affordability of private health insurance for many people and an equitable non-discriminatory regulatory framework for health insurance.
The Government continues to support sustainable competition and consumer choice in the private health insurance market. Alongside this, the Government will also support the stability of the community rated health insurance system and the safeguards provided to protect it, such as risk equalisation. This policy is designed with the express purpose of benefiting the insured population, particularly the elderly and the ill, who would otherwise be vulnerable to the effects of risk selection, and would find the cost of private health insurance unaffordable.
Risk equalisation seeks to remove an insurer's incentive to select preferred risks. It is clear from international health insurance markets that a system of risk equalisation and community rating is not incompatible with viable, ongoing competition. However, a market without the balancing measure of risk equalisation to address the effect of mandatory community rating exposes insurers with higher-risk members to spiralling claims and potential financial distress. Risk equalisation is not designed to over-compensate any insurance undertaking for the share of the total community of sick and elderly. It is about compensating for differential risk profiles rather than transferring profits. Its objective is to ensure that competition takes place on an equitable basis.
In December 2005, the Minister asked the Competition Authority and the Health Insurance Authority to examine the health insurance market and to bring forward recommendations on how greater competition might be encouraged. Their joint report is expected early in 2007. The Government is mindful of ensuring competition to allow consumers the choice to which they are entitled. It is the Government's view that the regulatory framework for private health insurance, including the provision for risk equalisation, is appropriate. This position has been endorsed by the High Court in a comprehensive judgment delivered last week. The written judgment is not yet available and will need to be carefully analysed by all concerned. While the Government accepts that the framework influences the market environment, it does so for a good reason, namely, the protection of the consumer and in the interests of the common good.