John Moloney (Laois-Offaly, Fianna Fail)
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I am pleased to address the House on Second Stage of the Health Insurance (Miscellaneous Provisions) Bill 2008. The Bill contains a number of important measures to support the operation of community rated health insurance which is widely supported by all parties in the House since the market was opened to competition. In 1993 in its first report, the seventh joint committee on commercial State bodies, which included four Members of this House, highlighted the threat to community rating that competition could bring while recognising that community rating could be preserved through the use of a mechanism which would channel compensation to insurers covering older subscribers from insurers covering younger subscribers. At the centre of community rated health insurance is inter-generational solidarity between all insured persons through the application of community rating to all insured persons irrespective of their age or health status. It is a policy which successive Governments over many decades have been committed to maintaining.

Approximately 51% of the Irish population holds private health insurance. This figure has typically reflected the numbers of people in employment and there has been a small decline in the numbers insured over the past six months. Given the manner in which inter-generational support operates it is essential the regulatory framework, especially at a time when overall membership is subject to the broader economic environment, effectively supports inter-generational solidarity. Recent data indicate the market share of VHI has fallen to about 66%, while the share of Quinn Healthcare has increased to 22% with Hibernian Aviva, which took over Vivas in 2008, close to 10%. Most relevant to any assessment of the market, VHI continues to have by a considerable margin the highest number and proportion of members over 50 years of age. While Quinn Healthcare's customer profile is maturing, along with Hibernian Aviva it enjoys a significantly younger age profile than the overall market. A community rated market with such a profile requires a mechanism that redistributes the higher health care costs of supporting the elderly.

While all political parties and most academics and professional bodies, including the Society of Actuaries in Ireland, supported the risk equalisation scheme, commercial interests opposed it from the outset and sought to overturn the entire regulatory framework through legal challenges. The challenges ultimately succeeded when, in July 2008, the Supreme Court found the risk equalisation scheme to be ultra vires on a point of statutory interpretation. While the Supreme Court decision did not strike down the principles of community rating, open enrolment, lifetime cover or risk equalisation, it found the scheme to be ultra vires because the legislation did not provide an explicit link between community rating as defined in the Health Insurance Acts and the section of the Acts providing for risk equalisation. The Chief Justice subsequently commented that the decision was not an obstacle to the Government bringing forward a new scheme.

Currently, a system of single community rating applies whereby all individuals with a specific insurer pay a single rate for the same cover, irrespective of age, when entering the market. The Minister will be bringing forward regulations in the early autumn, as provided for under section 7A of the principal Act, with the intention of commencing lifetime community rating by the end of this year. The introduction of these regulations will encourage younger people to continue to take out health insurance as those who delay taking out cover until older will be liable for a late entry loading reflecting the fact that they did not contribute positively to the overall risk pool and intergenerational solidarity when in a position to do so.

Following the Supreme Court decision in July 2008 the Government came to the conclusion that there was an immediate need for an interim scheme to prevent a risk rated market developing in a manner that would make it impossible to revert to an effective community rated market.

There was also a need to ensure the protection of older people, many of whom had been paying private health insurance since their youth and who were now at the point where they needed such insurance most, facing the prospect of no longer being able to afford appropriate cover.

It is also true that the principle of community rating protects all persons suffering ill health, irrespective of age. This is because, under a community rated system, prices for products are the same to all persons, irrespective of age and health status. However, without risk equalisation or related measures insurers are incentivised to focus solely on attracting only younger lives.

The reality is that in the absence of an immediate mechanism to support intergenerational solidarity there are incentives for insurers to design products that are attractive only to healthier lives undermining intergenerational solidarity and the common good protections. The market is then open to fragmentation and intergenerational solidarity is at risk of being weakened or eliminated.

Given this, the Government determined that officials from the Department, with the Health Insurance Authority and legal and actuarial experts, would work to develop an interim scheme which could be put in place promptly to stabilise the market, while a longer term solution was developed. Consideration was also given to submissions received from and representations made by market stakeholders. It is this interim scheme that is provided for in the Health Insurance (Miscellaneous Provisions) Bill 2008.

On the interim scheme, the measures provided for in the Bill were notified to the Commission, DG Competition, on 19 November in the same manner as the 2003 scheme had been notified. That scheme was approved by the Commission and the Commission's decision was subsequently upheld by the Court of First Instance as the previous scheme was recognised as a justifiable measure given the obligation imposed in the common good on health insurance providers. Similarly, the Commission has recently determined that the interim scheme is also an appropriate measure given the nature of our market.

The Bill has been amended since publication to reflect the detail of the Commission's decision, particularly as regards the inclusion of a framework to satisfy the Altmark criteria applied by the Commission and to allow an assessment of whether any overcompensation occurs. I take the opportunity to clarify that the Commission's decision, primarily reflecting the examination of DG Competition, specifically recognised that any action the Commission would take on VHI's historical derogation from having to be authorised would be a separate matter, primarily for DG Internal Market and Services.

The interim scheme consists of two elements: age related tax reliefs granted to individuals who hold private health insurance and a levy, that is a stamp duty, charged on private health insurance companies to be used to finance the age-related tax reliefs.

The details of the relief are as follows. People aged 50 to 59 - €200, aged 60 to 69 - €500, 70 to 79 - €950, and over 80 - €1,175. The existing tax relief at source of 20%, which will continue to apply, will relate to the gross premium paid net of the new credit being introduced.

On the levy, each private health insurance company will be required to pay an annual levy to the Revenue Commissioners. The levy will be remitted to the Exchequer where it will form part of the overall Exchequer funding. The levy will be charged on all adult insured lives at a level of €160. Apart from a reduction to one third of this amount, €53, for insured lives under age 18, to reflect the fact that insurance premiums for under 18s are on average of the order of one third of the adult premium, there will be no differentiation on the basis of age.

Both the age-related private health insurance relief and the levy will be subject to annual review to take account of medical inflation and the impact of an ageing population.

The stamp duty is being placed on the health insurance companies for each insured life, and not on the individual subscribers. It is a matter for the companies whether to pass this duty on to their customers.

The additional tax relief under the scheme is being granted at source to the insurer as tax relief at source, TRS. It is granted on the basis that the insurer must charge the same net premium to all persons covered by a plan. The operation of the medical insurance relief at source means the relief is available to all persons, including those whose taxable income would be insufficient to avail of the tax relief. This will be reflected in the fact that each person will only pay the same net premium.

The tax relief being made available under this interim scheme is a fixed sum tax relief. The amount of relief given is fixed, irrespective of the plan held by the insured person and, accordingly, higher amounts of relief will not be available for more expensive plans.

The age related tax relief and the levy will only apply to the commercial insurers operating in the market. They will not apply to the restricted membership undertakings, RMUs, for the ESB, gardaí and prison officers. The option given to the RMUs to choose to be included in the original risk equalisation scheme has been identified as a legal weakness in the regulatory framework.

The main objects of the Bill are to affirm that the purposes of the Health Insurance Acts include, inter alia, ensuring that access to health insurance cover is available to all consumers without differentiation made in respect of age and health status, and providing for the implementation of related measures to achieve these objects.

Section 3 provides that the principal objective of the Minister and the Health Insurance Authority in performing their duties under the Act is to ensure, in the interests of the common good, that access to health insurance cover is available to all consumers with no differentiation made, in particular as regards the costs of health services, based on age and health status.

Section 4 includes revised definitions, reflecting the Supreme Court judgment, of terms such as "community rated health insurance contract" and "community rating", which now encompasses measures that support the achievement of the principal objective.

Section 6 includes a basis for determining reasonable profit. Determination of "reasonable profit" will be assessed in accordance with the Community Framework for State Aid in the Form of Public Service Compensation, which has been inserted to the Bill as Schedule 2. It also substitutes a new section for section 7 of the Act with changes aimed at ensuring community rated health insurance contracts are made available without differentiation, irrespective of age or health status. Insurers are required to offer any particular contract for a period of not less than 31 days and insurers are to charge all persons the same net premium.

Section 7 amends section 7A of the principal Act and provides for a reduction of the age at which the late entry loadings can be applied from 35 to 30.

Section 8 provides that private health insurers are to submit samples of all contracts to the Health Insurance Authority ten working days in advance of offering them for sale to potential customers. This section also provides for the authority to establish a register of health insurance contracts.

Section 9 inserts a new section into the principal Act to provide for the necessary data returns to be made to the Health Insurance Authority to allow monitoring of this scheme. The section provides for an evaluation and analysis of the data returned by the authority and for it to make a determination on the appropriate level of credits and duty for the following year and to advise the Minister accordingly. It also sets out a process for determining net beneficiaries of the scheme and a test for possible over compensation, and for net financial impact being evaluated on a cumulative basis over the duration of the scheme. The section also provides for the insured person being informed of the gross and net premium.

Section 10 amends section 12A of the principal Act. This amendment provides for the use of any data returns made in the calculation of the age-related tax credit and the amount of the levy payable.

Section 11 replaces section 13 of the principal Act which contained limited provisions relating to advertising and promotion of health insurance business. This new section includes much stronger provisions with an emphasis on enhancing the position of the consumer in relation to the provision of information by insurers and regulating the content of advertisements.

Section 12 amends section 14 of the principal Act. This amendment prevents the establishment of new restricted membership undertakings offering health insurance.

Section 13 inserts a new part into the principal Act that enables the Health Insurance Authority to pursue enforcement of provisions where it is of the opinion that an insurer is contravening a provision or is likely to do so again. The section sets out a specific process whereby the authority may take a number of steps to have any contravention remedied, including making an application to the High Court to seek compliance.

Section 14 provides for the amendment and substitution of section 21(1) of the principal Act, which deals with the functions of the authority. It enhances the functions and powers of the authority in line with the provisions of the Bill.

Sections 15 to 21 amend the Taxes Consolidation Act 1997 to provide for a new age-related tax credit in respect of payment of private health insurance premiums during the course of this scheme in respect of persons aged 50 years and over. These sections relate directly to the tax relief elements of the interim scheme which I described.

Section 22 inserts a new section 125A into the Stamp Duties Consolidation Act 1999 to provide for the collection of the annual stamp duty on health insurance companies based on the number of lives covered. The section now provides for four return periods recognising that premium payments made monthly will flow into 2012. The section also provides for benefit in kind assessment on a basis that will not result in an employer who pays insurance on behalf of staff facing higher costs.

Section 26 provides for the application of the levy on the health insurance companies. It has been amended since publication to address issues raised by the industry. In particular, the levy now applies only to contracts renewed or entered into in 2009 and onwards.

Section 27 provides for the amendment of the Insurance Act 1936 with the definition of premium contained therein amended for the purpose of solvency calculation and corporation tax assessment on foot of industry representation.

The combination of measures in the Bill is designed to protect the common good features of the market, in particular community rating and effective open enrolment. These measures need to be put in place while a more permanent replacement for the 2003 risk equalisation scheme is designed. While that work intensified over the next two years the Government must ensure that the regulatory framework does not support product segmentation and the development of niche products directed at attractive segments of the population, undermining community rated health insurance.

The Bill also contains a significant number of new measures, including the establishment of a register of contracts, information provision by insurer, control of advertising, compliance with the principal objective and related enforcement powers for the Health Insurance Authority. I commend the Bill to the House.

Liam Twomey (Fine Gael)
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The risk equalisation issue goes back to 2003. I find it surprising that this legislation is necessary in 2009. I was a Member of the Dáil when many of the issues related to risk equalisation cropped up and they were debated at length. The level of corporate knowledge of this issue in the Departments of Health and Children and Finance must be substantial. I do not understand the need for this legislation. The Government should have dealt with the core issue, which is the role of risk equalisation in a community rated private health insurance market. The Bill imposes a levy on private health insurance, which is an easy way out of a difficulty.

This levy will penalise the young families who are hit hardest by the present economic downturn and will further drive people out of the private health insurance market. This will lead to knock-on problems. Of the 2 million people who have private health insurance, approximately 500,000 are over the age of 50. If people under 50 are driven away from private health insurance, what will be done next? The Government will be forced to increase the proposed levy further in years to come. I am not sure the Government is approaching this issue in the right way.

When I was a Member of the Lower House, I debated with the Minister for Health and Children the issue of the 40% reserve which must be kept by private health insurance companies. Four years ago, the Minister, Deputy Harney, and I discussed the fact that 40% seemed an incredibly high reserve for private health insurance. Health insurance is not like insurance against accidents or storm damage. Companies can predict, more or less, what will happen year on year. I do not understand the need for a 40% reserve. A reserve of 25% would seem to be sufficient. Why is this figure not questioned? Is there some reason the figure cannot be lowered to, say, 25%? The VHI reserve has dropped from 35% to 27%. If the Government lowered the required reserve figure there would be no need for such a high levy. I accept the need for a levy if the Government chooses to maintain risk equalisation within the market but I do not accept it should be so high. A household consisting of two parents and three children will be liable for a levy of €500 per year. This is another tax on families.

Consider the example of a person who pays the VHI premium for an elderly parent who is an old age pensioner. Will the full premium now have to be paid in such cases? Such an elderly person will not have tax credits. Will his or her premium be increased by €1,000? Many elderly people, often holding medical cards, have their premiums paid by their families. The Bill will oblige children who pay premiums for elderly parents to pay an additional €1,000 per year, on average, because the elderly person will not benefit from tax credits. I ask the Minister of State to answer that question.

The Minister of State does not appear to know how many children have private health insurance. Does the Department work on the basis of a rough estimate or is the exact figure known? I have heard it said that the Minister of State does not know the exact figure.

We appear to operate on the basis that private health insurance companies are perfect. Let us suppose I have an accident and am taken, unconscious, to hospital, where blood tests, X-rays and so on are taken. If, when I become conscious, I tell the hospital I have private health insurance, the procedures, which have been performed at the taxpayers' expense, will be paid for again by my private health insurer. That anomaly in our public health care system has never been tackled. The Minister for Health and Children appears to have been lulled into a false sense of security regarding the private health market and is convinced it is the only way forward. The way the private element works in public hospitals is wrong. Everyone who stops at a patient's bed and shakes his hand can submit a claim to a private health insurer. There is no control of costs. Sometimes the VHI asks patients to inform the organisation if they see anything wrong with their bills. However, the detail in the VHI bills can be very poor, and I am surprised the VHI puts up with that. None of the private insurance companies on the Continent would put up with the poorly itemised bills that are issued by hospitals to the VHI.

The Minister should pay far greater attention to the costs incurred by the VHI. There are plenty of Members who run businesses and they know that if one is sloppy about one's costs and the cost of one's service, all one can do is front-load those costs onto the customer who is buying the services. One will not get away with that in a normal business environment because a competitor will control their costs better and, therefore, keep the cost of their service down. However, that is not the situation for the VHI. The Government, which is the ultimate beneficiary of the VHI, does not pay much attention to this either. There is scope to deal with this, considering the average cost paid by the VHI for hospital procedures is approximately €900. If it was possible to cut 10% to 15% of that cost, it would have a significant impact on the levy the Government is now charging people under the age of 50, children and young adults, to pay for getting the risk equalisation argument wrong. The Minister must tell us why the Government is failing to deal with this issue.

The cost of the levy should be tiered. Plan D or plan E costs about twice as much as the basic plan B. People who join the VHI at a lower plan level and can only afford plan A or plan B will pay the same Government levy as somebody who has plan D or plan E. That is inequitable. If somebody wishes for and can afford the higher plans, they should also pay a higher levy if the Government genuinely believes that those who earn more should pay more. It should not hit poorer families with the same high levy as better off people. There is a huge difference between the cost of plan D or plan E and the cost of plan A or plan B.

With regard to the derogation the VHI gets from the Government because it does not have sufficient reserves, how long will that last? I understand it will only last until the end of September, although it has been extended a couple of times over the last 15 months. Does the Government have another plan for VHI? If the VHI is short of €100 million to bring its reserves to the level required by current regulation of this market, there is not a hope in hell of it coming up with that amount before the end of September. Will the Government drop the percentage from 40% to 20% or 25% or is it planning to sell the VHI?

When she commented on this recently the Minister, Deputy Mary Harney, seemed to indicate that there are plans to privatise the VHI. Some people would support that while others would not. However, we must be told if that is what the Government plans for the VHI. There is a belief that the Government is fattening up the VHI for sale, and that this is the purpose of the levy. The levy is a high amount. Some people might not think so but it is high. The Minister must be honest and state the Government's future plans for the VHI. If it intends to sell the VHI, I do not believe hard-pressed young families should have to pay this levy under the guise of it being an interim solution for risk equalisation. I do not believe it is an effective interim solution for risk equalisation but I will await the Minister's response to the debate.

Geraldine Feeney (Fianna Fail)
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I welcome the Minister of State, Deputy John Moloney, and thank him for his presentation. While Senator Liam Twomey was speaking I recalled the time we spent on the health committee four years ago. The Senator was then a Member of the Lower House. We debated this issue ad nauseam. There were brilliant debates involving Mr. Vincent Sheridan, the chief executive officer of the VHI, and Mr. Martin O'Rourke, managing director of BUPA Ireland, the health insurer that would be most affected by the levy required at the time for risk equalisation and community rating.

Until four years ago I did not know what risk equalisation or community rating were. I knew what the VHI was; we were roughly about the same age. I grew up with the VHI. It was founded in the same year I was born, 1957. It was a household name and everybody had ownership of it, whether that was through affection or hearing one's parents say: "God, this is an awful bill we have to pay". There were hard times when I was a child but one's parents still had to pay their subscription. There was a huge amount of loyalty to the VHI.

I recall listening with interest at the committee. I felt almost like a lawyer because when I heard one side of the argument from the VHI, I was very much on its side and thought risk equalisation and community rating were necessary. I recall Mr. Sheridan saying one day that it was not fair because the VHI had all the old nuns and old priests and it could not afford to maintain its level of support for them. My attitude would have been, too bad - the VHI got them when they were young priests, brothers and nuns and they paid their premium like everybody else. Then I heard the other side of the argument from Mr. O'Rourke from BUPA. Was it fair to penalise BUPA to the tune of millions of euro just because it was a newcomer to the market? Naturally, as a newcomer, it was attracting people who were coming into the market for the first time. The people who were more settled and who had grown up with the VHI, like me, were afraid of change and did not wish to change their insurer for fear anything would go wrong.

I have come full circle on this issue. I am delighted that the Minister of State has risen to higher ranks but four years ago he was the chairman of the health committee so he knows a good deal about this matter. In the early days I would not have been on VHI's side but now I am. I have firmly come round to the view that risk equalisation and community rating are what we need to go forward and to encourage competition in this market. Before BUPA entered the market there was no competition. It was a little like the Aer Lingus and Ryanair situation. Now the market has opened up and more procedures, ranging from laser treatment to maternity services, are covered by private health insurance.

Unlike Senator Liam Twomey, I believe this legislation is necessary. I do not claim everything in the legislation is perfect but it is necessary. We could not leave the situation as it was, after the Supreme Court had found against BUPA, without enacting legislation. I appreciate the Minister outlining the different provisions in the Bill but I have some concerns about the levy. It seems severe that every insured adult must pay that levy of €160. We all come at this from our own point of view, judging how it will affect our pocket. I have five persons on my VHI policy, myself and my four children. Unfortunately, while they are all adults, they do not earn adequate funds to pay for their own schemes and, for peace of mind, it is easier for me to keep them on my policy. I certainly notice increases when they occur but I go without other items to keep private health insurance.

Senator Twomey will leave the Chamber today asking what Senator Feeney had for her breakfast because, while normally we never agree on anything, today I agree wholeheartedly with what he said.

Liam Twomey (Fine Gael)
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It would frighten me if the Senator agreed with me twice in the one day.

Geraldine Feeney (Fianna Fail)
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That might happen later. I agree particularly with what the Senator said about VHI coverage and what it pays for. It seems that anybody who asks persons in a nursing home or a private or public hospital if they are all right can put in a bill and get a few bob. Like the Senator, I have raised this issue on other occasions in the Chamber.

I would like to see a situation whereby a person going for a procedure, for example, a woman having a D and C, need not go in the night before because there is no need for an overnight stay. One can go in at 7 a.m. and be discharged later that evening. If one is having minor day surgery one should not be brought in the evening before because that is where the charges occur. I do not know if the fault lies with the insurer or the hospital.

I tabled a matter on the Adjournment some weeks ago regarding maternity services. A pregnant woman might wish to go into hospital to have her baby delivered by a midwife under the public health system and she might like a private room. However, she is denied this facility because private rooms are at the request of the consultant who will tell the woman she can only have a private room if she consults privately, using her private health insurance. There is something wrong with such a system and it should be looked at and tightened up. Perhaps if that were to happen, much of the money that has been spent, unnecessarily, in my opinion, might be offset against the high premiums people must pay.

I welcome the Bill and look forward to debating it on Committee Stage with its accompanying amendments. I believe the Opposition is being reasonable. Perhaps there are areas in the Bill where there might be some tweaking. I hope that when we go deeper into it next week we might widen it out somewhat. The legislation was necessary and will firm up in people's minds that these provisions are signed, sealed and delivered. It gives some comfort, particularly for the older and sicker section of our population.

With any luck, at this stage in their lives the persons in this Chamber will not have had great value for all the money they have paid into the VHI. That is a nice thing to say rather than a bad thing. My parents are now deceased but in their day they would certainly have felt they were paying out a great deal of money and getting very little for it, perhaps the odd appendicitis operation, tonsillectomy or treatment for a childhood accident such as the person falling from a window who needed to go to the hospital. However, in the final stages of their lives, both my parents received from the VHI ten times what they paid into it, particularly my father, who suffered with respiratory failure in the latter part of his life. I say that as a source of comfort. The care will be there for us and what we pay in today, we will reap in the long run.

I heard what Senator Twomey said and I sympathise and hold similar views. It is difficult, especially at a time when we are going through an economic downturn and other levies are imposed upon us. There is none of us who does not look at the bottom line of our salary cheques every month and think that we are much less well-off than we were six months ago.

I welcome the legislation, which is necessary, and I look forward to debating it as it goes through the Chamber.

Feargal Quinn (Independent)
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May I share time with Senator Prendergast?

Paddy Burke (Fine Gael)
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That is agreed.

Feargal Quinn (Independent)
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Perhaps the Leas-Chathaoirleach will remind me if I exceed six minutes. The Minister of State is very welcome and I am glad to see him in the House. I support the aim of the Bill, namely, to ensure that older people and those with illnesses are not forced to pay higher insurance premiums, as they would be if the market were left unregulated. I hope the scheme will counter the motivation among insurers to focus on younger age groups and that insured persons will be less likely to face higher increases or product segmentation related to their age.

Given that last year the VHI made profits of €112 million and that most of the levy to be collected is to be used as a form of subsidy to the VHI, I am sceptical as to whether this is merely a distortion of the market. I foresee more hardship for the more than 2 million people in this country who have health insurance. Senator Twomey asked whether the Government will go ahead with its plan to sell off the VHI in some years' time. I would like to know that too. If that is the case, it seems clear that the motive behind this move is to divert much of the levy to the VHI. I wonder why we are not introducing a long-term risk equalisation scheme at this point. This is an interim measure for only three years, supposedly to stabilise the market. I can only presume that part of the reason for this move is the ongoing legal challenges, such as that from Hibernian Aviva which plans to take a legal challenge to the decision of the European Commission to endorse the Government's health insurance levy.

What plans are in motion for the Government to establish a long-term risk equalisation scheme? Although the aim of the Bill is to prevent premiums for the over-50s rising to unaffordable levels, it is questionable whether this will be the case. Higher premiums seem inevitable for those under 50. At what point does health insurance become unaffordable for this group?

The Minister of State mentioned that both the age-related private health insurance relief and the levy will be subject to annual review to take into account medical inflation and the impact of an ageing population. I do not believe there will be medical inflation. Instead, I predict medical deflation. At least I hope that will be the case because if one compares medical costs elsewhere, what we pay doctors south of the Border is greatly in excess of what is paid north of the Border. There will be changes and I hope it will be on that basis.

I draw the Minister of State's attention to a situation that attracted me greatly in the United States. The US has a different insurance system, but I do not propose we should adopt it. Safeway, an American supermarket company, has instituted a policy for its 200,000 employees that is well worth examining and very interesting to observe. Some 47 million Americans have no medical insurance, while tens of millions of others are underinsured and probably cannot afford to go to the doctor. Those with jobs are in a much better situation. I do not propose we copy the American method, but Safeway has introduced a scheme that rewards good behaviour among its 200,000 employees. It is preventative rather than curative. Safeway states that if its employees behave in a certain manner their medical premiums will be reduced. The scheme has been so successful that the company has formed a consortium with 60 other companies to attempt to introduce it into the American system. They reward those who do not smoke, who take regular exercise and who watch their weight. This behaviour has enabled them to reduce their costs. In terms of the cost of health insurance, behaving well and acting to prevent diseases that they might otherwise have had have been of benefit.

Safeway makes the case that four chronic conditions account for 74% of all health costs, namely, high blood pressure, high cholesterol, arthritis and respiratory diseases like emphysema. It believes that changes in one's behaviour can alleviate most of these conditions. The results have been startling. Steve Burd, Safeway's chief executive to whom I spoke last week, has almost become a missionary, making the case for prevention rather than cure.

Introducing something similar into our insurance system must be possible. I am not sure how it would be done, but examining the case of Safeway and the other 60 countries that joined it in the United States of America would be worthwhile. The scheme's ability to reduce costs is significant. Senator Feeney's comments on the years of high costs and inputs were interesting because I have had the same experience, in that we do not aim to reduce costs to the extent that we should do. This should form part of the target. If we can achieve it by rewarding good behaviour - taking exercise, not smoking and watching weight - we will be able to reduce the costs of health insurance and prolong people's lives.

Phil Prendergast (Labour)
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I welcome the Minister of State. I also welcome the opportunity to discuss the Bill. I concur with Senator Feeney in respect of maternity patients. For many years, it was a matter of considerable frustration for women who were VHI clients and wanted to avail of private rooms that they could not do so due to hospital policy, not necessarily because of the consultants. It is ridiculous that so many people who want private rooms would instead be put into public beds because of hospital policy. It also wastes hospitals' money. I wish to expand the discussion on this matter.

The reward system for people in the US who have private health insurance has been proven to work well. I read about the Safeway case, including on the Internet. A system wherein people would be rewarded for looking after their health would always be good.

The VHI's market share has decreased to an estimated 66%, but its profits remain substantial, so I am not too concerned. The risk equalisation issue must be examined. I like the interim scheme, as it will provide an opportunity for a proper evaluation and review of any insurance system put in place. Many people are VHI clients because they are members of a work scheme and their contributions are deducted from salary at base or so on. As with Senator Feeney's case, I noticed quite a jump when my youngest son recently became 18 years of age and was put on the higher rate. It should be the case that people who are still in school should not be put on a higher rate, given the dramatic jump. Those who are less well off would feel it significantly.

Every other point has been discussed by previous speakers.

Maria Corrigan (Fianna Fail)
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I join colleagues in welcoming the Minister of State. I welcome the clarity he has provided in his contribution by outlining the Bill's necessity, which is to provide for an interim scheme that can be put in place to ensure continuation of the system of single community rating and risk equalisation while a longer term solution is being developed. The Minister of State clearly outlined that a failure to pass legislation on an interim scheme could result in a risk-related market developing in a manner that would make it impossible to revert to an effective community-rated market at a later stage.

I welcome the Minister of State's announcement that regulations will be introduced in early autumn with the intention of commencing lifetime rating by the end of the year. It is particularly important, as it will encourage younger people to continue to take out health insurance. Those who delay until they are older will be liable for late entry loading, reflecting the fact that they did not contribute positively to the overall risk pool. This is the importance of community rating and risk equalisation within the health insurance market. That there is no differentiation in terms of age or health status has been an important market component.

Colleagues have referred to parents, relatives or people they know who have paid for private health insurance for all of their lives. Were we not to have a community rating scheme and risk equalisation, it would be paradoxical that those who contributed positively to the collective pool of insurance for all of their lives yet may not have utilised it would be penalised by higher insurance costs as they became older. The introduction of community lifetime rating to encourage younger people to take out insurance is essential if our principles of community rating and risk equalisation are to be effective. Otherwise, there would be no incentive and those people could go for ten or 20 years without contributing, yet still be able to access insurance at the same rate as everyone else.

I wish to ask the Minister of State about one of the measures in the legislation, namely, tax credits that will become increasingly available according to age. As I listened to him, I remembered a constituent who raised the matter with me some years ago. An older person, he was on a pension. When he required a consultant's services, he opted to attend a private consultant instead of going on the public waiting list. He paid full private consultancy fees. Since he was on a pension, he was not paying any tax, so a tax relief or tax credit was of no benefit. He made the point to me that, by opting to attend a private consultant, he had taken pressure off the public service by not adding to public waiting lists. While everyone else was able to avail of a tax relief, he could not. Will the Minister of State clarify how tax credits will work in respect of older people who do not pay tax? I am struck by the point that this man asked at the time whether some measure, in the form of a supplement or subsidy, was available. He was continuing to contribute at an older age.

I welcome section 8, which will require all insurance companies to submit samples of all new contracts to the Health Insurance Authority ten days prior to the sale of any new contract.

I was very struck by the comments of Senator Quinn on the importance of rewarding behaviour that is conducive to good health. There is merit in considering his point that it may eventually be possible to develop a scheme that would achieve this. It is in everybody's interest and insurance companies should consider actively how they can provide incentives for those who engage in behaviour that is conducive to positive health. Ultimately, in addition to a benefit accruing to the State on foot of there being no increased pressure on the health service as a result of ill health, a benefit would accrue to the insurance companies in that there would not be as many claims as a result of ill health.

I look forward to Committee and Remaining Stages and compliment the Minister of State on the legislation.

Paddy Burke (Fine Gael)
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I welcome the opportunity to say a few words on this legislation. I welcome the Minister of State, Deputy Moloney, and wish him well with the Bill. However, it will be very hard to vote in favour of it.

The Minister of State's speech was very complicated and the average person on the street could not comprehend from it what is to occur in regard to health insurance. Senator Twomey referred to some very important questions and figures associated with the Bill's implications for those who must pay for health insurance. At the very core of community rating is the concept that the introduction of the guidelines will encourage young people to continue to take out health insurance and that those who delay taking out cover until an older age will be liable for late entry loading, reflecting the fact that they did not contribute positively to the overall risk pool and intergenerational solidarity when in a position to do so. This was referred to by the Minister of State and Senator Corrigan. At what age will people be liable for late entry loading? At what age will one be relieved of the obligation of paying the penalty? Will there be a sliding scale such that one who avails of health insurance at 20 will not have to pay a penalty, one who avails of it at 30 for the first time will have to pay a small penalty, and one who avails of it at 50 for the first time will have to pay the full whack? It is very important to know this. It is necessary that everyone pay for health insurance because the more who pay, the lower the cost for everyone.

Senator Twomey implied the Minister of State is taking €150 million from people under 50. This is quite a considerable sum for young people who are at their wits' end trying to put bread on the table and pay for their mortgages, cars and kids at college. An adult is to be levied at €163 per year and each child at €53. The levies being imposed are driving up the cost of health insurance. It will be very difficult for the Opposition to vote in favour of a measure extracting €150 million from the pockets of those under 50. The Minister of State should explain whether the levy will be imposed on a graduated scale depending on one's age. Those with mortgages, car loans and kids at college will be hit hardest and will find payment very difficult. As Senator Twomey stated, they will be driven out of the market whereas we need to drive them into the market on the basis that costs will be lower for everybody if more pay for health insurance. Eventually the levy will drive competitors out of the market because they will not be able to afford to remain in it. One or two providers will be left in the market and they will be able to charge whatever price they want. The Minister of State needs to answer some of the questions raised by Senator Twomey.

Déirdre de Búrca (Green Party)
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I welcome the Minister of State. I am thankful for the opportunity to engage in this debate on the Bill. We are all aware that public access to health services is becoming increasingly important. Some Senators referred to circumstances in the United States where 47 million people find themselves without health insurance. Health services and access thereto are becoming increasingly expensive. Ireland is also struggling in this area. We are challenged to produce a response that will ensure all citizens have access to timely and affordable health care.

Ireland has focused considerably on the issue of waiting lists and timely access to health services. Increasingly, however, because of the ruling of the Supreme Court in July 2008 that the risk equalisation scheme was ultra vires, we must really consider the regulation of the health insurance market so health products and services will not become increasingly inaccessible to ordinary members of the public due to their cost. I refer in particular to vulnerable sectors of the population, such as the elderly, who have more health care needs than others. The cost of meeting these needs is likely to grow significantly and, therefore, we must protect the vulnerable and examine ways of incentivising younger people to enter the market. We must ensure the principle of intergenerational solidarity, which has informed the market to date, is upheld, protected and enshrined in the health insurance legislation.

The Minister of State has made it clear this Bill is interim legislation and it is really responding to the Supreme Court judgment. I welcome many aspects of it and its objectives are set out very clearly. The main objective is to ensure access to health insurance cover will be available to all consumers without differentiation on the basis of age and health status. The purpose of the regulations set out in the legislation is to ensure health service providers do not operate within the legislation in contravention of its main objective.

Section 3 sets out that the principal objective of the Minister and the Health Insurance Authority in performing their functions under the Act is to ensure that, in the interest of the common good, access to health insurance cover will be available to all, with no differentiation made on the basis of age or health status. The section also provides that the insurer shall not engage in a practice or agreement against the principal objective. This is very important. Clear definitions of complex terms are also provided, such as "community rated health insurance contract", "community rating" and "net premium".

Section 6 is aimed at ensuring community rated health insurance contracts are made available to all persons without differentiation based on age or health status. Insurers are required to offer any particular contract for a period of not less than 31 days and are to charge all persons the same net premium. The issue of entry loadings is dealt with also. Based on the way the new system of regulations is designed, it is obviously in the interest of citizens to take out health insurance as early as possible so they can contribute over time to the risk pool and the principle of intergenerational solidarity through their insurance contributions so that when they are likely to make greater demands on the health services at a later stage, they will have made early contributions. The late entry loadings are for people who enter late into the market and who do not take out health insurance cover until later in life when their claim costs would be at a higher level. Obviously, they would not have made any contribution to intergenerational solidarity. The main change in this area of the legislation is to ensure that the age at which late entry loadings can be applied will change from 35 to 30. The legislation also clarifies that these loadings can apply on renewal of a contract to which the loading would previously have applied.

The Health Insurance Authority is given a central role in the legislation. Under section 8, insurers are now required to submit new contracts to the Health Insurance Authority 20 working days in advance of offering them to potential customers. Therefore, the authority has a role in screening and supervising the kinds of contracts being offered to potential consumers. The authority is also required to establish a register of health insurance contracts and this register must be available for inspection by the public free of charge at the office of the authority. There will, therefore, be much greater transparency and oversight in the system.

Section 9 obliges insurers to make information returns to the authority, which is a welcome development. The legislation prescribes that these would be six-monthly returns so that the authority, and in due course the Minister, will be enabled to perform functions under the Act. This is an improvement because previously, insurers were obliged to make data returns under the risk equalisation scheme. This provision ensures that more detailed and regular information is required of the insurance providers. The authority must also submit a report to the Minister at the end of every year. This will empower and assist the Minister because it will provide advice on matters that should be brought to the attention of the Minister as a result of evaluation and analysis undertaken. As mentioned already, this is an interim scheme that is being put in place and there will, obviously, be room for improvement. The role of the authority will be to advise the Minister in that regard. This section also provides the Minister with the power to make recommendations to the Minister for Finance on any of the reports submitted.

Section 11 deals with the issue of information and advertising as it relates to consumers. It enhances the position of the consumer with regard to information and advertisements where this is considered to be in the consumer's interest. Section 12 deals with the registration of insurers and section 13 deals with the enforcement of provisions contained in the Act.

The Minister has indicated this is considered an interim scheme to stabilise the market in light of the ruling of the Supreme Court. Therefore, we need to look at the issue of a longer term scheme. The Minister of State, Deputy Moloney, mentioned that until recently some 51% of the public had private health insurance, but that percentage may have decreased slightly. We need to consider the shape the longer term health insurance scheme should take. The Green Party would hope we would consider a universal health insurance scheme.

We can learn from the experiences of other countries, for example Canada, where there is one major health insurer that deals with all the various private health providers. This might be a good model for Ireland to follow. Whatever choice we make, we must ensure we have a proper longer term scheme. Currently our health insurance market is a bit of a hybrid. We have a strong public health system, but we also have increasing pressure as a result of competition law to allow for private providers to enter the market. We need to ensure that whatever health insurance we put in place, we hold true to the object of intergenerational solidarity set out in the Bill and ensure that no member of the public is discriminated against in terms of access to health services or the provision of health insurance on either the basis of age or health status. I welcome the legislation to the House and the Green Party is happy to support it.

David Norris (Independent)
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Senator de Búrca's contribution has been one of the best I have heard. It was delivered at rapid fire speed and was most enlightening. I felt privileged to listen to it. I do not have the same command of the detail as she clearly has. I was very impressed by her contribution.

I could be wrong, but I imagine the chief instigator of the Bill was not the Minister of State. The Bill has the hallmark of campaigns waged for a long time by the Minister, Deputy Harney. I do not always agree with the Minister and would have liked to take a bit of a smack at her on the last "Questions and Answers" programme, but felt that would have been wrong because of it being the occasion of John Bowman's last show. It would have been rather puppish for me to take a swipe at Deputy Harney on it. She was making extraordinary claims such as that thanks to the Progressive Democrats and its policies, people could now walk in off the street and get a phone. Of course one can, but they are mobile phones. That overlooks the fact that Eircom is a complete and absolute shambles. Thank God we can get mobile phones and are not dependent on Eircom any more. The same is true with regard to Progressive Democrat policies on air transport. They made ducks and drakes out of Aer Lingus, but thank God it has survived. They rubbished Team Aer Lingus and many of its jobs have now moved to Zurich.

I am glad, because I like and respect the Minister, that I now have something on which I can agree with her in principle. I am interested in the philosophical context of the Bill because I do not believe in a two-tier system, but in access. There should be a more radical approach to health. We should have universal health care that is paid for by those who can afford it and that is subsidised by the State. I have no objection to paying the highest rate, which I do, and do not mind my contributions, even if they are increased, going into a nationalised health service and helping to bring in some other citizens. That is real solidarity.

Senator de Búrca referred to the Canadian system. I suggest we should also look at the Australian system, which was explained in general outline to me in the past few days. Under that system, everyone has access to health care, but the people with extra money can buy the frills. Everybody has universal access to beds, treatment and care etc. That is the way to do it. If we want to have a private area, it should be for the frills. I am already on plan E, but if there was a plan F, I would be on it. People in my situation need not be a burden and to be able to afford to look after themselves. Therefore, health insurance for me is a prudent investment.

I well recall how the private capitalist investors in people's illness challenged the risk equalisation scheme, which I supported, in court where it took a bit of a toss. The principle, however, survives and I am glad that the Minister of State referred to this. At the end of his speech he unobtrusively used the key phrase, "the common good", to which I would like all Departments to pay attention. My view, and that of many who are more expert in law, is that the common or public good takes precedence over personal or commercial financial gain. This is a social and community issue. It is obvious that there should be a responsible rather than a profit-orientated attitude to health care.

At the beginning of his speech the Minister of State said that 51% of Irish people have private insurance. That is significant. It tells us that 51% of Irish people do not regard the public health service as satisfactory. That should be noted and addressed. They have every entitlement to that view. The sad fact, of which the Minister of State is aware, is that this stark figure may well fall because people will not be able to afford private insurance. The Minister of State points out that the VHI market share has fallen to 66%, but that is still a massive share.

Quinn Healthcare and others have moved up the scale. The English crowd, BUPA and others, tried to stick their noses in the trough. There is no doubt that the Quinn group is a very skilful and clever organisation dedicated to the generation of money for itself and its investors. It has a talent for cherrypicking, which is precisely what this Bill is intended to address. It cherrypicks in all its insurance activities. I have heard numerous stories on the radio, and read them in the newspaper, of people who applied to Quinn Direct and Quinn this, that and the other but happened to live in the wrong area of Dublin, as I do. Twice I wrote to Quinn Direct seeking a quote for my house but received no answer. I live in Dublin 1, near 'handbag corner' so it would not give me a quote. It did not even reply. The same applies for certain occupations. That is cherrypicking. That seems to be prevalent in the insurance industry but it is certainly not appropriate when we are dealing with health. Quinn comes to this trailing a reputation for cherrypicking. I am not saying it is doing anything illegal but that is its business practice and it is not appropriate when providing people with health insurance.

One of the interesting aspects of the Supreme Court judgment is that the Chief Justice immediately drew the Government's attention to the fact that it was not ruling out the principle of looking after the most vulnerable people through risk equalisation and more or less urged the Government to bring forward a new scheme. There are many occasions when the Judiciary reproves the Oireachtas for allowing lacunae to exist in the law. It also has ideas on its side of the fence on how we as legislators should address the law. I have suggested here a couple of times that there should be some channel of communication between the Judiciary and the Oireachtas. I know there is separation of powers but that does not mean there cannot be communication. There should be some institutionalised system whereby if the Judiciary sees a gap in the law that damages the interest of citizens, it can send a message asking us to look into it. That could perhaps operate in two ways.

I notice that the commission has approved this and so on. In general I welcome this Bill because it is in the interests of all of us. We are a community, not just a collection of financial units, and anything other than this would lead to a rather nasty fragmentation of society and compartmentalisation on an age basis. I suppose I would feel that as I sail into my late 60s. It is good that we do not stand idly and that we attempt to amend what could have been a fracturing of our sense of community.

Fiona O'Malley (Progressive Democrats)
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I wish first to reply to Senator Norris.

David Norris (Independent)
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The Progressive Democrats riposte, and why not?

Fiona O'Malley (Progressive Democrats)
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I was bursting to speak when Senator Norris said that competition does not work, particularly in respect of the aviation industry. For years Aer Lingus overcharged people to get in and out of this country because there was no competition.

David Norris (Independent)
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Yes, and now one pays €650 for a seat next to some little fellow picking his nose who paid €1.

Fiona O'Malley (Progressive Democrats)
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Thank God Ryanair and British Midlands were established because now we get to and from the country free of charge. That has done wonders for the tourism industry, apart from anything else, not to mind that we all come and go and are not ripped off a month's wages to get as far as London.

David Norris (Independent)
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Oh yes we are.

Fiona O'Malley (Progressive Democrats)
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The principle of competition has been good in other areas. I agree that competition must be well regulated but it has improved the health insurance market. The propensity for the monopoly player is to dictate prices and terms, leaving no room for manoeuvre which forces the State or whoever to deal with the prices determined by that player.

David Norris (Independent)
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Let us make a joint call for a debate on that issue.

Fiona O'Malley (Progressive Democrats)
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I would welcome one. When the Minister of State was Chairman of the Oireachtas Joint Committee on Health and Children we dealt often with the health insurance market, which is fascinating. I took a strong interest in this area as we watched the evolution of competition in the sector. We heard that the VHI would decide how many days a patient would stay in hospital and the terms of that stay. It did not matter if the patient came out after three days or did not need to stay in for three days. That is a total abuse of power. That is why I welcome the arrival of companies based in other countries.

Our system is good in so far as we have a high rate of people on private health insurance, although that is declining in the present economic situation. One hears that the first thing people cancel when they can no longer afford it is health insurance, but intergenerational solidarity and risk equalisation is a good principle. That is why the insurance Bill and changes in the insurance market are necessary.

There is, however, a contradiction in this Bill because the Minister of State uses the term intergenerational solidarity and states that nobody should pay any more, but he proposes a levy which eliminates the notion that everybody pays the same. I am not a fan, if that is the correct word, of health insurance. I do not really believe in it. I believe the public system should be good enough for us to have faith in it. I do not have health insurance. If one decides to take out health insurance later in life one will pay a penalty for doing so. That may well be because one will not have cost the health insurance company any money at that stage and therefore it is entitled to get more money out of one. That flies in the face of the notion of true risk equalisation and fairness. I see this as an interim measure to deal with the legislation as it is. It is an area that needs a great deal of change where litigation has been pending for many years and, as we all know, BUPA took the State to court. It is not over and it is not a level playing field.

The Minister of State will know from his time as Chairman of the Joint Committee on Health and Children when we dealt with this matter that it is a very uneven playing field. The committee tried to make the playing field more level but we were somewhat restricted from doing so, largely because of the dominance of the VHI and its construction in terms of its financial obligations. I wish we were introducing legislation to deal with that because it is far more important. We need regulation in this area, but we need light-touch regulation. We need to be able to encourage many more insurers into the market.

I note this interim measure is to deal with the specific issue of the judgment and to provide a degree of certainty to older people in particular because they are at risk of facing higher premiums. We need a once and for all health insurance Bill to deal with the dominance of the VHI and I would welcome it into the Oireachtas. I understand what this Bill is trying to do but there is this inherent contradiction and I am interested to hear the response of the Minister of State on this.

We need to encourage more participants and health insurance providers into the market. That is the best way of ensuring competition and getting greater efficiencies and better value for money for the patient and the State in terms of what it pays for health insurance, which is after all what we want. The monopoly has interfered with or damaged much practice and bad practices were allowed to develop. As I mentioned before, competition now exists in the aviation sector and is much to the benefit of the consumer. This could be replicated in the health insurance area. I seek changes in the ongoing regulation of the health insurance market because we need to keep competition alive in it.

Paul Bradford (Fine Gael)
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I listened with interest to the contributions of the two previous speakers and I share some of the sentiments expressed by both of them. However, I very much disagree with the comments of Senator Norris on the BUPA health insurance group. To paraphrase what he stated, he claimed that BUPA arrived into the Irish health insurance market to feed at the trough. I wish to point out to Senator Norris and those who hold such a view that BUPA is a mutual society. It is not a profit-making agency and invests its surplus in health care projects across the globe. It does not have shareholders who benefit from the profits of the industry and I am glad that BUPA arrived in Fermoy. It opened up the Irish health insurance market. Without BUPA we would not have had the Quinn Group, without whose entrance we would not have VIVAS. Without those companies we would not have competition and the VHI would have continued to enjoy total dominance. My only disappointment about BUPA is that the mishandling of the risk equalisation policy resulted in BUPA leaving the Irish market which was a grave disappointment. It was bad news for the Irish health care industry and I wish it had been handled differently.

I agree with Senator O'Malley's comments on the need to foster and encourage further health insurance competition in the Irish market. By international standards, notwithstanding Ireland being a small country, it is quite extraordinary that one company still has almost 70% of the business. In every walk of Irish life we have seen that where there is such dominance by one company it is bad for the consumer and I hope that further competition will enter the Irish market.

The Bill we are debating today is a continuation of the ongoing debate on risk equalisation that we have been having for the past decade. I contributed to the debate in both Houses because I felt from day one that the way risk equalisation was being introduced was unhelpful to competition and needed review and change. It is a pity it took so long and ended up in the Supreme Court. I support the concept of community rating, as I am sure do all my colleagues, but the heavy-handed approach we apply to risk equalisation has resulted in the mess we are in now.

There is one aspect of the Irish health care industry on which we need to concentrate and that is the cost of health care. It is great to have private health insurance companies footing the bill, and the more companies, the better. However, we must ask why the cost is so high. Why is health care in Ireland so expensive in comparison with most other countries, not only in the European Union but worldwide? Last year, I was in Italy for a social occasion and I had to attend a doctor to obtain a prescription for antibiotics. I was in a small village and I was pleasantly surprised to find a doctor readily available in a local health clinic. To the best of my knowledge, the bill for the consultation for his writing of the prescription was €20 and the prescription in the local chemist cost me €4.50. If it was here, the bill would have been €70 or €80, I would have been made feel under a compliment to walk in and meet a doctor so easily and the prescription in the chemist shop certainly would have cost €20.

While we are debating health insurance it is important, necessary and fundamental to consider the other side of the equation, which is how much we spend on health services and what type of value for money we get. We have to ask ourselves why Irish health care is the most expensive in the world. Why does it cost €60 or €70 to visit a doctor? Why does a prescription cost so much more than in any other country?

A debate will take place today in the other House on the difficulty that the Minister is having with the pharmacists. I am very sympathetic towards the Minister's proposals in this regard because the taxpayer and consumer in this country have been ripped off as far as health care is concerned. While I welcome insurance policies in one sense, in another they are almost covering up the core problem, which is the cost of health care, and we need a very fundamental debate on this.

We all acknowledge we need more hospital beds, step-down facilities and community care facilities. However, we may also have to examine the training of general practitioners and the number of GPs we have. Why is it such a closed group? Measures have been taken by the Minister for Health and Children to increase slightly the number of persons training for a degree in medicine and the college entrance procedure has been changed. It is hoped this will result in additional GPs coming on stream. Until such time as we change the supply and demand equation, health care providers will remain in a position to charge exorbitant fees. That is a very fundamental part of the debate, not only on health insurance but on the provision of health care. It needs very thorough examination and, more importantly, it needs action by the Minister and his Government colleagues.

I appreciate the legislation is interim and I suppose it is an emergency measure. I was surprised that so many people expressed surprise at the Supreme Court decision on risk equalisation. The risk equalisation policy, as it existed previously, looked to me at though it could have been written by the VHI itself. It appeared to be a policy that was absolutely detrimental to the little bit of competition that had arrived into the Irish market and would ensure that no further competition would enter the market. We now have to go back to the drawing board. Yet, what we are doing here by way of levies, taxes and charges is not dealing with the fundamental problem of the cost of health care provision.

I was interested in what Senator O'Malley said, namely, that there should be universal health care and that the public system should be so sufficient, efficient and effective that it should be the answer to everybody's problems. In an ideal, utopian world that would be the case, but it is not the case in this or any other country. There will always be a degree of necessity for private health insurance and health care, and it should be possible that it sits complementary to the public system. The Minister of State is aware of the Fine Gael policy announced relatively recently on universal health care, which is the result of a process of long debate within the party. It is worthy of serious consideration.

I heard Senator Norris refer to the Canadian model of health policy. Somebody else mentioned Australia. We have toured the world over the past ten years and heard about marvellous systems in country A, B or C, but when one investigates them they are never as marvellous as it would appear and there are always problems. The core of the problems which need to be tackled are the fact that a GP visit costs €60 or €70 and medicine prices are so high. Senator Norris mentioned that health care is not a privilege and he is correct. It should not be a privilege but should be enjoyed freely and easily by every citizen of the State, who should have ease of access to it, but sadly that is not the case today.

With regard to the legislation before us, I appreciate why the Government had to respond in some form to the court decision. However, since 1998 or 1999, when the first piece of political thinking on risk equalisation was debated in the other House, we have not got it right. We have been stumbling from one solution to another and this is a case of a Band-Aid being applied to a much bigger problem. The passing of this Bill does not deal with the fundamental cost issues at the core of the crisis in Ireland.

John Moloney (Laois-Offaly, Fianna Fail)
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I thank everybody for the debate and will try to respond to as many of the issues as I can. I thank the officials, Mr. Barrett and Mr. Smyth, for their support and advice throughout the passage of this Bill.

It should be remembered that many issues mentioned here were dealt with and flagged in the health committee some years ago, when we had presentations from VHI and BUPA. Many of the concerns raised by members of the committee are now being addressed or at least referred to.

I thank Senator Twomey for his contribution. He referred to the effects of the levy on younger people. The reality is that the increase in younger peoples' premiums because of the levy reflects the fact that younger members of these insurers had not been supporting intergenerational solidarity.

Whilst the solvency requirement is high, its level is a matter for the Financial Regulator. It has already been made aware of these changes. As the credit is granted at source all persons will benefit, in the same way as they benefit from the standard relief currently granted. There is no change in that particular apparatus.

Liam Twomey (Fine Gael)
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If I pay for somebody else, can I claim the credit?

John Moloney (Laois-Offaly, Fianna Fail)
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Yes, there is no change. The level of the credit and the levy was calculated based on current market data and was not agreed by the Department taking a notional figure.

It would not be possible to impose a higher levy on specific plans. In granting a standard level of credits an equitable approach has been taken. The Government will shortly be considering the best approach regarding VHI's authorisation. This scheme is separate to that question and will not fully compensate VHI for its adverse risk profile. That was pointed out often during the deliberations of the health committee some time ago when those points were made on a regular basis.

Senator Feeney offered her support to the Bill. It is welcome and I welcome the fact that she and Senator Twomey agree on so much. That has been noted. I see peace breaking out in every area.

The scheme does not penalise companies. It is a necessary measure in the community rated market. I also wish to emphasise that the levy is not being imposed on any person, rather it is on the insurer. The VHI has given considerable attention to reducing costs and most of its coverage now concerns day care, which were the points raised by Senators Feeney and Twomey.

The high costs of VHI were referred to in this House and the Lower House. VHI does not control its costs in an effective way - this point has been made. However, all insurance companies in the health area, here and abroad, face significant costs in meeting the claims of their members. VHI is no different from any other insurer as it, like Government-funded services, sees new technology constantly emerging, whether in drugs or new imaging equipment. It is also seeing an increase in activity in acute hospitals, particularly in day work. I understand VHI does take steps to control costs, such as through robust negotiations with private hospitals on their budgets and with medical consultants. Senator Quinn referred to VHI's profitability and status. The provisions in this Bill only partly compensate VHI for its age profile. Should it emerge that medical inflation falls, it will be part of the Health Insurance Authority's assessment in considering the level of credits.

The overall impact of the measures in the market is neutral. As the amount collected in levies is paid it is not possible to implement a new risk equalisation scheme in the time available. That is why the interim measure is being introduced. I take the point made by Senator Twomey, who asked why, in all the years we have spoken about the issue, it is happening now. It is an interim measure until the complete legislation proposed is passed. We will take the issues and proposals made here into account in the interim measures before the new scheme is developed.

Senator Prendergast raised similar points. VHI's financial position is not as positive as she indicated. For example, it has recorded significant losses for 2008. With regard to the availability of higher tax credits, the position is that by granting the credit at source, even those who do not have a tax liability will benefit.

I will deal with the points raised by Senator de Búrca. With regard to lifetime community rating, the regulations will specify a maximum percentage that can be applied to the standard premium in respect of each year beyond 30 that the person concerned does not hold cover. They will not apply to persons who have cover before the regulations are made. Issues raised by Senator de Búrca on protecting the elderly, given the cost that inevitably arises from the care of older people, is at the centre of the Bill. Furthermore, the Bill also contains a number of measures aimed at enhancing the position of the insured.

A number of points were raised by Senator Norris. With regard to the common good aspect of the framework, the Government is obviously committed to protecting the common good and ensuring the conditions are met. Consequently, the Bill includes a number of measures beyond the interim scheme which the Government aims to achieve.

Questions have been raised about the long-term future of the VHI and, specifically, whether it will be sold. The Minister, Deputy Harney, referred to this issue on a number of occasions. She is considering the issue of authorisation of VHI as an insurer at present and the Government will deal with the authorisation as soon as possible. The issue is raising the capital to allow for authorisation and there are obviously options in this regard. All these will be considered by the Minister in framing the final document.

I will take into account the issues raised by the Senators and will respond more directly on the next Stage of the Bill.