Seanad debates

Wednesday, 25 June 2014

Health Insurance (Reform) Bill 2014: Second Stage

 

12:55 pm

Photo of Feargal QuinnFeargal Quinn (Independent)
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I move: "That the Bill be now read a Second Time."

I welcome the Minister for Health, Deputy James Reilly, to the House. We are getting to know him here as he comes in on a regular basis. I hope he will welcome the Bill.

I produced this Bill to address concerns which I have had for some time about certain aspects of the health insurance sector in Ireland.
There are features within the health insurance sector as well as surrounding the regulation of the health insurance sector which make me uncomfortable. Special treatment for one provider over all others and conflicts of interest at the highest levels are not features of a fair and equitable health insurance sector where the consumer is prioritised above all other considerations. Quite frankly, under the current arrangements the consumer comes a definitive last.
The Minister for Health currently stands in the position of being the shareholder and largest provider of private hospital services in the market through the HSE. The Minister is also the shareholder of the largest health insurer in the market, VHI, and he also has responsibility for regulating the health insurance sector – exercising wide-ranging powers that have a direct impact upon both the HSE and the VHI. By any measure, that is an unhealthy set of circumstances.
The fact that the VHI is not subject to the same regulatory or solvency requirements as other health insurance providers in the market is also untenable. It is not a matter of choice. The Government is required to give effect to the decision of the European Court of Justice in the case of European Commission v. Ireland.
The purpose of this Bill is to introduce reforms in three areas of the health insurance market. First, the Bill provides for the transfer of the responsibility for the management of the State's ownership of VHI to the Minister for Public Expenditure and Reform. This proposal is designed to bring about an end to any actual or perceived conflict of interest that comes about from the fact that the Minister has to wear a number of hats. This is a relatively simple, but yet important, proposal.
Second, the Bill seeks to normalise the regulatory position of VHI by requiring VHI to meet the solvency requirements that are applicable to all other health insurance providers in the Irish market. This proposal gives effect to the decision of the European Court of Justice. It is not a matter of discretion for the Government. Based on that decision, it must be implemented. The fateful day has been set and has been postponed on a number of occasions. We saw last week that VHI recorded a surplus of €65 million. It is time to cut the apron strings and let VHI stand on its own two feet. The least consumers can expect in an open and progressive economy such as ours is that the health insurance market is transparent and equitable. At present, I suggest this is certainly not the case.
Third, the Bill provides for the dissolution of the Health Insurance Authority, HIA, and the transfer of its regulatory functions to the Central Bank of Ireland. All other insurers in the State are regulated by the Central Bank. Why should the health insurance sector be any different? What I propose is that we dissolve the HIA and transfer its functions and expertise to the Central Bank. Not only does this proposal make perfect sense, it is also consistent with the Government's commitment to reducing the number of public bodies in existence. Some time back, a former Minister for Health asked me to get involved. At the time, I was not able to do so. I could not believe the number of quangos and different organisations, some of which were in the same town doing the same thing. I believe there is a need to reduce their number.
As those of the squeezed middle continue to be forced to abandon their health insurance, and as the cost of health insurance continues to rise year after year, we as legislators must act to bring some sense to this situation. We can no longer tolerate a situation where, time and again, the welfare of VHI outflanks the welfare of the consumer. That is unsustainable.
It is time to normalise the regulation of the entire health insurance market. There can no longer be any favoured health insurance provider. If that means the State must divest its interest in VHI or attract further investment, then so be it. I am fully supportive of the State maintaining control over key public utilities, such as water, electricity, public transport and, indeed, air travel – certainly, air-traffic control anyway - but a case can no longer be made for the State's continued ownership and control of a health insurance provider.
I would ask the Minister to reflect on what I and my colleagues have to say here today and accept that the status quo in the health insurance sector can no longer remain, and to not oppose the passage of this Bill. There are three parts to it. I believe each is worthy of consideration, approval and support, and I urge the Minister to do so.

1:00 pm

Photo of Sean BarrettSean Barrett (Independent)
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I welcome the Minister back to the House. I hope the evening we had yesterday, taking his Public Health (Standardised Packaging of Tobacco) Bill 2014, will prove to be successful.

On this occasion it is an honour, as always, to second Senator Quinn's Bill. I believe it has huge merit. I believe it is the right thing to do.

There are so many problems arising in this area, not least, for instance, according to the Department's website, that the Minister appoints both the board of the VHI and board of the HIA, which is currently the regulator for the sector. That would strike me, in sporting terms, as though one of the teams got to choose the referee for the matches on various Sundays.

I note also a concern of the Minister, of ours and of the IMF, that the health budget is 8.7% of gross national income and the comparator countries do it for 7.3%. I cannot think of a stronger advocate than the Minister when the health insurance premiums were rising in that he asked the health insurers to compete with each other and to do deals, and asked them to question whether the number of tests were necessary. All the Minister was saying was certainly music to my ears in the House. We need to do that. On an indexed basis, we are spending 20% more. Our index would be 119 compared to the OECD countries' average of 100, and many of the OECD countries have older populations than we do. There is a problem.

A question that occurs to me, on which the Minister agreed when we raised it in the past, is how come, between the last recession in the mid to late 1980s and the peak, we doubled the number of staff in the health service. It went from 55,000 to 110,000. The Minister had to, as part of the arrangements with the troika, bring it back to 103,000. Surely, the other question is what on earth did we get for the 55,000 extra staff recruited over that 20 year period which have given us this extremely high-cost system which this Bill attempts to address.

One can do a certain amount - I do not mean that in any patronising way. One can perform the actions that the Minister has, but it is difficult to do and the Department of Health is known as "Angola" for that reason. There is considerable criticism of measures which are necessary in the financial interest of the Minister every time he tries to do that.

Looking at the Milliman report, given the average length of stay for a treatment of 11.6 days for VHI members and 3.7 days for best international practice, one can see the numbers of noughts mounting up. That amounts to 20,000 extra hotel costs incurred. I fully support the Minister's attempts to move procedures to outpatients and GPs. However, if we pay hospitals more for keeping patients in longer and VHI with the State guarantee is seen as the easy way to do that, it will be impossible to reform the system.

Unless we implement reforms such as those proposed by Senator Quinn compulsory health insurance will be about as popular as water charges. Mr. Ben Dunne once said in respect of water that if 40% of the stock disappeared from one of his shops, he would not blame the customers. This will become a burdensome and annoying tax unless we reform health insurance. As we used to say when the then Minister for Transport, Jim Mitchell, both owned Aer Lingus and regulated the market, such wisdom is not given to mere mortals. The European Court of Justice decision to which Senator Quinn referred, as well as the ruling in the Supreme Court, requires us to attempt to achieve the results sought in this Bill. In 2011 the European Court of Justice ruled that the current arrangements whereby VHI is treated more favourably than other health insurance providers is discriminatory.

Let us keep this Bill on the Order Paper. All of us seek a more efficient health service. I am supporting the Bill because I want a company to be able to say to the Minister that it charges smaller premiums for health insurance because it can treat old and young people at a lower cost than the VHI. Please allow it to continue to do so and do not require it to bring its costs up to the level of the VHI. Without much evidence, the VHI has always stressed that it has a large number of older customers and that companies which recruited young folk into health insurance were in some way cheating. If we can show that company X can do a better job for the Minister and the rest of society at a cheaper cost for young and old people, let us give it a try. Health insurance is a financial service. The Minister should give responsibility for it to the Central Bank rather than involve himself in appointing directors to the referee board of the Health Insurance Authority and to one of the competing health insurance companies.

1:10 pm

Photo of James ReillyJames Reilly (Minister, Department of Health; Dublin North, Fine Gael)
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I thank Senator Quinn for bringing forward the Health Insurance (Reform) Bill 2014 and I welcome the opportunity to participate in the debate on it.

Having noted what the Senator said about the Bill in this House and in a recent newspaper article, I am satisfied that all staff in the private health insurance unit maintain the highest standards of probity by conducting themselves with honesty, impartiality and integrity, as required under the Civil Service code of standards and behaviour. The code requires that particular care be taken to safeguard information concerning the commercial affairs of companies or organisations which have been submitted in connection with official business on condition or on the reasonable assumption that it would remain confidential.

Senior officials in this area also hold positions that are subject to section 18 of the Ethics in Public Office Acts 1995 and 2001. Information received from any insurer is used solely in the carrying out of official duties and is not made available outside of the Department unless required under law. As a commercial State body, the VHI has obligations to the Minister for Health under the code of practice for governance of State bodies. These obligations are monitored by the private health insurance unit of my Department which, among other things, is charged with overseeing the maintenance of a competitive and sustainable private health insurance market, management of ongoing market issues and appropriate liaison with and governance of relevant State bodies. I reject the assertion that there is preferential treatment of the VHI. That is a misunderstanding of the situation.

I will address risk equalisation during the course of my speech but suffice it to say that if any of the other companies had the same proportion of older people to their membership as the VHI, there would be no discussion of this subject. Risk equalisation is intended to address that. If we all subscribe to community rating, whereby customers pay the same premium for the same policy irrespective of their age, sex or disease status, we have to compensate companies which have a higher proportion of older and sicker people as opposed to those which have a much younger customer base. Nobody in this House is naive enough to believe that the market is not used by the insurers to chase the more profitable young people. All one has to do to confirm this is to examine the products provided by new entrants to the market and the percentage of young versus older people on their books. The story speaks for itself.

The Senator and I share the same objective for the private health insurance market, namely, to achieve a viable and sustainable system, affordable to all, which operates in the best interests of the public. I want to make sure that this happens, but I think that there are different ways of achieving the objective. The Bill before us proposes a number of changes to the regulatory infrastructure underpinning the private health insurance market. While I appreciate the intentions in bringing forward this Bill, any changes we make must be in the context of moving to universal health insurance. There have been many important and positive developments in the private health insurance market in recent times and legislation must take account of these.

The VHI's position has already advanced considerably towards authorisation by the Central Bank but the Bill does not take account of these developments. Similarly the Health Insurance Authority will be the engine for reform of the private health insurance market and to implement the provisions of this Bill would be entirely inconsistent with the new role that I see for the Health Insurance Authority under universal health insurance. It would be helpful to inform the House of the progress achieved to date in respect of sustaining the private health insurance market. In addition, I will set out the policy supports that I will introduce shortly, and the planned reforms in respect of private health insurance before addressing the three key proposals in the Bill.

I acknowledge Senator Quinn's concerns about the decline in the numbers insured in the private health insurance market since its peak in 2008. More than 250,000 people lost their jobs in the period since 2008 because of the financial decline of this country. In addition, 250,000 medical cards were issued and 250,000 people left the insurance market. They are not all the same 250,000 people but there is a relationship with the financial situation in which the country and the individuals who live here find themselves. The current private health insurance coverage stands at 44.2% of the population. I am keen to create the best possible environment within which more people will want to obtain and retain private health insurance cover that is affordable and competitive, and meets consumers' needs as we prepare to move to universal health insurance. I am taking a series of steps to support the private health insurance market. With all respect to Senator Quinn, I consider these initiatives, rather than those proposed in his Bill, are the most appropriate to promote a sustainable and competitive private health insurance market.

In June 2013, 1 appointed Mr. Pat McLoughlin, to work with insurers, the Health Insurance Authority and my Department to identify effective strategies for cost management in the market. Mr. McLoughlin's first report, which was published at the end of December 2013, made a number of important recommendations, including the introduction of lifetime community rating as a measure to encourage younger people to buy health insurance. Lifetime community rating is intended to encourage people to join health insurance schemes early and to retain their private health insurance cover. Late entry loadings will be applied to those who join later in life. There will, of course, be a grace period to allow people take out insurance without loadings and a strong communications campaign to give everyone adequate notice of the change.

The introduction of lifetime community rating will provide a mechanism to discourage people from only taking out private health insurance as they get older by allowing commercial insurers to charge higher premiums to late entrants to the market and thus provide an incentive for people to take out private health insurance at a younger age. This is important because the health insurance market requires a sizeable cohort of younger members, who are generally healthier, to offset the high cost of older and less healthy members. This is critical to the sustainability of our system of community-rated health insurance. Many of those who are growing and require additional care are the very people who supported those who went before them when they were younger. Officials from my Department, in consultation with the Health Insurance Authority and the health insurers, have been working to finalise regulations to provide for lifetime community rating. I intend to sign the regulations to make this a reality shortly. I also wish to help to address the substantial reduction in market penetration rates among those between the ages of 20 and 25 by providing for sliding discounts for all young adults up to age 24 years. I propose to introduce phasing-in of full adult rates to smoothen the dramatic price increase currently experienced when student rates no longer apply, usually after the age of 21 years at present.

I propose that this measure will be introduced in legislation later this year, for implementation in 2015.

In addition to the measures I have outlined, I have consistently emphasised the need for much greater cost control in the private health insurance industry so that premiums are affordable for as many people as possible. I have urged all the private health insurers to do everything possible to keep down the cost of private health insurance. I am determined to address costs in this sector in the interest of consumers and I have made it clear to insurers that I believe significant savings can still be made, the effect of which can be to minimise the need for premium increases.

In addition to the introduction of lifetime community rating, significant progress has also been made on the implementation of the other recommendations in Mr. McLoughlin's phase 1 costs review report. For example, the HSE and insurers are now working together to implement a number of the report's recommendations on claims processing, and admission and discharge issues.

As regards fraud, waste and abuse, the private health insurers have agreed to use existing anti-fraud and confidential hotline structures under the auspices of Insurance Ireland to facilitate combating fraud in the private health insurance market.

As a shareholder, I have seen the letter from the VHI to my Department's Secretary General. I know that the VHI is engaged in post-market surveillance. When people have left hospital, they get a phone call which they find useful because it is nice to know that one's insurer is interested in how one got on. They can also check whether the tests they have been billed for have actually been done. The particular recommendations on case-based charging will be incorporated into the work already under way by my Department under the money follows the patient system.

Senator Barrett alluded to the need for clinical audits, which astonishingly we never had before. Such audits can check whether or not the tests were necessary in the first place. In addition, there will be more robust auditing both of doctors and hospitals, as well as benchmarking what we pay. We are still paying several hundred euro for procedures that used to take two hours, but now only take 20 minutes. In this respect, much work has to be done this year and the renegotiation of many of these consultant contracts will take place around this time.

Work on phase 2 of Mr. McLoughlin's report, which will deal further with the factors driving costs in health insurance, is progressing well. This second phase report is expected to be finalised and published in the coming weeks.

Under universal health insurance, UHI, competing health insurers will form the backbone of the new purchaser-provider split. Insurers will be the commissioners of a wide range of primary care services, acute hospital services and acute mental health care. I recognise that in advance of UHI, we need an affordable, competitive market that meets consumers' needs. I want to create the best possible environment within which more people will want to take out, and keep, health insurance cover.

Community-rated health insurance systems across the world use risk equalisation as a mechanism to distribute fairly some of the differences that arise in insurers' costs due to the differing health status of all their customers. I alluded to this at the beginning of my speech. I am committed to making further improvements to the risk equalisation scheme as a mechanism to support community rating in the private health insurance market. In January 2013, I introduced a permanent risk equalisation scheme which takes greater account of the extra cost of treating older and sicker patients, compared with younger and healthy lives. The scheme encourages insurers to focus on product innovation, efficiency and customer service. Subject to expert advice and in line with existing legislation and other requirements, I am committed to the following: maintaining the current level of effectiveness and, where possible, over the period of 2014-16, increasing the effectiveness of the scheme to 85% for those in their 70s and to 90% for those over 80 years of age; adjusting the hospital bed utilisation credit as a proxy for health status; and introducing a more refined health status measure through the use of diagnosis-related groups on a phased basis between 2016 and 2018. A robust risk equalisation scheme is also required as a foundation stone to delivering services under universal health Insurance. The House will appreciate that the progress I have outlined, together with the proposed reforms, are in line with the Government's commitment to maintaining a viable and sustainable private health insurance market.

I will now address each of the Bill's three key proposals. The Bill proposes to transfer responsibility for the VHI to the Minister for Public Expenditure and Reform. As Minister for Health, I have responsibility under the Health Insurance Acts for maintaining the stability of the health insurance market. The Government recognises that the maintenance of a healthy and functioning voluntary private health insurance market is an essential step to facilitate the transition to a market-based universal health insurance system, under the remit of the Minister for Health.

The VHI and the other open market insurers will play a key role in the delivery of services in a multi-payer UHI model. In my view, therefore, transferring responsibility for the VHI to any other Minister would not be appropriate. In addition, I would remind the House that the VHI, as a commercial body, recently announced that it does not expect to require Exchequer funding to achieve authorisation. In these welcome circumstances it is unclear what role is envisaged for the Minister for Public Expenditure and Reform. I commend the VHI and its new management for the great progress they have made. When we came into government, we were looking at a bill in excess of €250 million for Government to put into the VHI in order to make sure it was authorised.

Part 3 of the Bill deals with the regulatory status of the VHI. I am pleased to note that the VHI submitted its application for authorisation to the Central Bank on 16 May. A consultation period with the bank is now under way. Subject to authorisation, which is of course a decision for the Central Bank, the VHI will be subject to the very same regulatory and solvency requirements as any other health insurer.

In addressing VHI's regulatory status to the satisfaction of the EU Commission, officials from my Department, Ireland's Permanent Representation to the EU and VHI officials have held regular and positive meetings with Commission officials. The latest meeting was held on 20 May 2014. The Commission was pleased that the VHl's application had been submitted and I am confident that the deadline for addressing the regulatory status of the VHI by 31 December 2014 will be met. It therefore does not seem to make sense that the Senator would want me to wait until 2015.

The VHI has recently announced positive annual results for 2013 with €65 million in profit after tax. The Senator has already outlined that fact. This is an improvement of €10.7 million over the corresponding period last year, when reported profits were €54.3 million. It represents a marked improvement on the figures for 2011 of €7. 4 million. This is a positive indication of the future sustainability of the Irish private health insurance market.

Additionally, I welcome the fact that VHI has negotiated a further reinsurance deal for a four-year period from 2014 to 2017, inclusive. The VHI believes it can achieve the solvency levels required by the Central Bank for authorisation without the need for capital from the Exchequer and a consequential State aid application to the EU Commission. The improved profit level reported recently for 2013, the new reinsurance deal and a reported fall in claims costs of 2.1% for 2013 will, I believe, strengthen the VHI case for authorisation by the Central Bank of Ireland.

It is a great vote of confidence in the VHI that an investor of the stature of Warren Buffet's company would invest in it, as well as being a great vote of confidence in Ireland.

The section of the Bill regarding the VHI meeting solvency requirements by the end of 2015 is unnecessary as I have already set an earlier target date of 31 December 2014 by regulation, which is achievable.

Part 4 of the Bill proposes the dissolution of the Health Insurance Authority and a transfer of its functions to the Central Bank of Ireland. The Central Bank is the Financial Regulator and, as such, it regulates matters governing the prudential and solvency requirements for financial markets, including the health insurance market.

The Health Insurance Authority is the independent regulator for the health insurance market and performs a range of specialist functions as set out in the Health Insurance Acts. These functions include monitoring the market, advising the Minister for Health, operating the risk equalisation fund, provision of consumer information and maintenance of registers.

In the White Paper on UHI, the Government proposes that the Health Insurance Authority will have substantially increased responsibilities and powers which will include a range of important measures. For example, under UHI the State will make a financial support payment for those on low incomes. The Health Insurance Authority will have a key role in recommending the efficient market rate. The authority will ensure compliance by insurers with the UHI standard plan. It will play a critical role in regard to cost controls of the insurance market. It will be responsible for managing a public complaints process for the health insurance market. The HIA will manage the insolvency fund to be established to ensure that costs associated with insurer insolvency could be met.

Another thing it will be empowered to do will be to determine the number of policies available on the market. As Minister for Health and as a doctor, I believe that 256 different policies from one insurer is set to confuse the customers and not to aid them. It needs to be much tighter. I would defer to what the Health Insurance Authority believes is a reasonable number of policies to have in the market. In my view, therefore, it would be very inappropriate to abolish the Health Insurance Authority given its considerable expertise in the health insurance area and the expanded role proposed for it under universal health insurance. It would make no sense to abolish the authority and transfer its powers to the Central Bank of Ireland at a time when we will need a strong presence, dedicated to regulating the private health insurance market effectively.

I have consistently indicated the importance of maintaining a sustainable private health insurance market and I have detailed the significant progress made in this regard. Taken together, the market reforms I have outlined to the House will help to ensure private health insurance remains affordable in the lead-up to universal health insurance. The Government will continue to work intensively to ensure a well-functioning insurance system and it will encourage the VHI, as its sole shareholder and as the biggest payer, to ensure it drives down costs, reduces and eliminates fraud and waste, and tackles the issue of clinical audit in a robust fashion to ensure patients are not subjected to unnecessary tests and that the taxpayer, through its subsidies to the VHI and other insurers, is not burdened with additional costs either.

I thank the Senator for his contribution and acknowledge the considerable work involved in preparing this Bill. However, I do not believe the Bill's proposals are appropriate or necessary given the work already completed and the planned reforms I have outlined to the House.

1:30 pm

Photo of Thomas ByrneThomas Byrne (Fianna Fail)
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I pay tribute to Senator Quinn for bringing this important legislation before the House which, I hope, will lead to an important debate on this issue. Fianna Fáil welcomes this Bill as an important contribution to the debate on addressing what is now a serious crisis in health insurance. Health insurance is seen by some people as a luxury for the well-off but the reality is that almost half the population has health insurance and probably half the population has medical cards. Despite the worrying drop in health insurance take-up, many people still have health insurance and pay for it.

We support letting this Bill go to Committee Stage but I have some concerns about what Senator Quinn proposes. There is no doubt there is a crisis, not only in this market but in terms of health care for families throughout the country. An average of 4,000 customers left the private health insurance market every month in the year to March of this year. Approximately 1,600 customers per week left in the first three months of this year. That is a serious crisis which is not being tackled by the Government. Before the general election, Fine Gael, in particular, placed great store on its fair care proposal. It is unfortunate to have to say to the Minister that the reality is nothing much has happened. I would say the Minister has had very little support from his colleagues, either in his own party or in the Labour Party, for this proposal. The Minister gave himself ten years to do this at a time when the HSE itself was only six years old. At the time, I thought it was a bit rich that even though the HSE was relatively young, Fine Gael was giving itself a longer period of time to implement universal health insurance. That has not happened and, in the meantime, people are getting out of the habit of paying health insurance. It is crucially important that Senator Quinn has brought this Bill forward to get the debate going on what we are actually doing in regard to health insurance.

The Bill seeks to normalise the regulatory position of the VHI by requiring it to meet solvency requirements. That is obviously required under a legal judgment and must happen at some point. It provides for the transfer of responsibility for management of the State's ownership of the VHI to the Minister for Public Expenditure and Reform. We certainly have no difficulty with that.

The Bill provides for the dissolution of the Health Insurance Authority and the transfer of its regulatory functions to the Central Bank of Ireland. We are not as enthusiastic about that. I am not sure that would be a welcome development and that it is entirely appropriate to treat health insurance simply as a financial product. It is way more than that and is about people's health and lives. I am not sure the Central Bank of Ireland has the expertise to regulate these bodies simply as financial organisations.

We have a consumer problem in health insurance. The Minister mentioned the hundreds of policies available and the confusion that causes. We need to bring in what Obamacare did and divide the policies into gold, silver and bronze and have a minimum policy. Every policy would be classified in one of the categories, which is what Obamacare did. It would be very useful as one would know what type of policy one was getting. It is hugely confusing for people currently. Companies should be able to offer whatever products they want and I certainly would not stop them offering all these products but there are ways around it and of classifying these products and how they good are.

I am not aware, although I could stand corrected, of any regulation which stipulates what type of cut-off payments or what type of co-payments are legally allowed to be required, what type of services can be offered and whether one can force someone to pay thousands of euro even though he or she has paid health insurance. Much of that must be dealt with better through legislation and regulation. The Health Insurance Authority's website is certainly very helpful but that is not the answer. We need massive simplification by simply labelling the policies. We also need to know what should be the minimum available on these policies. I do not know whether that exists in law. If it does, it certainly has not been looked at for quite some time.

To cut costs, insurance companies are offering fewer services and are removing hospitals in which people may want to be treated. The Government is doing little about that. Regulation and a legislative framework in respect of that need to be drawn up urgently by the Health Insurance Authority because these policies are very expensive and can be hugely necessary at certain times in people's lives.

I support the fact Senator Quinn has brought forward this Bill. We certainly support its passing Second Stage. This is an important debate, but there are much wider issues with health insurance in this country in terms of consumer protection and consumer information. The Health Insurance Authority's website, although excellent, is not the answer. We need a much simpler labelling solution for policies. Our health spokesman, Senator MacSharry, is absent because, I have been told, there is a meeting of the banking inquiry currently. I suspect this will happen regularly in the House over the next year or more.

Photo of Colm BurkeColm Burke (Fine Gael)
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I welcome the Minister. I, too, welcome this Bill in the sense of having a debate on this important issue. Major changes have taken place over the past three years in the health care sector and it is important we debate and scrutinise everything that has happened. In fairness to Senator Quinn, much work and research have been done on this Bill and I thank him and his assistants on the work they have done in carefully drafting the Bill. They dealt with three key issues. I suppose one of the reasons he raises this whole issue is as a result of the European Court of Justice ruling in 2011 and the request by the competition section of the European Commission that the Irish State end the unlimited guarantee provided to the VHI. In fairness to the Minister and the Department, they have responded to those issues.

As has been outlined, the three major components of the Bill provide for the transfer of responsibility for the management of the State's ownership of the VHI, require the VHI to meet its solvency requirements and propose the dissolution of the Health Insurance Authority. The Minister dealt adequately with these three components and has made most of the points I wanted to make, but on the solvency requirement, the VHI made an application on 17 June for authorisation and secured a four year reinsurance deal. The solvency issue would appear to have been dealt with and it will not be a concern from the State's point of view.

The fact the VHI made a profit in the past 12 months of more than €65 million shows careful management by the company of the premiums it charges and scrutiny the claims being made.

The Minister has responsibility for maintaining the stability of the health insurance market, which is important because, as he noted, more than 44% of the population have private health insurance. Before the Government took office, a major insurance company, albeit one that is not active in the health area, reinvested a sum of approximately €350 million in other markets, despite the requirement that this money be set aside to ensure sufficient funding was available for claims. The Minister has an important role in maintaining stability, ensuring uncertainty does not arise, guaranteeing full accountability and protecting policyholders. It is important that the Department continues to play a key role in these areas.

Section 3 dissolves the Health Insurance Authority, which plays an important role in the current market. While major changes have been introduced to the way in which the Central Bank works, I am concerned about the proposal to add another function to the Central Bank following the dissolution of the Health Insurance Authority. We need to have one body with the principal function of ensuring everything is above board in the health insurance sector.

Health insurance is an extremely important industry in which large sums are paid over by policyholders to health care providers. The Health Insurance Authority plays an important role in regulating the issue of solvency and ensuring insurance companies comply with current regulations. Its role also includes monitoring the insurance market, advising the Minister and operating the risk equalisation fund. This fund is extremely important because one insurance company, the VHI, is carrying a high proportion of older policyholders who are responsible for a greater number of claims than other age groups. Risk equalisation is an important tool in ensuring he age profile of policyholders is properly managed.

The Health Insurance Authority also provides consumer information. It is important that information is provided on the products provided by insurance companies. While the companies will engage in their own marketing efforts, it is important to have an independent authority monitoring the market and ensuring correct information is available to consumers.

I welcome this debate. Major changes will be made to the health service through the introduction of universal health insurance. It is important to have proper structures in place for the transition and the Minister is taking the correct steps as he moves towards the introduction of universal health insurance.

1:40 pm

Photo of John CrownJohn Crown (Independent)
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It is 21 years since I returned to Ireland. At that time, I rapidly came to the conclusion that the health system was in fundamental need of reform. The key problems that were obvious to me were the general poor quality, extraordinary inefficiency and highly unequal nature of the health system. It struck me that the key problem was that we had two fundamentally different health systems operating in parallel. The first followed what is known as the Beveridge model used by the British National Health Service, under which general taxation revenue is doled out by the central government in a prospective fashion to institutions which are told to live within a budget and cut their cloth, as it were. The second is more closely related to the Bismarckian model, the first model of socialised medicine which was introduced in Germany in the 1880s by the Iron Duke himself. Under this model, people have mandatory insurance and the amount they pay is fixed to the amount they earn. Under this system, a form of progressive taxation applies in that rich people pay more than poor people and people with higher incomes pay more than people with smaller incomes to obtain the same level of health care. At the end of the process, everybody has a freely negotiable insurance instrument which he or she can take to any doctor or hospital which must, by mandate, accept his or her custom. We need to introduce this model here.

The Bismarckian model in Germany survived two world wars, a great depression, the Nazis, the division and reunification of the country and the many problems that arose from the economic consequences of unity. It is extraordinarily successful, by far the most successful model for health systems in place in large countries. It is, for example, much more successful than the British model and delivers much better access to care and much better quality outcomes than the national health system.

Countries which follow the alternative model, the Beveridge model, occupy the bottom five places in the OECD rating of access to care, with Ireland in last place and the United Kingdom in second last place. This rating is calculated on the basis of information on waiting lists and so forth. There are other moral hazards associated with the Beveridge model, a major one being that there is far too much lining up of all sources of information and power on one side of the health care equation. The same people run, manage, provide, regulate and pay for the service and they have a powerful motivation to ensure the service is perceived in a good light. They have at their disposal extraordinarily powerful tools to ensure the maximum positive spin is placed on any outcomes associated with the service. A significant amount of literature is bubbling through in the United Kingdom to show that whistleblowers are experiencing problems, with doctors, nurses and others who point out deficiencies in the British health system being victimised. A near religious devotion is shown to the notion that if one disagrees with any aspect of the national health service, it can only be because one is an anti-social person, rather than someone seeking to point out problems.

The reforms the Minister hopes to introduce will have the effect of delivering the type of high quality service provided in the top five countries in the OECD ranking. It will give us guaranteed access to care based on need as well as social subsidisation and solidarity in the sense that the rich will pay more than the poor for the same service. It will also have the effect of de-bureaucratising the system. The Minister must study carefully the successful models in place in Canada, which has a single payer system, and Israel, which has a number of not-for-profit insurance companies and one or two for-profit companies. Above all, he must examine the German system under which not-for-profit insurers compete with for-profit companies and the custom is to require citizens to take mandatory insurance. Moreover, in Germany people who do not have an income have their insurance paid for by people like us who have an income, which is as it should be.

With respect to the current arrangements, I sometimes become a little nervous because some of the reforms taking place in the health service are not pointing us in the direction of the type of insurance model in place in Germany but instead in the direction of propagation, as it were, of the Beveridge model of central budgeting. One wonders how, in a competitive environment, having a relatively small number of hospital groups will work and people who have their own insurance will be able to decide to go elsewhere. One wonders if the skill set exists in the Department and Health Service Executive to manage such a radically different health service.

My colleagues in the Fianna Fáil Party have raised objections to the insurance model based on the likelihood that it will result in the introduction of an additional stealth tax. It will be an additional tax unless one provides that people can write off this payment against their existing tax. People currently pay for a level of health care from general taxation. If they are to be required to pay into a separate ring-fenced fund that is kept out of the clutches of the Exchequer and used for health purposes only, there must, by rights, be a commensurate decline in what individuals pay for their health care. Otherwise, the new system will create an additional tax. Parenthetically, this should also have been the case with the water tax. We are always told we should not whinge about the water tax because water is not free must be paid for.

The reality, however, is that the tax we pay already covers water services. If we are now facing a ring-fenced tax for water services, why is our overall tax bill not reducing by the amount taken under the new charge? What we are seeing here is effectively double taxation.

There is a need for fundamental reform of the health system. I am supportive of Senator Quinn's Bill as a step along the way, but the scope of the revolution that needs to take place is absolutely vast. There is an conflict of interest in that the Minister as sole shareholder in VHI is also the person who dictates the terms of employment for hospital specialists, as he did several years ago when he made the decision to impose certain changes in respect of the employment of hospital-based specialists. One could argue that he is exercising a rather monopolistic position by dictating the conditions under which people can work in private practice and the fees they are paid for private activities while, at the same time, having responsibility for governing the public system. In so doing, he is preventing the natural competition that should be there. Senator Quinn's Bill would have the effect of resolving part of that conflict of interest by removing the stewardship of VHI from the Minister.

The Minister has great responsibilities in running the health service. I wish him all the best for a long career in his current role and in implementing the insurance reforms that are desperately needed. He is the first Minister who has actually tried to do after an election what he promised to do before it. I hope he gets the opportunity to see those reforms through, in which case I will support him 100%.

1:50 pm

Photo of John GilroyJohn Gilroy (Labour)
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I welcome the Minister, Deputy James Reilly, to the House and thank Senator Feargal Quinn for bringing forward these proposals. Although I do not propose to support the legislation, it affords us a welcome opportunity to discuss issues relating to the health insurance market The explanatory memorandum refers to the significant decline in recent years in the numbers availing of private health insurance. Indeed, some 266,000 people have left the market in that period. As the Minister said, we must find a way to ensure that as many people as possible can retain their health insurance. The Minister pointed to some of the market reforms he has introduced to that end and to initiatives such as lifetime community rating, which offers a form of discounted access to the market according to need and age.

The explanatory memorandum notes that health insurance providers are required to have a solvency margin of 150%. VHI recently announced that it has free cash reserves of €389 million, which gives it a solvency ratio, at 160%, over and above what is required. As such, the need for this element of reform, as set out in Senator Quinn's Bill, is unfounded. With 1.1 million customers, VHI is the largest provider of health care insurance in the Irish market. It is the best guarantor of community rating and risk equalisation, which we all agree are necessary and desirable. It is, of course, necessary to ensure a level playing pitch, but there are some aspects of the public good which the market is simply not able to provide. Health care is one of them. The Minister noted in his contribution that we can see some evidence of a lack of dedication to the public good on the part of private companies, which, notwithstanding their denials, are offering market segmentation strategies. We know this is happening and we know it is not in our interest.

VHI achieved a profit of €65 million last year, coming on top of a figure of €54 million in the previous year, and its operating costs are down. There has been much criticism of the company historically, but these numbers show it has taken significant steps towards reforming itself. While it was necessary to impose a 3.1% increase in premium costs this year, that price rise is significantly below what was sought by its competitors. The four-year Berkshire Hathaway reinsurance scheme, which will cost VHI €20 million per year, means the Exchequer probably will not have to close the €200 million gap in the company's reserves. Taking the reforms VHI has initiated itself together with those imposed on it by the Minister, the Health Insurance Authority and the market itself, plus the vote of confidence by Berkshire Hathaway, the outlook is very promising for the long-term sustainability of the company.

The proposal in the Bill to transfer regulatory authority from the Health Insurance Authority to the Central Bank is not one I support. The HIA has the capacity to perform certain specialised functions that are not available to the Central Bank. When it comes to balance sheet issues or prudential issues of regulation, the Central Bank is the place to be. However, the authorisation sought by VHI later on in the year addresses that aspect of the Bill's concerns.

The contention of a perceived conflict arising from the Minister's function as shareholder as well as steward is to be resolved under Senator Quinn's proposals by moving responsibility from the Department of Health to the Department of Public Expenditure and Reform. This is not a proposal I support. Again, the HIA has specialised functions that are simply not available in that Department. Moreover, transferring responsibility in this manner would not be consistent with the ongoing and longer-term objective of the Government and Minister to introduce a system of universal health insurance.

I could comment further on the proposals but the Acting Chairman has indicated that my time is up. The provision of health insurance should not be determined by the identity of the provider, whether private operator or the public sector. The determination as to whether a system of voluntary health insurance works must be based on whether it is efficient in delivering the best level of care at the best cost to the Exchequer. While we do not propose to support the Bill before us today, I thank Senator Quinn for affording us an opportunity to air some of the issues relating to VHI and other health insurance companies.

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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Like many other speakers, I welcome the thrust of the Bill and acknowledge the work done by Senator Feargal Quinn and his staff in bringing it forward. It allows us a welcome opportunity to debate a range of issues which remain to be resolved relating to the health insurance market. The difficulties in this regard are borne out by the fact, as acknowledged by the Minister, that many families and individuals can no longer afford private health insurance. This has a knock-on effect on the public system and a primary knock-on effect on employment and service provision in private hospitals, as we saw last year and again this year.

These proposals come in the wake of the case taken against Ireland by the European Commission at the European Court of Justice in 2011. The finding in that case was that the same regulatory or solvency requirements were not being brought to bear on VHI as those applying to other insurance providers, and this is having a destabilising effect on the Irish insurance market. VHI is the front runner in that market, providing cover to the majority of those who take out health insurance in this country.

It is the market-setter in terms of price as well. It is also adding to the inflationary cost of providing health cover here regardless of whether one likes it. For example, Aviva Health Insurance increased its prices by between 2% and 23% on adult premiums in March this year. VHI increased premiums on 12 of its plans in April or May by between 5% and 23% for adults. Laya Healthcare has finished its promotional price for children on its essential connect family plan on 1 May and the prices have increased here as well.
Coupled with the price increases and the current economic situation, we have seen a substantial decrease in those availing of private health insurance. When considering the categories of people who are choosing not to avail of private health insurance or not renew their premiums, it is startling that the highest number is in the 18 to 29 age bracket, where more than 73,000 chose not to renew their premiums in the period from 2010 to 2013. In my age group of 30 to 39, some 55,000 people chose not to renew their premiums. If those people do not renew their premiums at that age, they will find it very difficult to obtain premiums in the years that lie ahead because, of course, the premiums will increase. While it might not be evident at the moment, that will lead to a crisis in the years ahead.
That is having a knock-on effect in the private hospitals, with the Mater Private Hospital announcing 95 redundancies, representing 10% of the workforce. Dermot Goode of healthinsurancesavings.iehas said that there is a serious risk that one or more private hospitals would close this year. In January the Mount Carmel Hospital went into liquidation, and the Blackrock Clinic and Galway Clinic have reduced their profits. While I am not advocating the support of private hospitals, I am saying that if those private hospitals are not offering the same level of care it is because fewer people are availing of private health insurance.
If a family does not renew private health insurance it is going into the public system, putting more pressure on it. That is having a rippling, knock-on effect, as we mentioned on the Order of Business today, leading to the logjam in the public system at the moment. It is an issue that needs to be addressed urgently. I acknowledge that the Minister is taking steps in that direction. Politically there should be a joined-up approach and one should not play politics with this on every occasion. However, it is one of the issues that is crippling our health service at the moment.
I again acknowledge the work of Senator Quinn. I appeal to the Minister even at this stage to accept the thrust of Senator Quinn's Bill, allow it to go to Committee Stage and work with Senator Quinn on amendments or revisiting parts of the legislation so that at least the Bill can progress without dividing the House. I hope the Minister and Government Senators will accede to that.

2:00 pm

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I do not doubt Senator Quinn's sincerity in introducing the Bill, on which I commend him. He has been a pioneer in introducing legislation in this House, but I do not see how the Bill fits into the vision of a fair, equitable and efficient health-care system that I would like to see in this State. The reality is that people are dispensing with private health insurance in droves because of the cost and because in many cases people are living in poverty. People are in low-paid jobs and can no longer afford to pay the premiums.

I am deeply uncomfortable with the language we use regarding the market and health care. I come from the position that health care should be provided as of right based on health need alone. There should be no institutionalised queue jumping. There should be no need for private health insurance. If somebody needs to get private health insurance and wants to pay for better care, it should be fully covered by them and it should not be subsidised by the taxpayer at a time when we are taking money out of the health service, as this and the previous Government have done.

When the Minister for Health is not in the House, on the Order of Business on a regular basis we have Senators who call for his resignation because of the disastrous health-care situation. However, when he comes into the House they are strangely silent or mute. I take the view that if say something when he is not here, I should say it when he is here, which is that he should resign. He should resign as Minister for Health for a range of reasons. Even if he resigns and is replaced by a Minister of like mind, we will still have the same policy positions and the same disaster in our health service. We had the complete disaster of the medical cards which has now been acknowledged by the Minister and the Taoiseach as a complete fiasco. It was unfair on all those-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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The Senator should stick to the debate we are having.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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It is linked to the debate and I will get to that. In the Minister's vision for health care - if we could call it that - he wants to open health care to the private health insurance market completely. He promised free-GP care for all - it was one of his core commitments as Minister for Health. What did he deliver? He delivered fewer medical cards for people - people who need them, people who had medical cards-----

Photo of James ReillyJames Reilly (Minister, Department of Health; Dublin North, Fine Gael)
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There are more medical cards than ever in the history of the State, just to correct the record.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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That is because people have more medical cards-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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I ask the Senator to speak on health insurance.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I can speak on whatever issue I want; I have six minutes. It is a Second Stage speech and we are talking about health care.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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The Bill is the Health Insurance (Reform) Bill 2014.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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We are talking about health care and-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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No, we are dealing with the Health Insurance (Reform) Bill 2014.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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-----the private health insurance market. I will speak to whatever I want to speak to, with respect.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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In that case the Senator will be out of order, the Chair will rule him out of order.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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You can rule me out of order all you want -----

Photo of James ReillyJames Reilly (Minister, Department of Health; Dublin North, Fine Gael)
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Regardless of the accuracy, but that was never a problem for Sinn Féin anyway.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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-----but I will outline to the Minister the important issues for people outside this House. They are worried about these issues. They are the people bearing the brunt of losing their medical cards. More people have medical cards because people have lost their jobs and are in low-paid job; that is the reason. The Minister will have to accept the reality that people have lost their discretionary medical cards because of a change in policy by the Government.

The Minister's vision for health care in terms of the private health insurance market has been a complete failure. It will not work and the Minister has not been able to deliver it. I cannot let this opportunity go when the Minister is in the Chamber without reminding him of what is happening in my city of Waterford where we do not have proper dermatology services. How can he stand over that as Minister for Health? That region, as the Minister well knows, has very high levels of cancer. Consultants have left and have not been replaced and we are without dermatology services, which is completely unacceptable.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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I do not want to have to warn the Senator again. He should speak on the Bill. This is not a general discussion on the health service.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I ask the Acting Chairman to remind me what the Bill is about.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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It is the health-----

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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Health. Thank you for that. It is about health care-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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-----insurance.

Photo of James ReillyJames Reilly (Minister, Department of Health; Dublin North, Fine Gael)
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Health insurance.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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-----and this is the Minister for Health.

Photo of James ReillyJames Reilly (Minister, Department of Health; Dublin North, Fine Gael)
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Sinn Féin likes to forget about the full story.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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I will call the next speaker if the Senator does not address the Bill.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I have six minutes and I will continue with my contribution.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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The Senator does not have six minutes; he has one minute left. I will call the next speaker if he continues stray away from the subject.

Photo of David CullinaneDavid Cullinane (Sinn Fein)
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I will continue with my contribution because the Minister needs to hear what people outside this House are saying and also to hear what people inside the House are saying when he is not here.

The reality is that a market-driven approach to health care will not work. Opening it up further to private health insurance will not work. The only system that will work and be fair and equitable is one funded through general taxation and delivered free at the point of delivery and based on equality and health need alone. That is the only way in which health care should be provided.

Any other way will continue the two-tier system and the inequalities we have in health care. Unfortunately, as long as the Minister, Deputy Reilly, is Minister, and as long as there is a Fine Gael Minister for Health, we will get more of the same.

2:10 pm

Photo of Feargal QuinnFeargal Quinn (Independent)
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I appreciate the Minister's presence, the effort he made and his consideration. However, I do not appreciate some of what he said. In his speech he indicated that he had urged all the private health insurers to do everything possible to keep down the cost of private health insurance. To me, that sounds a little like the Minister for transport saying 20 years ago that he had urged all the airlines to keep their costs down. It did not work. We paid £299 to go to London to the two existing airlines. The situation did not change until Ryanair came on the scene and we now pay approximately €19 instead.

I admire much of what Senator Cullinane said but I also disagree with him as I believe the marketplace will give us a better deal. The Minister's approach in saying that he has urged all the private health insurers to do everything they can to keep down the cost is a long way from what could happen. I do not think there is any evidence that new insurance companies ever refused to recruit older people. If there was any evidence it would have emerged and if insurance companies had evidence they would have made it known.

I am disappointed the Minister has not shown a greater degree of openness to the objectives of the Bill. Senator Ó Domhnaill urged him to accept the Bill in order that we could consider it on the next Stage. The diagnosis and prescription to help fix our broken health insurance market has been set down by the European Court of Justice. However, it seems that the Minister and his officials are deep in denial. The failure of the Department to adhere to a date for the regularisation of VHI’s unusual position suggests to me that it lives by the words of St. Augustine who pleaded for the Lord to make him pure but not just yet. There is evidence of such an approach by the Department.

The Minister might not like many aspects of the Bill but I am convinced that it contains core elements that are needed in order to restore stability to the health insurance market. The kind of stability to which I refer is stability of membership and pricing. When it comes to Government policy and the functioning of the health insurance sector, the consumer needs to take centre stage in the Department’s thinking, which is not the case at present. Policy decisions affecting the health insurance sector should no longer be driven or influenced by decisions which are taken solely in the best interests of the VHI or the HSE. I thank the Minister for attending and giving the Bill his attention. However, it would be better to leave the Bill on the Order Paper so that we could consider Committee Stage changes at a later point. I got a lot of help from Brian Hunt and Anne Ó Broin and wish to mention their names.

Debate adjourned.

Sitting suspended at 2.05 p.m. and resumed at 3.15 p.m.