Joanna Tuffy (Dublin Mid West, Labour)
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Question 233: To ask the Minister for Health if he will provide an update on recent reports in the media that there is to be an increase in the health insurance levy; the anticipated impact this will have on incomes of families that are already facing increasing levels of charges for a number of services; and if he will make a statement on the matter. [1766/12]

James Reilly (Dublin North, Fine Gael)
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Community rating, in principle, provides that everybody is charged the same premium for a particular health insurance plan, irrespective of age, gender and the current or likely future state of their health. The only exceptions to this rule relate to children less than 18 years of age and students in full time education.

Community rating therefore means that the level of risk that a particular consumer poses to an insurer does not directly affect the premium paid. It also means that premiums for younger or healthier lives are typically higher than their expected claims would require, whereas for older or less healthy lives, premiums are typically lower than the expected claims would require.

The Interim Scheme of Age-Related Tax Credits and Community Rating Levy was introduced in 2009 in order to provide direct support to community rating. It achieves this by way of a mechanism which provides for a cost subsidy from the young to the old. It works by allocating Tax Credits for persons in six age bands and funding this by the collection of an annual levy on health insurance companies based on the number of lives covered by policies underwritten by them. The scheme is designed to be Exchequer neutral and ensures that every customer has the benefit of a community rated health insurance premium.

The Scheme provides that health insurers receive higher premiums in respect of insuring older people, but that older people receive tax credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product. In this way community rating is maintained and insurers are partly compensated for the higher level of claims associated with older people.

Last month I was pleased to announce changes to the Interim Scheme which will help to make private health insurance more affordable for older people. With the agreement of the Minister for Finance, there will be extra age-related income tax credit for insured persons aged 60 years and over, from 1 January 2012, funded by an increase in the annual levy on health insurers based on the number of lives insured by them. The new rates will be included in the forthcoming Finance Bill.

The new rates are calculated to result in no overall increase in the total amount paid to health insurers by way of premiums and to spread the risk more evenly between the healthy and the less healthy, the old and the young. 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 on the individuals themselves. It is a matter for the companies as to the extent, if any, they pass the levy on to their clients. I welcome the announcements by both 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.