Health Bill 2009

Dail Eireann Speech by Dan Neville TD, on the Health Insurance (Miscellaneous Provisions) Bill 2009 – 19th May 2009

Deputy Dan Neville

The Health Insurance (Miscellaneous Provisions) Bill, which will apply retrospectively from 1 January 2009, places a levy of €160 on all adults and €53 on all children. To reflect these new levies all health insurers have increased their premiums over and above the annual rate of medical inflation, which has averaged 10% in recent years. As a result, health insurance is becoming unaffordable with families being pushed out of the market. Many policy holders can no longer afford the cost of their policy.

There will be a dropping-off of subscribers to the various health insurance providers because of loss of employment and other financial difficulties due to the reduction in income arising from the various levies. The increases of 23% by VHI, 16% by Quinn Healthcare and 22% by Hibernian will further impact on the opportunity for people to continue with their health insurance and there will be a considerable drop-off in the number of people who can be covered by insurance. That is a concern for people because of the lack of confidence in the public health service. Many who had what they saw as the protection of private health insurance will now not have such available to them, and these increases are partly, though of course not solely, the cause of this.

I understand the Government is still awaiting approval from the European Commission on the introduction of the levy. I understand the permission has not yet been received, but perhaps the Minister will confirm when she expects such permission from the European Commission to come through.

The insurance companies have been forced to raise their premiums. Hibernian Aviva Health and Quinn Healthcare have stated they have increased their premiums purely to cover the costs of the levy as the cost and retrospective nature of the levy would automatically make competitors to VHI loss-making. Although VHI is the net beneficiary of the levy, the company increased its prices by an average of 23% within two weeks of the levy being announced. This is typical of the dominant player. It is typical of the attitude of the VHI over the years to its dominance of the market. VHI was able to do this because the company knew its competitors would have to increase their prices to cover the cost of the levy. VHI’s competitors argue that without the levy being announced VHI would not have increased its prices by 23%. I refer to my figure for the annual usual increase of between 8% and 10%. Competitors such as Hibernian Aviva Health argue that it is already seeing the effect of there being no competitive pressure to engage in price restrictions but there is no incentive for VHI to lower premiums or become more efficient, quite the opposite.

The only beneficiary of this levy is VHI, the organisation. This does not benefit any of the other stakeholders, including VHI members who incurred the significant price increases already stated immediately following the levy’s introduction, yet VHI remains unregulated as an insurer and enjoys privilege as a result.

Also, VHI is not subject to the Financial Regulator’s guidelines on assessment management which might go some way towards explaining why its solvency ratio fell by 20% last year due to the investment losses. VHI was ordered to seek authorisation by 31 December 2008 but this deadline was extended to 31 March 2009. I understand VHI also missed this deadline and that the Minister has put out that date until 1 September. This raises the question of the unfair competitive advantage of VHI, which has not been subject to the minimum solvency requirements or the same scrutiny as the other health insurers. The Minister is one of those so keen on competition in all aspects of the economy. This, surely, is an area in which we must ensure there is competition allowing the customers, those who are insured, to get the best value for money. Competition will create that and the dominant player should have equal status with the other players.

Due to the crude nature of the levy introduced, health insurers cannot trade into it. If they agreed a contract and premium with a customer on 30 March 2008, they cannot adjust the price to cover the cost of the levy, which applies retrospectively to 1 January 2009, until the contract expires 12 months later. It will be December 2009 before new renewal prices come into effect for some policies.

The Minister claimed that VHI premiums were to increase by 60% for older persons. This could not happen under community rating. She claimed that the levy would not lead to an overall increase in the approximately €1.5 billion in private health insurance premiums. The VHI premium, as I stated already, increased by 23% and will earn the company an additional €230 million. Quinn Healthcare has passed on the levy, which has increased prices by 16% for that organisation. The Minister claimed that certain insurers are guilty of tailoring their plans to suit younger people. I put it to her that under each plan insurers must provide minimum benefits that include minimum cover, including cataracts or hip replacements. If the Minister was genuinely concerned about the level of protection offered under minimum benefits, she would have revised these as opposed to introducing a levy which increases the cost of health insurance.

VHI is charging this increase to persons on its core plans that generally include greater numbers of older people, not its company plans which generally include more younger people. High prices are being applied to older persons which is in breach of the principle of community rating and is contrary to what the Minister is supposedly trying to do, namely, prevent high premiums for older persons.

Community rating is already provided for in legislation, set out in section 5 of the Health Insurance (Amendment) Act 2001. This means that one must charge the same rate for the same service regardless of age, sex, health status, sexual orientation, etc. The Bill does not improve the definition of community rating, but only amends or redrafts it to reflect the tax credit and the Minister’s insurance levy. The legislative change is not necessary to strengthen the definition of community rating or to reinforce integration solidarity.

It is not clear whether the health insurance levy is ring-fenced for health insurance or whether it will be used to make money for the Exchequer. The Government needs to provide clarity on this.

The reality is the Minister is propping up VHI’s dominance and VHI’s market share, which is still anti-competitive and anti-customer. The levy will make private health insurance unaffordable, as I stated already, and will result in a contraction of the market by an estimated 10% or 200,000 persons. Family premiums are due to rise on average by 20% on typical plans. For cheaper family plans this will result in a relative premium increase of over 32%. Families on the cheapest plans tend to be those that are most price sensitive in the market, in particular under current economic pressures. It is projected that in excess of 200,000 persons at this lower end of the market will exit the market and will be left with no option but to revert to the public system.

This levy has a disproportionate impact on families and students within the market. A number of players in the market currently operate tiered discounting pricing for children and students, however the levy is calculated at a flat rate of €53 per child regardless of the cost of the premium. Therefore, even though a child may be free, he or she will incur a tax of €53.

In addition, the levy does not differentiate between students and adults, although the former are on discount premiums, as set out in the Insurance Act. Such students will incur an additional charge of €160.

The levy will significantly increase the cost of employee benefits for companies. A number of large multinationals provide private health insurance as part of their standard employee benefits package. This levy will further increase the cost of trading at a time when companies are facing severe economic challenges. To remain competitive on benefits and to attract a high calibre of staff, it is important that they be able to give a quality health insurance benefit. Small and medium-sized enterprises that purchase health insurance for their employees will face significantly increased charges to provide that benefit to their workers.

The levy amounts to an increase of €12,800 for a company with 100 employees and will clearly be considerably higher for larger companies. For small to medium-sized enterprises of 50 employees, the impact will be €6,400. If companies can no longer afford to offer health insurance to employees, it will further contribute to market shrinkage and increase the projected drop-off of 200,000 people at the lower end of the market.

The levy is anti-competitive and means to prop up the State’s dominant player. The VHI remains super dominant in the health insurance market with in excess of 70% of market share. In 2008, it declared profits of €112 million without ever having received any risk equalisation funds. Why was it necessary to introduce the levy with such speed when there was no instability in the market? Market segmentation and community rating prevent any company from charging higher premiums to older members. If the former was viewed as a danger in the market, it could have been prevented by an amendment of the supervisory powers of the regulator and an increase in the levels of minimum benefit required under regulation.

The levy is not ring-fenced. As such, the VHI can use the levy’s proceeds for any purpose it may choose, for example, expanding its business. The VHI remains unregulated, but requires funding to reach solvency as required under regulation and so that Ireland might avoid charges of infringement by the European Commission. The VHI has stated that it is seeking to expand its commercial mandate into other business lines and jurisdictions. It needs funding to accomplish this. It will receive in excess of €30 million from the levy in the first year, which will only contribute to its profit margins.

There are grave concerns about the levy’s impact on consumers, businesses and the wider market. According to research conducted by the regulator, price remains the primary reason for switching. With the introduction of the levy, there will be a harmonisation of pricing, which will reduce customers’ choices, a stagnation of market shares and a reduction in competition. The levy will also create an even larger barrier to entry by new players. Unlike the previous risk equalisation measure, there will be no exceptions to allow small, new players to establish themselves. In other countries, dozens of players in the health insurance market create healthy competition. This proposal will prevent companies from examining the Irish market with a view to creating further competition and, therefore, better value for those seeking health insurance. With such barriers to entry and given the harmonisation of pricing, there will be less scope to compete in the market, resulting in the delivery of less choice innovation and poorer value to private health insurance customers.

The previous Fine Gael contributor, Deputy Reilly, mentioned our party’s policy, which was complimented by Deputy Jan O’Sullivan. I congratulate Deputy Reilly on his work in this area. It is a comprehensive and detailed plan. If and when we are in government, our policy will significantly change the delivery of health—–

Deputy Mary Harney

It would be good were Fine Gael to get it costed. We could have a good debate on it.

Deputy Dan Neville

It is costed.

Deputy Mary Harney

It is not.

Deputy Dan Neville

The Minister has not read our document. She should do so. It is on the Fine Gael website. She would see—–

Deputy Mary Harney

I have read it. Fine Gael will pay the consultants more money.

Deputy Dan Neville

The other point that we have included—–

Deputy Mary Harney

Fine Gael should send the policy to the Department of Finance to have it costed, as is tradition.

Deputy Dan Neville

It is significant that psychiatric services be included in all areas of proposed changes to the health service.

Deputy Mary Harney

I agree.

Deputy Dan Neville

Under our proposals, psychiatric services will have the same status and will be dealt with in the same way as the general health services. The reforms will broaden primary care and set performance targets for hospitals.

The plan borrows from Northern Ireland by proposing a special delivery unit to ensure that hospital waiting lists are sharply cut. I am sure that the Minister is aware of the Northern health system’s success in reducing waiting lists. In year three of our plan, we will introduce a system whereby money will follow the patient. He or she will be seen as a source of income rather than as a cost to hospitals. It will incentivise hospitals to attract patients. At the same time, we will abolish—–

Deputy Mary Harney

President Obama is trying to change that in America.

Deputy Dan Neville

—–the National Treatment Purchase Fund, NTPF, because it will then be unnecessary. This is the first area of costings and savings that I can mention.

Deputy Mary Harney

Fine Gael wants to get rid of the NTPF.

Deputy James Bannon

Good riddance.

Deputy Dan Neville

This bothers and upsets the Minister. She is not prepared to listen to me. In year five—–

Deputy Mary Harney

It has a 94% satisfaction rating among patients, but Fine Gael wants to get rid of it.

Deputy Dan Neville

It will not be necessary under our system. She should have confidence in our ability to deliver a health service.

Deputy Mary Harney

I do not believe that there would be unlimited treatments for everyone free of charge. That does not occur anywhere.

Acting Chairman

Can we have order, please?

Deputy Dan Neville

She should have confidence that a health service can be delivered. The Minister is saying that the current system cannot be reformed.

Deputy Mary Harney

No, I did not say that.

Deputy Dan Neville

By interrupting me, she is saying that the health system cannot be comprehensively reformed. What Deputy Reilly, Fine Gael and I are presenting to the Minister is a total reformation of the health service to bring it out of the quagmire in which it finds itself and to restore confidence to those who work within it.

Deputy Mary Harney

I am just inviting Fine Gael to get its policy costed.

Deputy Dan Neville

We would have a health service that is as efficient as those of many of our European colleagues.

Year five will see the introduction of universal health insurance, with mandatory health insurance chosen from a range of providers. This will be overseen by a universal health insurance commission, which we will establish early in the lifetime of a Fine Gael-led Government. Under universal health insurance, everyone will receive free general practitioner care, with premiums either paid for or subsidised by the State. The cost will be no higher than current private health insurance premiums, with the State paying the total insurance cost of children and those with medical cards. Some 75%—–

Deputy Mary Harney

Will everyone be able to go to every hospital under Fine Gael’s plan?

Deputy Dan Neville

Yes, but every hospital will compete.

Deputy Mary Harney

Have it costed.