Written answers

Wednesday, 11 January 2012

8:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 36: To ask the Minister for Health if he has examined the ongoing and increasing cost of health insurance with particular reference to the ability of the consumer to meet such costs; if he has evaluated the increase in premiums over the past five years with a view to a determination as to the action that might be taken to ensure that private health insurance is affordable and available to the widest possible age spectrum; if particular attention has been paid to the extent to which the impact on such insurance is affected by the public and or private health sectors respectively; and if he will make a statement on the matter. [1337/12]

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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Question 965: To ask the Minister for Health his views on the fact that it has been estimated that because of the increasing cost of living and the increase in private health insurance cover that up to 6,000 persons a month are abandoning their health cover and that this amount of new public health patients will put an unbearable pressure on failing health service; and if he will make a statement on the matter. [1379/12]

Photo of James ReillyJames Reilly (Dublin North, Fine Gael)
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I propose to take Questions Nos. 36 and 965 together.

I am concerned that private health insurance is becoming harder to afford, especially for older people, as insurers increasingly tailor their insurance plans towards younger and healthier customers. I am strongly committed to protecting community rating, whereby older and less healthy customers should pay the same amount for the same cover as younger and healthier people. Under Universal Health Insurance, everyone will be insured for health care and the current unfair discrimination between public and private patients will be removed. In the meantime, I am focusing on addressing the problems of the current private health insurance market, where insurers have a considerable financial incentive to cover younger, better risks than older, poorer risks.

To protect community rating, we need a system of Risk Equalisation which ensures community rating can survive. An Interim Scheme has been in place since 2009. It is designed to compensate insurers that have older, less healthy customers and therefore higher claims costs, compared to insurers with younger, less costly customers. It does so by a system of tax credits, based on age, in respect of people aged 60 or more. Without such a system, community rating cannot survive. To keep down the cost of health insurance for older people, I was pleased recently to increase significantly the age-related income tax credit for insured persons aged 60 years and over from 1 January 2012. Without this support, health insurers would have had a strong financial incentive to segment the market by offering policies targeted at young people, to the disadvantage of older customers.

The measures I took are designed to result in no overall increase of premiums in the market and to spread the risk more evenly between the healthy and the less healthy, the old and the young. The increased levy is balanced by a corresponding increase in tax credits for older people, so the system is Exchequer neutral. It is important to note that the levy on policies is not a revenue-collecting mechanism for the Exchequer. The Community Rating Levy, under the Interim Scheme, is placed on private health insurance providers for each insured individual, and not the individuals themselves. The extent, if any, to which they pass the levy on to their clients is a matter for the insurance providers. I welcome the announcements by Aviva Healthcare and the VHI that they do not envisage passing an increase on to customers' premiums on foot of the revised rates of Age-Related Tax Credit and Community Rating Levy for 2012.

As part of Budget 2012, the Government agreed a number of changes to charges for patients who choose to be treated on a private basis in public hospitals. These changes will have no impact on public patients, who comprise the vast majority of those treated in public hospitals. When individuals elect to be treated privately, they agree to meet the costs of the consultant's fee and the hospital's maintenance costs. These issues were examined in the Value for Money and Policy Review of the Economic Cost and Charges Associated with Private and Semi-Private Treatment Services in Public Hospitals, which was published by the Department in December 2010. It is estimated that the average maintenance cost per bed-day in a category 1 hospital is €1,046. In keeping with the long-standing policy of moving towards recovering the full economic cost of providing treatment to private patients in public hospitals, the maintenance charges for private patients in public hospitals have been increased by between 3% and 5%, depending on the category of hospital, with effect from 1 January 2012. It is anticipated that this will yield additional revenue in the region of €18 million in 2012.

While the HSE and voluntary hospitals recoup considerable sums from private health insurance companies in respect of private and semi-private treatment services provided to their members, lengthy delays often occur between the discharge of patients and the receipt of payment from the companies. This has led to an unacceptably high level of debtor days with a significant amount in fees outstanding. Some hospitals are much more efficient at collecting this income than others. It is intended that more hospitals will achieve the income collection standard of the better performing hospitals, and, as a result, a target of €50 million in accelerated income has been set for 2012.

A significant proportion of private patients who are provided with treatment by a public hospital are not currently charged for the services because of the current rules on bed designation. In contrast, the public hospitals' consultants receive private fees even where the hospital cannot collect its maintenance charge. This represents a loss of income to the public hospital system and a significant subsidy to private insurance companies. It is intended to introduce new arrangements during 2012 to allow public hospitals to raise charges in respect of all private patients in public hospitals. This new system will be entirely in keeping with the changes required as we move along the road to universal health insurance. It is estimated that this new system will yield an additional €75 million in 2012.

In December 2011, I agreed with the three commercial health insurers to establish a Consultative Forum on Health Insurance, to tackle issues of mutual concern. We agreed to work co-operatively in driving down costs related to health insurance and to identify savings that could be achieved by both public and private hospitals. I indicated to the insurers that I would be happy to hear proposals from them which would result in lower costs for the health insurance sector. In addition, a new review of the VHI's claims costs will be carried out to establish what further savings can be made. The review is to be completed early this year and will contribute significantly to more effective cost control within the private health insurance market. In the meantime, VHI has been finalising contract negotiations with the private hospitals treating its customers. In addition, VHI's contracts with consultants are due for renegotiation in mid-2012 and the VHI has informed consultants that it will be seeking further savings at that point.

I am determined that these and other measures will have a significant impact in containing the level of any future increases in health insurance premiums. The Government's clear objective is for the health insurance market to remain competitive and strong as we move towards a new system of Universal Health Insurance. It is my intention to ensure the private health insurance market is reformed to ensure costs are reduced and there is a more even balance in the market. I recently welcomed the announcement that Quinn Healthcare's Health Insurance business was being bought out by the company's senior management team and will be underwritten by Swiss RE. The buy-out has brought certainty to customers of Quinn Healthcare in relation to the company's future and to the private health insurance market as a whole.

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