Thursday, 27 September 2007
Voluntary Health Insurance (Amendment) Bill 2007: Second Stage
I am pleased to address this House today on the Second Stage of the Voluntary Health Insurance (Amendment) Bill2007.
Though this is a relatively short Bill, it provides for the most significant changes to the provisions governing Voluntary Health Insurance, VHI, since the board was established 50 years ago. In the intervening period there has been only one other significant amending Act, the Voluntary Health Insurance (Amendment) Act 1996.
The main provision of that Act provided an enhanced commercial framework for the board providing health insurance cover to its members. It recognised the board's right to select its health care providers and to refuse to cover providers where it considered it appropriate not to do so. It also provided for ministerial consent to premium increases determined by the board in the context of the board meeting its liabilities and providing for reserves as it saw fit.
The 1996 legislation was enacted in advance of the completion of the regulatory framework for health insurance that opened the market to competition, put in place by the passing of the Health Insurance regulations at the end of March 1996. The development of the regulatory framework arose in the context of implementing the EU third non-life insurance directive. The directive provided, inter alia, for the opening of the health insurance market to competition. In that respect it differed significantly from the first non-life directive dating from 1972. That directive specifically recognised the position of the Voluntary Health Insurance board and the common good role it alone had played as a monopoly provider of health insurance cover to both the segment of the Irish population that did not have a statutory right to free hospital services and also those encouraged to take out insurance notwithstanding such a right. The 1972 directive specifically granted the board, along with a number of similar health care providers in Europe, a derogation from meeting the prudential obligations to be met by most insurance undertakings.
While the third directive opened the market to competition it did not remove the derogations granted under the first directive. Consequently, the VHI has continued to operate as a statutory body that is exempt from meeting the prudential requirements of the Financial Regulator. Notwithstanding this, the VHI board maintains significant levels of technical reserves, amounting to €292 million at the year ended 28 February 2007. While this is a large sum and well above the minimum requirement of the EU, it is approximately €140 million short of the level that established insurers with VHI's premium and claims experience would be required to maintain by the Irish Financial Regulator.
The VHI finds itself in the anomalous position of being both the market leader in the health insurance market and being an unauthorised insurer. The company's competitors consider that this position confers a competitive advantage on it. Although the present statutory arrangements also prescribe a number of significant disadvantages for the VHI, the Government recognises that the derogation cannot continue. It considers that it is in the best interests of the health insurance market and VHI that the company attain authorisation as an insurer in the shortest possible timeframe and be subject to the same prudential regulation as other commercial insurers operating in the market.
The proposed changes to the VHI Acts are consistent with the policy set out in the White Paper on health insurance, published in 1999. It recognised the need to give full commercial freedom to the VHI, placing its relationship with the Minister on a more appropriate footing and removing its exemption from meeting solvency requirements. The White Paper set out the policy context and the options for the VHI and specifically identified the need to fundamentally change the basis of the relationship between the Minister for Health and Children and the VHI. It provided that the VHI should operate in accordance with strict commercial criteria, be a market-driven, customer focused company capable of competing in the liberalised private health insurance market and exploit new business opportunities subject to it continuing to provide indemnity insurance for private health care.
The provisions of the Bill also reflect the general thrust of the recent recommendations of the Health Insurance Authority, the Competition Authority and the Barrington Group regarding the VHI, as set out in their reports on competition in the private health insurance market. They also address matters raised by other market stakeholders including the VHI's competitors. The European Commission has also taken an interest in developments in the market having regard to overseeing the operation of the insurance directives, complaints made to it by other market participants and the provisions of the treaty. The Commission has emphasised the need to address the VHI's derogation as soon as is feasible.
The provisions of the current Bill are very much focused on providing the VHI with a structure that is more appropriate to the competitive market in which it now operates and one that will oblige the board to pursue early authorisation and provide a statutory framework that will facilitate this process. Since its establishment the board's primary function has been to provide health insurance and that will continue to be the case.
I will now outline the sections and principal features of the Bill. Though a relatively short Bill, it encompasses significant provisions most of which are directly related to enabling and obliging the VHI to attain authorisation.
The primary purpose of the Bill is to oblige the board to achieve authorisation from the Financial Regulator as an insurer and to provide it with a structure that supports an application for authorisation. This involves giving commercial freedom on products and pricing to the VHI. It will, of course, under the parent Act, and in accordance with the memorandum and articles of association of any relevant subsidiaries, be obliged to continue to provide health insurance to the population. The Bill also provides for amending the definition of a health insurance contract in respect of cash plans.
Section 1 is a standard section providing for definitions relevant to the Bill. Section 2 amends section 2 of the Voluntary Health Insurance (Amendment) Act 1996. Section 2, paragraphs (a) and (b), remove the requirement to obtain ministerial consent for the board's health insurance schemes. Paragraph (c) provides for the board's determining premium increases, having regard to its obligations and outgoings. I will comment further on this when outlining the third repeal contained in the Schedule to the Bill.
Section 2, paragraph (c), also provides for a strengthening of the obligation on the board to attain a level of reserves that would facilitate securing authorisation. One of the primary purposes of this section is to oblige the VHI board to have regard to solvency requirements for authorisation and to focus on attaining this objective. The section provides a clear obligation on the board in respect of the building up of reserves by a date appointed by the Minister. I intend to move an amendment to this subsection on Committee Stage that will specifically require the board to attain authorisation by the end of 2008.
Section 3 provides for functions of the board. The first subsection replicates section 14 of the Health Insurance (Amendment) Act 2001, as regards activities in which the board may engage. That section is being deleted under number 4 of the Schedule of enactments being repealed. This subsection does not therefore confer any additional powers on the board. The second subsection provides for the board's engaging in new activities, subject to the consent of the Minister. I intend to move a Committee Stage amendment that will result in the provisions of this subsection taking effect only after the VHI has attained authorisation. This amendment will also facilitate removal of the requirement to obtain the Minister's consent from the subsection, given that the VHI will then be subject to prudential regulation by the Financial Regulator.
Section 4 provides for the board's forming, establishing or acquiring subsidiaries to perform any one or more of its existing functions, other than those set out in section 3, paragraph (b), and section 2 of the Voluntary Health Insurance (Amendment) Act 1996, these being new activities and health insurance respectively. It is a requirement, where authorisation as an insurer is being sought, for the applicant to be a stand-alone entity, that is, engaged only in activities relating directly to the insurance business. The section provides for the VHI to establish separate subsidiaries to undertake the company's activities under section 3(a).
Given the proposed amendment to specify that authorisation is to be attained by the end of 2008, and that authorisations can be granted only to incorporated bodies, I will also table an amendment on Committee Stage to provide that the VHI establish a subsidiary under this section to carry on its health insurance business. This subsidiary and any others that would require authorisation by the Financial Regulator will seek authorisation. The VHI is already subject to regulation by the Financial Regulator for its ancillary businesses, including its travel insurance business.
Section 5 will allow the board to form, establish or acquire subsidiaries to undertake activities outlined in section 3, paragraph (b), once authorisation has been achieved. To the extent that any of these companies require to be regulated by the Financial Regulator they too will be subject to such regulation. In summary, sections 4 and 5 will enable the VHI to put in place a holding company structure which is a necessary step towards attaining authorisation for its health insurance business.
Section 6 provides for terms and conditions of persons employed by the board's subsidiaries. It covers subsidiaries to be established to perform existing functions and those that may be established following authorisation. Section 7 covers the borrowing powers of the board and its subsidiaries. This section allows the board or a subsidiary to raise or borrow money for the purpose of performing its functions. It specifies a limit on borrowings to apply to the VHI and its subsidiaries. In order to allow the board scope to meet the prudential requirements of the Financial Regulator, the limit does not include any additional borrowings which may be used for the purposes of attaining authorisation.
Section 8 provides for the repeal of the enactments specified in the schedule attached to the Bill. Section 9 provides for Short Title, collective citation and commencement. This is a standard provision. It allows the Minister determine the appropriate times for the commencement of the various sections and also the repeals set out in the Schedule.
The Schedule provides for repeals relating to four existing legislative provisions. The first refers to section 18 of the Voluntary Health Insurance Act 1957. That section provided for borrowing by the board in very limited circumstances relating only to current expenditure. In the context of introducing the broader borrowing provisions contained in section 7 of this Bill, I am advised that the current provision needs to be repealed.
The second enactment to be repealed is an exemption for cash plan providers contained in the Health Insurance Acts. Typically cash plan payments are made directly to the insured person, provide limited cover for out-of pocket expenses and do not extend to indemnity cover. The current definition of a health insurance contract includes an exemption from the definition for the products of two cash plan providers. The exemption was provided on the basis that they were limited to offering community rated cash plans with a limited focus on hospital services. The exemption, however, is not available to other cash plan providers. It is necessary to put all existing and potential cash plan operators on an equal footing.
The Health Insurance Authority and the Competition Authority have addressed the matter in their reports on the market. The change proposed will limit regulation to the minimum necessary to protect the community rated indemnity market. It will enable cash plan providers to design their products so as to be exempt from the regulatory framework under section 2(a) of the Health Insurance Acts or to be subject to only limited regulation. This would include an exemption from the requirement to meet minimum benefit levels and to participate in risk equalisation where offering contracts covering general practitioner services, outpatient services and the supply of drugs.
As recommended in the White Paper, the question of whether cash plans should be subject to the requirements imposed on indemnity-based health insurance contracts will be kept under review. The third repeal is of section 3 of the Voluntary Health Insurance (Amendment) Act 1996, a section that obliges the VHI board to notify any proposed premium increases of health insurance premia to the Minister and gives the Minister the power to direct the board not to implement increases. Freedom on pricing is an essential requirement for an insurer which is subject to prudential regulation by the Financial Regulator.
In order for any insurance undertaking to be authorised, the Financial Regulator would have to be satisfied that the organisation has full independence in designing its products and the price its sets for those products. In a competitive market it is no longer appropriate for the Minister to have any involvement in these commercial decisions.
In the 11 years since the enactment of the 1996 legislation the Minister has only once refused to approve a proposed increase. This resulted in two increases being required the following year. My stated policy for a considerable time has been that decisions on products and pricing are matters appropriate to the board, given that it is best placed to make these decisions.
The fourth repeal covers section 14 of the Health Insurance (Amendment) Act 2001. That section gave the VHI the powers to engage in certain health related activities. It is being repealed as those functions are now encompassed in section 3, paragraph (a), of this Bill, with related provisions on the establishment of subsidiaries under section 4.
The VHI is a major provider of health care to a significant proportion of the population. We must ensure that it is obliged to meet the appropriate regulatory requirements. All of the many reports commissioned on the health insurance market since the introduction of the third non-life directive have supported the course we are pursuing. I believe that the provisions of the Bill will have a positive effect on the management and staff of the VHI, be good for its consumers and for the development of the health insurance market. The European Commission through its internal market Directorate General, which has responsibility for the insurance directives, has been kept informed of the evolution of the Bill and the Commission has taken a keen interest in the development of the Irish health insurance market.
I congratulate the VHI and its staff on the successful delivery of health care to the population for 50 years since it was established in 1957. I commend the Bill to the House.
I thank the Minister for coming here this morning to introduce this Bill. The Minister has said that she will introduce several amendments to it.
As the Minister noted, it is extraordinary that the VHI finds itself in the anomalous position of being both the market leader in the health insurance market and an unauthorised insurer. Obviously the Bill seeks to address this issue. I note the Minister has stated she will table a number of other amendments. I welcome her intention to table on Committee Stage an amendment requiring the board to obtain authorisation by the end of 2008, as I would have questioned the Minister regarding the setting of such a date. As for section 3(2), the Minister stated she intends to table an amendment on Committee Stage in order that its provisions will take effect only after the VHI has obtained authorisation. Such an action is more protective of the State's interest. A number of other amendments have been also proposed.
Fine Gael values the VHI as well as the service it has provided and was set up to deliver. My party established the VHI on 1 October 1957. I appreciate this amending Bill has been introduced partially in response to the threat of legal action by the European Commissioner for Internal Market and Services, Mr. Charlie McCreevy. I have certain questions and issues in this regard on which the Minister should provide clarification. I note the Government has been keeping the EU informed of progress as it has taken a keen interest in the development of this Bill and has expressed concern regarding a range of issues that have arisen recently in the private insurance market.
It is important to note that many players in this field have become concerned regarding a lack of policy discussion on the future of the health insurance market. In a sense, over the years the VHI has operated both as an arm of public policy in respect of public health services and as a private insurer. The Minister will agree it has come from a somewhat unorthodox background. Nevertheless, it is held in extremely high regard. Clearly, the State has invested greatly in the company, both in terms of tax forgone by way of the tax reliefs for which all citizens who pay VHI subscriptions are grateful, and through a mechanism on which the Minister has spoken at length, namely, the subsidisation of private care in public hospitals.
While the Minister for Health and Children remains the biggest shareholder, important questions arise for citizens in any discussion regarding the VHI's future. In many ways, the citizens' primary relationship to the VHI has pertained to the cost of premiums, which for any family constitutes a major expense in the course of a year. What exactly are citizens buying? Most people believed that through membership of the VHI they were buying fast access to health care, as well as a choice of consultant. This has changed somewhat in the existing health services on foot of many changes in this sector, some of which were debated in the House last night. Obviously, it remains to be seen what will be the role of private medicine, the availability of consultants to perform private work and the location of such work, depending on the outcome of the negotiations regarding consultants' contracts.
However, in respect of citizens' perceptions of what they were buying in terms of access to health care and choice of consultant, the face of the health care service is changing. I refer to the increased investment in private facilities. Yesterday, Members discussed the regulation of such facilities and the need for action in that regard. Change has arisen on foot of enormous private investment, which raises a series of questions regarding the identity of those establishing such services, as well as standards of care. While many superb private facilities exist, areas of concern have been raised by some people who have had procedures performed in some — I emphasise some private facilities and who have ended up in the public health service requiring a considerable degree of care. While this issue is a debate for another day, it is important to note it as an area of concern. In addition, while such changes also provide opportunities for development within the health service, there are some question marks from the perspective of patient care which must be on the agenda.
I am aware the European Commission initiated the first stage of legal proceedings against the Government regarding exemptions to solvency requirements provided by the VHI. This action followed complaints lodged by the rival health insurance company, VIVAS Health. Ultimately, this amending Bill will provide retrospective cover to the VHI for actions in which it engaged that may have been outside its perceived function. These include the SwiftCare clinics and the provision of travel insurance, to name two examples. The explanatory and financial memorandum for the Bill states its object is to oblige the VHI's board to attain the level of reserves necessary to achieve authorisation as an insurer and to provide it with a structure that gives commercial freedom on pricing to the company. Evidently this is essential.
I have some questions the Minister should address in her response. I refer to the Bill's commercial freedom aspect, which she mentioned a number of times, and the removal of the Minister's role. From reading the Bill, I presume this will give more freedom to the VHI to involve itself in other activities outside of those it has traditionally provided. Does the Minister believe the VHI should engage in such activities? For example, the Bill allows for the VHI to establish a subsidiary company to provide pensions, which constitutes a major change to the VHI's role. What would be the State's liability in this regard? Would such companies be completely separate? For example, if such a company encountered difficulties in the provision of pension or financial services, would there be an ongoing liability for the State? Is such commercial freedom not somewhat undermined by the VHI's ongoing obligation to continue to do the Minister's bidding? The Minister should clarify this issue. It may be that such companies will be completely separate.
I seek clarity regarding the political and public accountability that will remain in place in respect of such companies. Could a Shannon Airport-like situation arise in respect of the VHI, whereby such companies would be fattened up under the VHI's auspices and subsequently privatised? Will they be set up as independent commercial bodies from henceforth? The Bill is unclear in this regard. Members are being asked to make a highly important decision regarding the VHI's future and answers to my questions would be helpful.
Some questions also arise regarding the Minister's plans for risk equalisation and she should outline them. My colleague, Senator Twomey, will make the other points Fine Gael Members wish to raise.
I welcome the Minister. The Minister and I have been dealing with risk equalisation for the past two and a half years and in some respects it has turned us into private health anoraks regarding debates of this nature. While the Minister and I appear to understand the issues, no one else outside the Houses of the Oireachtas appears to do so. I refer in particular to risk equalisation, which has given rise to an incredibly confusing debate for the past two years.
One must consider what is happening. Half the population has private health insurance, which mainly covers hospital care. However, such care is a right, to be delivered free to all patients. Consequently, the sight of 50% of the population seeking private health insurance constitutes a vote of no confidence in the manner in which the public health service is run by the Government. A massive increase in the numbers taking up private health insurance has been noted. While the Minister, Deputy Harney, may wish to portray this increase as having taken place because the economy is performing better, this is not necessarily so. In the context of this Bill, Members are considering the VHI's privatisation, because it is leading to the company's eventual privatisation. Consequently, premiums will increase according to market conditions or to what the VHI wishes to charge its customers, with little or no way of stopping it. The Minister's comments regarding ministerial responsibility for controlling increases in premiums were interesting. In 2001, the year before the general election of 2002, the then Minister, Deputy Martin, did not allow an increase. However, two increases took place after the general election. Consequently, there may be some merit in removing political interference from the VHI.
Members should consider the VHI itself. No one who attends hospital and pays VHI premiums has any idea what he or she pays for as the bills are not itemised. The customer does not receive an itemised bill. Members should consider what would happen if a person presented a bill he or she received from an Irish hospital after attending as a private patient to an insurance company that requires itemised bills. For instance, somebody who was previously a Member of the European Parliament or who worked for the European Union is entitled to private health insurance through the European Union but if that person receives hospital care, he or she must present the European Union with an itemised bill of all the costs incurred. That does not happen with the VHI and we do not know for what we are paying as VHI, or indeed BUPA or VIVAS Health, customers.
If the Minister is going down this road and is concerned with protecting the consumer so that he or she will not be abused because of the monopoly position of the providers in this market, we must ensure transparency in how patients are charged and therefore we must look at the idea of itemised hospital bills. There is no point in someone being told his or her hospital stay cost €10,000 and that bill being handed to the VHI for payment, only for the VHI to state it incurred costs of €900 million last year, it wants to make a profit of €100 million and will therefore charge customers accordingly on a take it or leave it basis. That is essentially what is happening in the private health insurance market at present. I am all in favour of competition, and much of what the Minister is doing in this Bill will probably prove good in the long term, but if we continue with this secrecy in regard to how the VHI charges customers and how hospitals and the VHI work together, we will see nothing arising from this that will be beneficial to patients who are the customers of the VHI. The Minister is not assisting patients in that respect.
On the €140 million shortfall, the Minister is well aware of what may be happening in Europe and she should push this in Europe, and certainly with her former colleague, Charlie McCreevy. There is no need for an insurance company which exclusively deals with health to hold such large reserves as, for instance, another insurance company which writes life or accident insurance. There is always a possibility that a hurricane will hit Ireland for which an insurance company would require substantial reserves, but both the Minister and I know from looking at private health insurance over the past decade that there will be no major calamity which requires such large reserves of a health insurance company. There is no need for such a reserve.
The VHI could more then adequately keep its reserves at €300 million. There is no need for the customer to be charged an additional €140 million before the end of next year to make up that shortfall, and the Minister knows that is the case. The turnover of the VHI is less than €1 billion and therefore she is speaking of it making up 10% in its reserves this year and next year. That is impossible to achieve before the end of 2008. If, for instance, the turnover of the VHI is approximately €800 million, it means that the company must bring in €870 million this year and next in order to make up this reserve of €140 million of which the Minister speaks. It is not necessary. It is not achievable. We need a little more clarity in such debates in this House. I would be interested in hearing the Minister's views on that.
When one speaks of privatising the VHI one is very much speaking of the corporatisation of other aspects of Irish health care. The VHI has got heavily involved in the SwiftCare clinics and no doubt it will get involved in other aspects of health care provision. That means the Minister is now privatising and corporatising services like general practice, emergency care and pharmacy care. There has been no clear debate in this House on whether people want to follow this model. This happened in Australia a number of years ago and it failed. All that happened was that the service to patients became worse, the cost to consumers increased and it did not work out as expected. The quality of care disimproved.
Before we start going down that road and facilitating a vast company like the VHI, which will have a significant monopoly in the market and which could privatise many aspects of health care apart from private health insurance, we should have a proper debate in this House. In some respects the Minister should even be considering stopping or limiting the process or ensuring there is greater transparency. If we are not careful and if we do not look at these other aspects, merely privatising the VHI will create an unholy mess for the consumers. We have spoken previously about these other aspects and it looks like we will speak of them again, but there has been no clarity from the Government in this regard. I would like to see more clarity.
I welcome the Minister back to the House again today. I welcome this detailed technical Bill. As has been pointed out, the VHI has been a part of the lives of most of us. The company is 50 years old and it has served us well.
This Bill had to be introduced for the purpose of bringing the VHI in line with its competitors in this country — Quinn Healthcare and VIVAS Health — in terms of the level of reserve necessary for it to achieve authorisation as an insurer. As the Minister pointed out, the VHI has very high reserves of €292 million. This level of reserves is above the EU minimum requirement but falls short, by €140 million, of the levels of established insurers with premium and claim experience such as the VHI would have. As we know, it falls a long way short of what is required by the Financial Regulator.
The purpose of the Bill is also to provide a structure which gives the VHI commercial freedom on products and pricing. It is apt that the Bill comes at this time, as we all know the VHI had a monopoly up until seven or eight years ago in the area of health insurance. It is about time the VHI had the freedom to engage in other activities. One need only look at the level of advertising in the health care area. We have got to a stage, not quite of yellow pack as we would have known it but of buy two and get one free. Quinn Healthcare, in its radio advertisements, states that if one transfers one's VHI health insurance Plan B for two adults and two children as well as one's house insurance or motor insurance, it will provide free house insurance to the value of €300 or €400. The time is right in that if the VHI were not given the freedom to come into a market such as we are experiencing with Quinn Healthcare and with VIVAS Health, there is no way it would survive. I am glad to see that change being introduced.
This is a good Bill in that it provides that the VHI board may raise or borrow money with no cost to the Exchequer. There is no limit on the borrowings it may raise for the purpose of attaining authorisation. However, there is a limit on borrowings for day-to-day running or for the new products in which it may engage. It will not exceed 10% of the previous year's charges.
I am pleased to note the Minister's view that the decision on product and pricing is clearly a matter for the board, who are the people best placed to make that decision. Owing to the rate of change in the market, consumers can be assured that their best interests will be taken care of. The VHI, no more than Quinn Healthcare or VIVAS Health, cannot go on solo runs because if it does and it charges fees above those of its competitors, it will lose its share of the market.
I have some concerns. I would like to see the debate opening up and to see where it will go. A colleague told me yesterday that he went with a sore shoulder to the Beacon Clinic where he thought he would be covered by the VHI. The Beacon Clinic would not accept VHI cover or Quinn Healthcare cover, but would accept VIVAS Health cover, and he was told he would have to pay cash for the treatment.
On the other hand, we hear the complaints of people who have gone to the SwiftCare Clinic to be treated for a minor injury and who have taken their X-rays or notes to a hospital for further treatment only to find that the consultant does not recognise what has been done by the SwiftCare Clinic. There are discrepancies in what is occurring. There is much time and money wasting and perhaps now is the time for us to address those issues. People with private health insurance who go to hospital for minor procedures are required to be there at 4 p.m. Their blood pressure might be taken at 6 p.m. and they would not see anybody else until 7 a.m. or 8 a.m. the following morning. These people are taking up hospital beds, which, as the Minister pointed out yesterday, are the most expensive beds in the city. The Minister suggested that getting a suite in one of the best hotels would not be as expensive as a hospital bed. I would welcome an examination of all these issues.
I welcome the Bill as the beginning of the long-overdue restructuring of the VHI. One of the most pleasant and interesting points of discussion in the Oireachtas Joint Committee on Health and Children during the previous Dáil was the health insurance market and the proposed changes to it. These changes are especially necessary given the competition that exists.
The Minister and I did not necessarily share the same opinion about the commencement of risk equalisation but I accept what has happened. I welcome the start of the process to give a new corporate structure to the VHI. However, as the Minister would accept, it does not go far enough. We need the VHI to be broken up to provide a more level playing field for the health insurance market. Both Senator Feeney and Senator Twomey referred to the sharp practices that exist in the health insurance market and how the consumer is not benefitting from the limited competition that has been introduced.
I fully agree with what Senator Twomey said about transparency. I would be interested to know whether there is some way to oblige companies to provide itemised billing. I recently heard of a person who had stents implanted on an emergency basis. The bill, which was paid through the VHI, amounted to in the region of €1,000. When the consultant recalled the patient to his private rooms to repeat the exact same procedure, the VHI again paid the bill but on this occasion the cost was €6,000. The reason given for the discrepancy was that the VHI had agreed with the clinic in question that this procedure would require a five-day stay. It did not matter that the patient in question only stayed one night because the agreement was in place. That is a disgrace. That kind of sharp practice cannot continue. It would be preferable for patients to be issued with itemised bills and for the VHI to pay for whatever service has been delivered. We should ensure this happens.
The Minister proposes to roll back on the ability of her office to interfere, so to speak, in the VHI. We must provide a framework for a health insurance system that is fair to patients and to those who pay the premia. Reference was made in the York report which was commissioned into the health insurance market in Ireland to the fact that uncertainty regarding the restructuring of the VHI has been a bar to competition. For that reason I welcome the commencement of the process to settle the future structure of the VHI, whatever that may be. The change cannot happen quickly enough.
I would like to see the Minister deliver a restructured VHI. Perhaps she would indicate a timescale for the break-up of the company to provide a level playing field. I have a certain sympathy for the other players in the insurance market, namely, VIVAS Health and Quinn Healthcare, that have to pay risk equalisation to the dominant player in the market. It does not make sense that the VHI controls 70% of the market. I heard all the arguments about community rating and why this must happen and I accept them, but it is not fair that the VHI can operate differently from other health insurers in the market. I accept the Bill is going some way towards remedying the anomaly that exists. The dominance of the VHI must be addressed. I welcome this start to the process and hope it will not be too long before we see a competitive health insurance market where all players are approximately the same size.
Like other Members, I congratulate the Leas-Chathaoirleach on his appointment. I welcome the Minister, Deputy Harney, to this House where we both started in the Oireachtas together on the same day. We will not say how long ago.
In some ways the Bill is probably going much further than people might expect, but in other ways it does not go far enough. A number of anomalies arise when one considers the dominant position of the VHI in the private health insurance market. As other Senators have outlined, when patients go to hospital for certain procedures, they discover they are not covered by the VHI, irrespective of which policy they hold, while other minor procedures are covered. This matter must be examined.
Preventative medicine is perhaps of more importance where health insurers are concerned. There is a need for all health insurers to outline in detail to prospective policyholders what is covered. In some cases one is covered for certain procedures, but in other cases one does not get the cover to which one feels entitled and one ends up paying.
The VHI and other health insurers could perhaps examine the provision of care for the elderly. In recent times it has fallen to the State to carry this burden. The Minister has made some progress in this regard but her efforts are being thwarted by the Health Service Executive in certain categories of provision. A number of community projects exist throughout the country for which funding has been provided by the Departments of Health and Children and Finance, but the Health Service Executive has not proceeded to carry out the necessary work. I will outline the detail of these projects to the Minister in writing. It is wrong that although we are providing the money, people are not getting the service they require either on a public or private basis. Something must be done.
As far as I can gather, the HSE is at loggerheads with everybody and is not delivering a service to the public. We know change is required and even though it affects my part of the country, I welcome the measures announced yesterday by the Minister to provide centres of excellence for cancer treatment. The change is in the best interests of patients. If somebody wants to go to Dublin for a day's shopping, he or she will get there so I do not see how in most cases he or she cannot also get to Dublin to access health care. In providing centres of excellence, the HSE is probably doing more for the long-term benefit of patients than certain individuals want to accept.
There is a need for VIVAS Health, Quinn Healthcare and the VHI to explain to their customers exactly what is covered by their premia. It is obvious the health care market is a lucrative one when one considers some of the tactics employed to stimulate business. One company is offering free home insurance to customers who already have health insurance and car insurance with it. That proves to me the market is overcharging. If it were not overcharging, the margins would not exist to allow insurers to offer such carrots to customers. There is a need to review current charges.
While we are trying to ensure the VHI remains solvent and obeys the regulations, we must send out a clear message from this House that private health insurance must be fully reviewed. I agree with the point made by Senator Twomey and other speakers. Perhaps it is time for a debate in this House on private health insurance and the operation of the HSE. Everything comes back to the Minister. In many cases he or she has provided the funds but the people who are responsible for delivering the service are not doing what they should.
I welcome the Minister. We are getting fond of the Minister or she is getting fond of us as she has been in the House two days in a row. I congratulate the Leas-Chathaoirleach on his election yesterday.
When I was elected to the Seanad 15 years ago, I wondered how I would handle Bills coming through the House and I decided that I would look for the customer in each Bill. I wrote a book some years ago entitled Crowning the Customer, the first chapter of which was the boomerang principle. It stated that everything one does in business and in every enterprise is to try to get the customer to come back again. Admittedly, I had problems with the Governor of Mountjoy Prison who claimed that it did not apply to him to that extent and I had a problem with my cardiologist last year when he shook hands with me and said, "I hope I never see you again." It is from that point of view that I was impressed with Senator Liam Twomey's contribution because he talked about the customer and about patients. I was chairman of a hospital and I tried to get the hospital to change the word "patients" to "customers", but I was singularly unsuccessful in that regard.
I want to examine this issue from the point of view of the customer. I have long been a champion of competition in most areas of economic activity, but for even longer I believe I have been a champion of the interests of the customer. It is that hat I would like to wear on this occasion. Looking at the Bill from the customer's point of view, it is not immediately clear to me where the benefit lies. The explanatory memorandum states the purpose of the Bill is to oblige the board to attain the level of reserves necessary to achieve authorisation as an insurer and to provide it with a structure that, inter alia, gives commercial freedom on products and pricing to the VHI.
The first part of that is an attempt to what I call shoehorn the VHI into the European Union competition regime in the area of insurance. For many years we have succeeded in resisting that move and currently we have a derogation from it. By passing this legislation, we are, in effect, abandoning that derogation forever. I want to question, first, whether it is a good thing to do so and, second, whether it is necessary to do so. There is no doubt that abandoning the derogation will be costly for the customer of VHI services. Under the existing regime, where the State carries the ultimate risk, the company does not have the considerable expense of maintaining the level of reserves that would be necessary if we are to regard the VHI not as a State enterprise but as a private insurance company like any other.
We must be under no illusion that under this Bill, we are significantly increasing the cost that must ultimately be passed on to the customer. This Bill cannot be passed off as being in the interests of the customer in any way that I can see. The motivation behind the move is ostensibly to open up the voluntary health insurance market in this country to competition or, at the very least, to conform with the current European Union ideology on competition, which could be summed up as, "Thou shalt have competition even if it kills you."
I was brought up to believe that competition was good and I believe that intrinsically in my business life. The more of it, the better. Invariably, competition reduces costs and brings about the lowest costs for the customer. Following some of our experiences in recent years, I am beginning to wonder if that is quite as straightforward as I used to believe was the case. For instance, in the past decade we have had to suffer successive increases in electricity prices, which I spoke about last year, the justification for which was to make the market profitable for new competitors to enter. Somehow magically the prices go down simply by more players being in the market, but so far it has not worked out that way in the case of voluntary health insurance.
There is another consideration at work. In this country we have irrevocably committed ourselves to the principle of community rating as a priority matter of national importance. That means the risk of health insurance is spread over the entire community, including both younger people who have less call on it and older people who always cause the major share of health expenses. That is a wonderful principle of which I thoroughly approve. It is a great example of the community working together to share a burden across generations. By spreading the risk that way, we make it possible for many people to enjoy health insurance who would otherwise be unable to do so.
Our subscription to this principle makes me proud to be Irish but with the best will in the world, I am not sure that we can mix the principle of community rating on the one hand and an open insurance market on the other hand in which companies compete with one another for the business. The only way community rating can be maintained in a regime of open competition is by risk equalisation, in other words, making it impossible for companies to reduce their costs by selecting only the best risks. If they cannot benefit by cherry-picking the risks and if they cannot reduce the benefits they offer because if they did so they would not get any customers, the only area in which companies can compete on costs is by reducing what they spend on administration, and in that area I suggest the pickings are very slim.
If we are totally committed to the principle of community rating and to the practice of risk equalisation, it raises the question of whether those two commitments can be made compatible with the European ideal of open competition no matter what happens. I doubt they can. Any attempt to square the circle will have the effect ultimately of being at the expense of the end user, the customer. I am almost afraid to say this out loud but it may be that voluntary health insurance is one of the few areas that justify having a State monopoly in place. The Minister has no idea how difficult it is for me to say that out loud, and I am sure she finds it difficult to hear with her history, but I find that logic inescapable.
I was chairman of An Post for ten years and it brought home to me that some functions are better done by public rather than private enterprise if the social aims of the activity are to be met. The European Union does not agree with me about the postal service, and we are about to see a major battle in that matter, but perhaps what we should be having is a battle about voluntary health insurance.
The second aim of this Bill is about giving the VHI more commercial freedom, another principle that, a bit like motherhood, we tend to approve of in what I call a knee-jerk way. From the detail of the Bill, it is clear that what is envisaged is an extension of the VHI's activities away from what we have always called its core business, the payment of people's medical costs. Should the VHI, as this legislation envisages and as the Minister described very well in her contribution, stop being just a medical insurer and spread its wings so that it becomes a provider of medical services? If that is so, the business case must be carefully and thoroughly made before we take such a radical step.
Something I have observed in my years in business is the widespread tendency of empire building and what happens very often occurs by a process known as mission drift, that is, where companies start doing one function and begin to do others as well. It is the opposite to what should be a core principle, that is, sticking to one's knitting. That is the approach I tend to favour. I am a little concerned about allowing the VHI to get involved in other businesses, perhaps to support the basic business. I hear it in many other cases and I always have a concern about it. If the core business exists, they should stick to their knitting.
After our experiences with Telecom Éireann and with Aer Lingus, I hope in future we will be much more careful about privatising State enterprises. With my background, that is difficult for me to say, but I do question it and I questioned it last year at the time of the privatisation of Aer Lingus. If we intend to privatise something, we should be clear about our objective rather than just be driven into an automatic assumption that everything should be privatised. We should determine our approach not according to what I would call a supposed ideology but by answering the basic and simple question, "Will this benefit the customer?" Only when it clearly does should we do so. I understand where the Minister is coming from. I understand the ideology and the European Union's pressure on us to do this but I would like to look back at every Bill that was brought before the House and ask if it benefited the customer. In this case, I doubt it.
I congratulate the Leas-Chathaoirleach on his election. I thank the Minister also for her overview of the Voluntary Health Insurance (Amendment) Bill 2007. As other speakers have said, this Bill is about changing the corporate status of the VHI. It is a rather technical Bill. The Green Party broadly supports its thrust but we see the Bill as significant in that it may be the necessary precursor for the privatisation of the VHI. While the intentions of previous Governments in regard to the privatisation of the VHI have not been clear, we are aware the VHI board has indicated its preference for the privatisation of the company.
This is a significant question for us as a party and a member of Government because to date the VHI has been a significant player in the health sector and controls approximately 80% of the market. A monopoly position is anathema to some but it is not unusual. In Canada there is one health insurance provider and the system works efficiently. As we know, Ireland has a unique hybrid health system with a mix of public and private. Our responsibility as legislators is to get the right balance between the two. The Bill could tilt the balance towards private medicine as opposed to the public system. It makes the VHI more commercially autonomous, and allows it to stand on its own two feet and enter into alliances with other suitable partners.
The Minister has outlined some of the specific provisions. The Bill removes the derogation for solvency so the VHI will have to carry its own solvency reserves like other companies. It will also allow for the expansion of VHI services. While I appreciate Senator Quinn's point in this regard, it would be welcome for the VHI to expand into other areas, as has already begun to happen, certainly in regard to providing cover for alternative health treatments. The Bill will allow the VHI to acquire and manage subsidiaries to operate its business, and also to borrow money and increase its capital reserves. This is very different from the way the VHI has operated to date.
The difficulty is that there has not been a full and frank discussion on the future of the VHI and whether it will remain a State health insurance system or become a private health insurance company. No reference is made to this in the current programme for Government. One of the advantages we would see in having a State company is that the State, through the Government, could ensure our public health system was protected.
Sometimes when we talk about private and public health care, we do so as though the only difference is who delivers the care. In fact, a totally different ethos applies to public health care than that applying to the private health care system. With private health care or for-profit medicine, access and the quality of care patients receive is based on the ability to pay whereas the ethos of the public health system is entirely different and is much more about equity of access and quality of care. We must be realistic and accept that if the health market is becoming increasingly privatised, it will be difficult for the public health system to be protected and not become undermined. We need only look at countries such as the United States where the private sector has a much more dominant position in the health care system and the state of the public health system leaves much to be desired.
We are at a significant point with regard to discussing and making decisions about the future of the Irish health care service. The future of the VHI and its status as a private or public company is an issue of major importance to Irish citizens. Although we are a young State, we have a rapidly ageing population and this is likely to be a greater problem in the coming decade or two. At this time, 52% of the population has private health insurance cover as opposed to 12% in Britain, so the VHI's future is of interest to all of us, especially legislators. While the Green Party supports the Bill, we hope for a much fuller and more frank debate in both the Dáil and Seanad on the issue of the future of the VHI.
I thank the Minister for her presentation to the House. It is clear a review of the VHI and all health insurance is needed. The Labour Party favours a delivery of universal insurance for all patients. The Minister favours private insurers over the not-for-profit insurance provider and VHI, which has led to significantly higher premia, with an increase of 25% in the past two years and 50% in the past six years. In her contribution the Minister stated: "The third repeal is of section 3 of the Voluntary Health Insurance (Amendment) Act 1996, a section that obliges the VHI board to notify any proposed premium increases of health insurance premia to the Minister and gives the Minister the power to direct the board not to implement increases." As has already been noted by fellow Senators, when this did not happen in 1991, there was a double whammy after the election.
Freedom of pricing is an essential requirement but a breakdown of costings is also required, particularly itemisation of the services being provided by a hospital. For example, I became ill while abroad and attended a clinic for a week. At the end of that time, I received an itemised bill for just under €600. I was quite happy to pay because I knew what I was paying for and had clarity as to the nature of the costs. As I was a nurse with other nurses, I did not go to hospital because I thought I should stay out of it. Unfortunately, this did not favour me because I did not get paid by the VHI when I returned home.
There have been many advances in medical technology which have led to better diagnosis, shorter hospital stays and, in some cases, no hospital stay. However, how often are the services we provide in hospitals reviewed? I believe the Bill is a softening up for privatisation. There are many aspects of local financial arrangements. For example, from my work I am aware that patients with VHI cover often wish to avail of a private room after giving birth to a baby, which is a time when one would really want a private room. However, they cannot access a private room because they are not the private patient of a consultant, thus denying the hospital the money for the room. Having a baby is a perfectly natural life event and I do not understand why a consultant is needed in this regard.
I am not against consultants in any way. I have the highest respect for them, especially those in South Tipperary General Hospital. I must mention that.
Midwives rule. I would like a review of costings and how we fix prices. A 50% increase in six years is a massive one which impacts on people's ability to pay and denies people access to services.
Sometimes being in the VHI limits access to services for people who pay a premium for public services they might require, such as access to physiotherapy for chronic illnesses such as motor neurone disease or multiple sclerosis. Many people are disadvantaged in this way and they need universal cover. There is no element of bias. I never treated anybody differently because they had or did not have health insurance. Their clinical needs were what we dealt with and we did not concern ourselves with ability to pay, who a person was or where they lived. A thorough review is needed with regard to how price increases are determined, what we are paying for, how hospital stays are itemised, how we deliver the service and whether it is an efficient use of our time. I concur with Senator Quinn's analysis in this regard. Many aspects were raised during the debate and I am interested to hear the Minister's views.
We are broadly supportive of the Bill and will not oppose it. However, while the Minister is present, I would like to raise specific issues with regard to the VHI, risk equalisation and health insurance. The proposals in the Bill will give additional flexibility to the VHI, which we must welcome. At this time, the VHI provides insurance for more than 80% of the Irish market. I am concerned, however, that in the past five or six years, we have seen increases in costs of more than 50%. As Senator Twomey noted, we do not see transparent itemisation of these costs. I am particularly concerned to hear a Government Senator — one of the Minister's party colleagues — say she believes there is sharp practice in the charging process. I am interested in hearing whether the Minister concurs with her party colleague's view that sharp practices occur and, if so, whether she intends to take action to address the issue.
I am concerned that the 50% increase in VHI premia over the past five or six years is a precursor to privatisation. The Labour Party will exercise vigilance on this matter.
The Labour Party broadly supports the proposals on risk equalisation contained in this Bill and elsewhere. It is important that the issue of adverse selection is addressed and we must ensure that insurance companies cannot cherry-pick members. A facility must be established to ensure risk equalisation payments are made.
As the Minister will be aware, under universal eligibility regulations every patient may use the public hospital system regardless of whether he or she has private insurance. The Labour Party wants this position to continue to obtain. I ask the Minister for a clear and concise statement on the issue. Does she intend to remove the universal eligibility regulations?
I wish to share time with Senator Nicky McFadden.
It gives me a sense of déjÀ vu to see Senators again debating health insurance, an issue the House debated on numerous occasions during the previous Seanad. One of the Minister's political legacies from her previous incarnation as Minister for Enterprise, Trade and Employment was the change she brought about in the insurance industry. She deserves credit for tackling the compensation and claims culture, which led to a reduction in premia in the general insurance field. That change was a major political success, which I wish she could replicate in the area of health insurance.
The Minister has not enjoyed as much success in her current portfolio as in her previous Department. While I appreciate that health insurance is a more difficult issue to tackle, we have debated risk equalisation for three or four years. In the meantime, BUPA decided to leave the Irish market and was taken over by the Quinn Group and the emergency legislation was introduced to close loopholes.
The House could waste time by engaging in an ideological debate on health insurance. Instead, we must ensure that every citizen has access to health care and, if he or she so wishes, private health insurance at reasonable cost. To this end, the Minister must do everything possible to encourage competition.
I do not propose to pronounce judgment on the question of whether the VHI should be privatised. We have had evidence of privatisation working in some sectors and not working in others. Our role must be to ensure genuine competition and consumer choice. Not only must we ensure that Quinn Healthcare, VIVAS Health and others survive but we must also encourage other companies to enter the health insurance market. It is interesting that consumers have a wide choice of insurers in the field of general insurance, whether vehicle, home or property insurance, whereas the number of health insurance companies is very limited. Our political ambition must be to ensure a range of health insurance providers is available to consumers.
The legislation before us follows on from earlier emergency legislation and helps to level the playing pitch for newer and smaller insurance companies. Last year, the VHI demanded the introduction of legislation to prevent what is known as cherry-picking. A degree of rebalancing has since become necessary to ensure the regulations and conditions imposed on newer companies, including VIVAS Health and Quinn Healthcare, apply to the VHI. I welcome the proposed changes in this regard.
With regard to the provision in section 3 removing the requirement that the VHI obtain ministerial consent for increases in premia, while I accept the Minister's point that the VHI board is probably best placed to make the final decision on increasing premia, the provision is akin to washing one's hands of the political responsibility for price increases. Given that the VHI is still a State company for which the Government is responsible, repealing this provision sends out the wrong signal. Either the Government is in charge of the VHI or it is not and price increases, charges and levies go to the core of its responsibilities in this area.
I welcome the legislation as it helps to rebalance the position in favour of smaller companies. This is a positive development because more competition is needed in the health insurance market, an issue which the House will debate again in the future. I ask the Minister to state her view on the future ownership of the VHI.
On the appropriateness or otherwise of the Minister having a role in the VHI with a view to encouraging competition, as Senator Quinn stated, it is wholly appropriate that the Minister should have clear control over pricing. This is a crucial responsibility because we have seen, following the privatisation of Telecom Éireann and Aer Lingus, that it is unsatisfactory to have no control over pricing.
Last night, I attended a fund-raiser for the south Westmeath hospice foundation, which intends to raise €1.6 million locally to establish a hospice in the Athlone area. The region does not have a health facility worth talking about. Access is a vital issue and Senator Ellis's comment that accessing cancer treatment is similar to going on a shopping trip is utterly indefensible. He may not have meant offence but it is inappropriate to compare accessing cancer treatment with a shopping trip. People need to access services locally in so far as possible. Athlone, with a population of more than 23,000, is a suitable location for the VHI or a similar company to locate a private hospital or SwiftCare centre. A large number of patients would avail of such a facility.
This Bill does not do anything to guarantee the future of the VHI as a statutory corporation for which the Government has a special responsibility. The Government is pursuing a privatisation agenda in the health service and has maintained and developed the two-tier, public-private system. This is the context within which the House is discussing the Bill.
Sinn Féin has called for the establishment of a health funding commission which would assess all funds and moneys currently being spent on the health service by the Government and citizens in the form of health insurance premiums and user fees. While we do not know the total expenditure on health services, we know that this money is not being used to the best effect because it is being applied inefficiently and inequitably in a two-tier system. Approximately 70% of the population pay for health care twice, once through taxes and a second time through personal health insurance or direct user fees for general practitioner services, medicines and health care. Meanwhile the proportion of the population with medical cards is declining. This complex and inefficient funding system has been used by successive Governments to underpin the grossly inequitable, two-tier, public-private system. The system of health apartheid is being reinforced by the Government's private, for-profit hospital co-location scheme.
The Government's fundamentally flawed policies and gross mismanagement of the health services have resulted in more and more people having to take out personal health insurance for themselves and their families. Many of the people in question are on relatively low or moderate incomes and do not qualify for medical cards. They are concerned about facing long waiting lists and poor health care outcomes if they must rely solely on the public system. They are paying on the double for health care through taxation and PRSI and through private health insurance. Many fall between two stools because they do not qualify for medical cards and cannot afford private health insurance. The Government should immediately establish a health funding commission to plan for the transition to a fair and more efficient system. The only way forward is taxation based on the ability to pay and top quality health care based on need alone and delivered to all equally, regardless of income.
As recommended yesterday, I will take this opportunity to address an issue I raised then, namely, the decrease in HSE payments to pharmacies from the start of next year. The Minister is aware of an escalating situation, namely, pharmacists are threatening to withdraw all services to medical cardholders from 1 December. The situation will be acute in highly disadvantaged areas and areas where most of the population depends on medical cards. For example, Donegal has a high rate of medical cards per capita, accounting for some 80% of the population of a number of communities. Pharmacists have informed me of how they are threatened with going out of business before the end of the year. Many would need to merge in central and urban areas.
Will the Minister re-examine the issue to ensure those in the medical card system are not deprived of what the Government has offered them throughout the years and that rural communities, especially those on the west coast, will have pharmacies on their doorsteps? A Donegal pharmacist told me that if the decision is implemented in December, he will close. The nearest pharmacy is 75 km away. A pharmacy on Achill Island will close because all its patients are dependent on medical card subscriptions. The nearest pharmacy is 100 km away. This is not only an issue of health but also of supporting rural communities. Will the Minister examine the matter?
I thank the Cathaoirleach. I am pleased to address the Bill in the House and to respond to some of the statements made. If they had been reported to me, I would have been surprised.
I will begin with Senator Doherty's contribution. He referred to for-profit hospitals, but he made a point about pharmacists. They are private operators and in it for profit. The most expensive pharmacies in Europe are in Ireland and pharmacists pay millions of euro to enter the business. One would wonder why they would do so were the business not lucrative.
In the interest of the taxpayer, the Government has sought to reduce the money paid for drugs because we pay more than any other country. We will save €100 million per year through the new negotiations with the producers of medicines and €90 million per year in respect of wholesalers. We pay pharmacists a dispensing fee of €3 euro per item dispensed through the GMS and a 50% mark-up for each drug they dispense on all other schemes. If a drug costs €100, pharmacists will receive €50 plus a dispensing fee. While the Senator seems to support pharmacists blackmailing the Government by withdrawing services from the most vulnerable, it is incredible and we will not support it.
In April and May, the House passed legislation liberalising the pharmacy sector. It was opposed, but it was the right thing to do. Young Irish graduates who could not get into pharmacy school here because there was only one school with restricted places went elsewhere, primarily the United Kingdom. They qualified and returned, but they could not open pharmacies because of legislative restrictions. It was a ludicrous situation, but it was stood over for years. I have no sympathy with the Senator's opinion. We will use the money to provide more public services.
I am a strong fan of public medicine. In the time since I became Minister for Health and Children, the amount spent by the public sector has increased from 78% of the total spent on health to 80%. The amount of private health care funding has declined by 2%.
Sometimes, we let our perceptions and ideologies get in the way of facts. While I understand people supporting public medicine, some state that there is a special place in their hearts for an insurance company that happens to be owned by the State and the guarantees it provides to patients. If one has private health insurance, one has preferential access to diagnostics and facilities paid for the by the taxpayer and for which a group of employees in the system gets a fee.
I was asked about itemised bills and why, after moving from a private facility to a public hospital, someone's tests needed to be redone. I do not know the specifics of the case, but the doctor would not have got a fee for the tests carried out in the private facility. Patients are often put through a second set of tests because a fee will go to radiologists, pathologists and many others in the public hospital system if the patients have private health insurance.
Some of these matters are at the heart of what we are trying to do with the consultants' contracts. I want to ensure the resources put into public health facilities by the taxpayer are accessible to patients on the basis of medical need without preferential access for one group of citizens who pay private health insurance, sometimes with great difficulty.
The Bill's purpose is to put the VHI on a level playing field with its competitors. I have great respect for Senator Quinn and his enterprise and zeal. As he knows, I am a fan of one of his stores in Lucan where I shop. It is innovative. If he were made to do something differently than his competitors, he would not find it acceptable. VIVAS Health must put 50% of its premium income aside for reserves. Contrary to Senator Fitzgerald's statement, this is not a European requirement. As the Financial Regulator requires insurers who raise €100 million in premia to put €50 million into reserves, it is unfair to exempt the VHI. It is not acceptable that a group of investors in a market must play by a different set of rules than another group, particularly where the second player has approximately 75% of the market.
When the first life directive was implemented in 1972, the VHI and its counterparts in other European countries had a derogation. When the market was opened up in the late 1990s, the VHI continued with its derogation. This is not good enough. Irrespective of Europe's opinion of the derogation as a state aid, it is not fair to other competitors from our perspective.
I agree with Senator Twomey's point, but the high threshold is due to the Financial Regulator rather than Europe. The regulator requires companies to put a higher proportion into reserves than is the European norm. For example, BUPA was registered in the UK and put aside 25% of its premium income, but the regulator requires 50% of VIVAS Health. This figure may decrease to 40%, but it would be substantially higher than would be the case were the company incorporated elsewhere. If the VHI were incorporated in Northern Ireland, it could probably meet the reserve requirement in the morning.
The regulator is an independent body. In a previous job, I was responsible with the Minister for Finance for establishing an independent financial regulatory framework with a focus on consumers because there was too strong a focus on other issues. The Barrington and other reports have drawn attention to the regulator being too conservative, but we cannot interfere. It must make the decisions. I share Senator Twomey's opinion that health insurance is more predictable than insuring for, for example, hurricanes in other markets. I would like the regulator to lower the requirement to approximately 25%, as we would be able to authorise the VHI in a matter of weeks or months instead of waiting until the end of 2008. As for my philosophy, I do not care who actually owns companies as much as for a level playing field and fair competition. It is not just an ideological hang-up. When there is competition one gets innovation. If there is only one player, it does not have to think very hard.
I was in a friend's house recently and picked up a brochure they had received from a new insurer in the Irish market. I was very interested in its emphasis on an annual check-up, with 50% of the cost to be subsidised. General practitioner services were to be covered, to an extent, and I thought it offered a very good package. Like many other consumers I tend to be a creature of habit. The cost of my VHI insurance comes out of my monthly pay cheque and I do not really look at it. Thankfully, and touch wood, I have not had to use it.
In the leaflet I read I was very pleased to see the emphasis on an annual check-up. It seemed particularly geared to people over the age of 60 and that is a very good thing. The more we develop the area of chronic illness management the better because many people end up in hospital as a result of their blood pressure being out of control or they have not had their drugs reviewed by a doctor. Therefore, these are good services for citizens, patients and the health system. Such innovation arises when new companies come in and try to capture market share. I hope we will see more of it.
People may ask why BUPA was the only company to come into the market when it opened up. The reason is the large share of the market held by the VHI. We must make a decision and financial advisers have recently been appointed to my Department and the Department of Finance to advise on the best way for the VHI to meet the authorisation requirements by the end of 2008. The options include the taxpayer putting €140 million into the company, which would be instead of building a school or Garda station or hospital.
Alternatively, the Barrington group suggested mutualisation, which effectively means the members will become owners and raise the necessary capital. We could partly sell the company but there are a number of options. They are not for today and we will undoubtedly have a good debate about them. As legislation may be required, we as a Government and the Oireachtas as a whole will have to decide the most appropriate way of finding the money and investing it to make the VHI an authorised company like its competitors by the end of 2008.
A private hospital in Athlone was suggested. The citizens of Athlone have a low attendance record at accident and emergency units.
I do not believe that. When a hospital is available it encourages customers and Athlone citizens go to their general practitioners. Many people who visit accident and emergency units should go to their GPs but it is a chicken and egg situation. GP services in some areas are patchy and that is among the things we are trying to change. I am not in a position to encourage people to open a private hospital, or to discourage them from so doing, but I welcome the fact that Fine Gael wants to see a private hospital in Athlone.
If the Senator was in the Dáil last night listening to my so-called privatisation agenda she would smile at that suggestion.
I was in Sweden for St. Patrick's day this year and one of the places I visited was a hospital in Stockholm. Believe it or not, a socialist Government in Sweden brought in a private company to run its biggest hospital, St. Görans, a number of years ago. If I even suggested we did such a thing in Ireland there would be uproar.
I heard a woman interviewed from Roscommon last night criticising the fact that breast surgery was being discontinued and asking what women would do. It was discontinued 18 months ago and nobody seemed to notice but once one makes the grand announcement it is a different story. In health we must open our minds to the best way of doing the business and to innovation in all its forms.
With regard to the itemisation of bills, as I understand it, insurers tend to negotiate a deal with the hospitals. If a person is only in hospital for one day, rather than four, the hospital gains but if a person is in for seven the insurer gains. We want to meet international best practice for hospital stays, certainly for basic procedures. In 17 of the top procedures for which people go into hospital there is, on average, a 50% longer stay than there is in places such as Australia. That is not acceptable and is the reason for there being such debate around acute hospital beds. It is not so much about the number but about how we use the current stock of beds. I would like insurers to be involved in that debate. Hospitals would be paid for what is broadly regarded as international best practice, though I recognise that there are always exceptions and that some people are more ill than others or experience complications, even with a basic procedure.
The VHI was established in 1957 by a Fine Gael Minister, Tom O'Higgins, and I was delighted to meet some of his family at the 50th anniversary dinner. It was established because, at that time, 20% of the population did not have universal coverage and it was recognised that the gap needed to be filled. That is not the case today, however, and I can assure Senator Hannigan that, contrary to what I heard a commentator on the radio say last week, the top group of people will not have to pay for their health care. That is not the plan and everybody will continue to enjoy universal coverage for public hospitals, because that is a good thing and desirable for our society.
Among the reasons people take out private health insurance is choice of doctor, hotel-type facilities etc. There is no doubt the gaps and delays in our services in recent years have forced people to take out private health insurance, believing it leads to more rapid access to services in our public hospital system. That is the case, though it should not be, because clinicians making admission decisions will receive a fee from some people but not others. That is at the heart of what is very wrong with the current contract of employment for new hospital consultants. As we prepare to double the number of consultants we have in the Irish health care system and to produce consultant-delivered services we must make sure we have a contract of employment that meets the needs of the public health care system, rather than a contract entered into at a time when some 10% or 15% of the population had private health insurance.
Private health insurance in Ireland, by comparison with the UK, is very low. Some 11% of people in the UK have private health insurance and there is no community rating or risk equalisation. Essentially, risk equalisation makes insurance affordable to the highest possible number of people. If we did not have it, the vast majority of people with private health insurance in this country would not be able to afford it. I recently met an Irish couple who had returned from living in the UK and told me that their insurance bill for VHI plan D was approximately €2,600 but that the equivalent in the UK was €18,000. That occurs in a market where there is no risk equalisation. Older and sicker people have to pay a lot more and for most it is simply not affordable.
I disagree with Senator O'Malley in that I am a strong supporter of risk equalisation and community rating. They are very important because, without them, companies would cherry-pick their customers and the younger and healthier customer is the more lucrative, being unlikely to need to be in hospital. Many insurance companies pursue young women in childbearing years because, though it is a loss leader, once they have them they have them for life and the chances are they will not cancel their insurance but will also sign up their children. Risk equalisation and community rating are fundamental to our system of health insurance and have served us well.
I do not believe Ministers should decide on the prices of products for a commercial company. I will go back to my office shortly and there will be 30 files on my desk, as well as letters and telephone calls from people unhappy with yesterday's decision, all wanting to tell me what they think of me. I have no expertise in insurance and meddlesome Ministers are the last things commercial companies need. There was a tendency in the past, not with VHI but other commercial companies, whereby political decisions were made which were wrong, and the commercial freedom of companies was interfered with, which is bad for any commercial company.
I commend the Bill to the House and look forward to returning on Committee Stage to propose amendments and deal with more specific queries of Senators.