James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 125: To ask the Minister for Health and Children the level of reserves and solvency in Voluntary Health Insurance at the end of October 2009; and if she will make a statement on the matter. [47205/09]

James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 126: To ask the Minister for Health and Children the reserve policy being executed by Voluntary Health Insurance; the level of reserves the management set as an objective to achieve by the end of 2009; and if she will make a statement on the matter. [47206/09]

James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 127: To ask the Minister for Health and Children if it is normal insurance practice to fund pricing decisions by running down reserves; if the pricing policy executed by Voluntary Health Insurance management is contributing to an increase or reduction in the level of reserves in place; and if she will make a statement on the matter. [47207/09]

James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 128: To ask the Minister for Health and Children her plans regarding the future of Voluntary Health Insurance, VHI; her further plans regarding part or total privatisation of the VHI; and if she will make a statement on the matter. [47208/09]

James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 129: To ask the Minister for Health and Children if she expects that Voluntary Health Insurance will now fail, for a third time, to achieve the deadline set by her for approval by the Financial Regulator; and if she will make a statement on the matter. [47209/09]

Mary Harney (Dublin Mid West, Independent)
Link to this: Individually | In context

I propose to take Questions Nos. 125 to 129, inclusive, together.

The Health Insurance Acts provide that I, as Minister for Health and Children, have no role to play in the day to day running of and commercial decisions relating to private health insurance companies including the VHI. In addition, as Minister for Health and Children, I have no role to play in the setting of prices by any of the private health insurance providers. This is a commercial decision for the insurer concerned. Health insurance prices can be affected by a range of economic considerations including the costs of health care services and other costs and may also reflect the age profile of the customers in any insurer's customer base. The sole purpose of the temporary scheme of levy/tax relief is to underpin the principle of community rating, so that insured older persons are less likely to face higher increases and/or product segmentation due to their age . The Government have been clear in our view that the VHI should achieve authorisation on a level playing field with other insurers. A stable, community-rated health insurance market, supported by a robust risk equalisation system, will be achieved in circumstances where the VHI is authorised and regulated as other health insurance companies are. The capital position of the VHI presently, and the prospects for its reserves over the medium term, are some of the key factors in the decision of the Financial Regulator to grant authorisation. Clearly, the reserve position of the VHI is influenced by the measures in place currently, and in prospect for the future, whereby the costs of claims for older people are supported by younger insured persons.

A critical issue is the share of older customers among the insurance companies. VHI's overall market share is 64%, with 32% held between Quinn Healthcare and Hibernian Aviva Insurance (4% is held by restricted undertakings). However, VHI's share of the 50-59 age group is 71%; it has 80% of the 60-69 age group, 90% of the 70-79 group and 95% of the 80+ group.

It is also the case that any system of risk equalisation or tax relief / levy is subject to approval by the European Commission, in relation to both the principles and extent of the scheme. The ownership by the State of the VHI is a relevant factor in the considerations of the Commission in this regard. In addition, the European Commission would have to approve any proposal for capitalisation of the VHI by the State according to the prudent investor principle. There are a great many inter-related factors involved in setting out the roadmap now to a stable, community-rated health insurance market, all of which are under consideration by the Government.

James Reilly (Dublin North, Fine Gael)
Link to this: Individually | In context

Question 130: To ask the Minister for Health and Children her views on whether a stated objective for the introduction of the health insurance levy, that is to keep the cost of health insurance down, has not been achieved and that the health insurance levy has forced costs up; that this levy fails to motivate the Voluntary Health Insurance to drive costs down. [47210/09]

Mary Harney (Dublin Mid West, Independent)
Link to this: Individually | In context

The health insurance levy is part of the interim scheme provided for under the Health Insurance (Miscellaneous Provisions) Act 2009. This interim scheme consists of two distinct elements:

(i) age-related tax credit provided at source to private health insurers in respect of persons over the age of 50 who hold private health insurance policies. This aims to secure a health policy objective of achieving inter-generational solidarity in terms of assisting individuals to meet their health insurance costs on the basis of age, and

(ii) a levy charged on private health insurance companies for each insured person in order to fund the age related tax relief so that the scheme remains cost neutral to the Exchequer.

I would like to stress that the levy is placed on private health insurance providers for each insured individual, and not on individuals themselves. It is a matter for the insurers to decide whether or how much of the levy they pass on to their customers. Insurers with a disproportionate share of older people will be net beneficiaries. Insurers with mostly younger customers will also have some older customers and receive tax credits in respect of those customers also. This interim scheme will be in place for a three year period commencing on 1 Jan 2009 and, for cashflow reasons, running into 2012. Officials in my Department along with the Health Insurance Authority are working on a new scheme of risk equalisation to replace the interim scheme.

As Minister for Health and Children, I have no role to play in the setting of prices by any of the private health insurance providers, including VHI. This is a commercial decision for the insurer concerned. Health insurance prices can be affected by a range of economic considerations including the costs of health care services and other costs and may also reflect the age profile of the customers in any insurer's customer base. The scheme's sole purpose is to underpin the principle of community rating, so that insured older persons are less likely to face higher increases and/or product segmentation due to their age.

The Government's clear policy objective is that health insurance should remain affordable to a large number of people, particularly to older and sicker people. To this end, community rating must be the cornerstone of the Irish health insurance market. The viability of the system relies on the effective operation of solidarity between different generations through which the young subsidise the health care costs of the elderly and are subsidised in their turn by the following generation. Health insurance should not be risk-rated for increasing age, medical status or claims history.

Sustaining community rating requires a legally and financially robust system of risk equalisation to ensure cross-subsidisation across the entire market, not just within each company's cohort of customers or among the holders of each health insurance contract. As I mentioned, work is now under way to replace the temporary levy and tax relief arrangement with such a robust system of risk equalisation.