Billy Kelleher (Cork North Central, Fianna Fail)
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To ask the Minister for Health if his attention has been drawn to the fact that private insurers are designing policies to be less attractive to older persons thereby evading community rating policies; and if he will make a statement on the matter. [37116/12]

James Reilly (Dublin North, Fine Gael)
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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, 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.

Community Ratingmeans 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. It is also useful to note that older people who have been paying health insurance premiums for many years will have supported the older generation when they were younger and could reasonably expect to benefit in a similar way as they themselves now become older.

Community Rating needs a robust system of risk equalisation. Otherwise, insurers will have a strong incentive to avoid older customers. Without risk equalisation insurers would have a clear incentive to attract and retain only healthy customers who are less likely to make claims. 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.

The Interim Scheme provides that health insurers receive higher premiums in respect of insuring older people, but that older people (in six age bands ranging from 60-64 yrs to 85 yrs+) receive an age-related tax credit equal to the amount of the additional premium so that all people continue to pay the same net amount for a given health insurance product. The tax credit is provided as a tax relief at source - that is, the cost of the policy is reduced by the amount of the age-related tax credit. The Scheme is funded by an annual levy on health insurers based on the number of lives insured by them. The Scheme is designed to be Exchequer neutral, neither a cost nor a benefit to the State. It is a matter for the insurance companies as to the extent, if any, they pass the levy on their clients.

In order to keep down the cost of health insurance for older people, I was pleased 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 an even stronger financial incentive to 'segment' the market by offering policies targeted at young people, to the disadvantage of older customers. It must be stressed that the measures taken 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 to that the system is Exchequer neutral.

The Programme for Government contains a commitment to introduce a permanent scheme of risk equalisation. This is a key requirement for the existing private health insurance market and also in the context of plans to introduce Universal Health Insurance from 2016. In December 2011, the Government agreed to introduce a new Risk Equalisation Scheme (RES) with effect from 1 January 2013 which will replace the present Interim Scheme of Age-Related Tax Credits and Community Rating Levy. The new scheme will allow for a greater number of risk factors than the Interim Scheme, including a measure of health status. The legislation is currently being drafted and a Bill will be published in the coming weeks.

The new RES will be operated prospectively by the Health Insurance Authority (HIA). Funds will be collected via a stamp duty by the Revenue Commissioners. In terms of financial arrangements, the main difference between this and the current Interim Scheme is that risk equalisation payments will be disbursed by the HIA rather than by the Revenue Commissioners. The rates will be set each year by an Act of the Oireachtas.

The Health Insurance Authority (HIA) is the independent regulator of the private health insurance market in Ireland. It provides information to policy holders in relation to rights and health insurance plans and the benefits provided. The HIA's website is www.hia.ie and has a very useful health insurance plans comparison tool which may assist the public in finding the most suitable and competitive health insurance plan to meet their individual needs. The telephone number of the HIA is Lo-Call 1850 929 166 or +353(0)1 406 0080.