Olivia Mitchell (Dublin South, Fine Gael)
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Question 192: To ask the Minister for Health if he will explain the purpose of a €50 administrative charge introduced by VHI in view of the fact that it seems that this is the only insurance company in the world which operates an additional administrative charge for ordinary insurance work; and if he will make a statement on the matter. [18148/11]

Olivia Mitchell (Dublin South, Fine Gael)
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Question 193: To ask the Minister for Health if he has raised with the VHI the anti-competitive practice of charging customers seeking to move to a new insurer, the full yearly cost of the health insurance levy; and if he will make a statement on the matter. [18150/11]

James Reilly (Dublin North, Fine Gael)
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I propose to take Questions Nos. 192 and 193 together.

As Minister for Health, I have overall responsibility for policy in relation to health insurance. In particular I have responsibility for governance issues relating to the VHI, including such matters as Board appointments and the receipt of its annual report and accounts. While owned by the State, VHI is a not-for-profit company operating in a competitive market and within those constraints, like its competitors, it is free to impose certain terms and conditions. I am on the record as opposed to this administration charge and I intend to discuss the matter further with the company.

I am informed by the VHI that there are a limited number of special circumstances where they do allow a customer to breach their contract mid-year without penalty, including redundancy and emigration. It is important to note that customers are free to cancel and change their policy at their renewal date without difficulty.

VHI is required by law under the Health Insurance (Miscellaneous Provisions) Act 2009 to provide contracts of insurance that are 12 months in duration. While insurers provide a facility to consumers to pay premiums over the policy year, rather than at the start of the policy, this does not change the twelve month nature of contracts. I understand that the €50 administration charge imposed by VHI is to cover the cost of the administration involved in the cancellation of a policy post-breach of the contract (it should be noted this is per policy rather than per person – the average VHI policy involves two people). The administration charge only arises in a breach of contract occurs.

In respect of policies renewing or commencing in 2011, the current Scheme of Age-Related Tax Credits and Community Rating Levy provides for the payment by insurers of a levy of €205 per adult. It should be noted that, where customers leave before the twelve month insurance period expires, the insurer incurs a loss in relation to the levy paid as the levy may only be collected once. If a policy is cancelled mid policy year, insurers cannot reclaim a proportion of the levy. Where a policy holder switches to an alternative insurer, the second insurer does not have to pay the levy in respect of the replacement policy, if the two policies commence in the same accounting period. In this regard, accounting periods are normally the twelve month period starting on 1 August and finishing on 31 July.