Press Release

Cowen Publishes Policy on Private Health Insurance

Arising from the commitment contained in the Government’s Action Programme for the New Millennium, Mr. Brian Cowen, T.D., Minister for Health and Children, today launched the White Paper on Private Health Insurance. The White Paper represents the first ever Government statement of policy on the sector since voluntary health insurance was formally instituted over forty years ago. An estimated 42&percent; of the Irish population have private health insurance and health insurers currently pay out approximately £350 million in claims.

Health insurance systems internationally are being subject to review and reform with a view to providing high quality healthcare on a financially sustainable basis. In pursuing this objective, Governments are engaged in encouraging competition, while safeguarding the established solidarity-based dimension on which their respective systems are built. These challenges are no less evident in the system here and are addressed by the Government in the White Paper.

Minister Cowen said that in the White Paper “the Government’s aim is to provide a supportive and developmental framework, consistent with the maintenance of the core values of our voluntary health insurance system – community rating, open enrolment and lifetime cover”. He said that the Government’s intention is “to play to the strengths of the system already established while also introducing significant change”.

At the same time, the Government’s commitment to equity of access to acute hospital care between public and private patients was emphasised by Minister Cowen who said that “the Government make it clear in the White Paper that their primary concern in the administration of the public health services is to serve the needs and interests of the public patient”. He pointed out that the Government will continue with their programme of major investment in public health services, directed at reducing waiting times, expanding specialised services in the cardiac and cancer treatment areas and improving facilities and services generally.

Minister Cowen noted that the proposals contained in the White Paper involved significant change across fundamental areas of market regulation, structures and relationships. He identified one of the main messages of the White Paper as being that change in these areas “should reflect the best interests of consumers/patients and be responsive to the demands of a modern, changing, market which is characterised by service, quality and efficiency”.

In the White Paper, the Government set out improvements to, the method of community rating, the arrangements for risk equalisation, the basis for public hospital charges to private patients, the structure of the Voluntary Health Insurance Board, the scope for product development and the focus of consumer information. The Government are also proceeding with the establishment of the Health Insurance Authority to undertake direct regulatory functions currently discharged by the Minister. Other important areas of action relate to improving the delivery of private care through hospital accreditation, availability of wider data on hospital activity and technology assessment, as well as promoting wide-ranging dialogue between interested parties through a Private Healthcare Forum.

Minister Cowen set out an “Action Agenda” to implement the White Paper proposals, which will involve the preparation of legislation to amend the Health Insurance Act, 1994 and to change the corporate status of the Voluntary Health Insurance Board. He concluded by stating that the White Paper represented “a balanced approach to the effective organisation and development of our market”.

Read the White Paper on Private Health Insurance

Key Proposals


The Voluntary Health Insurance Board

  • The Government propose to give the VHI full commercial freedom of operation.
  • The Government intend to repeal the VHI Acts 1957 to 1998 and bring forward legislation to convert the VHI to the status of a public limited company owned by the State.
  • The Government intend to provide an investment of the order of £50 million (63.5 million euros) to restructure VHI’s capital base and to enable it to be considered for authorisation as an insurance company.
  • The Government intend to include in the legislation on a new corporate status for VHI, enabling provision for third party investment in VHI and for its full sale, if deemed desirable.
  • The Government intend to provide, in the event of the full sale of VHI, for an Employee Share Option Programme.
  • On the full sale of the State’s shareholding in VHI, the Government will allocate a proportion of the value of the original share capital to medical science and research or similar purposes.

The Health Insurance Authority

  • The Government have given approval, in principle, to the establishment of the Health Insurance Authority with a remit relating to the maintenance of the common good aspects of the health insurance system.

Private Healthcare Forum

  • The Minister for Health and Children will promote and facilitate the establishment of a private healthcare forum, which will bring together the interests concerned with the funding, delivery and use of private acute health services.

Consumer Information Provision

  • The Minister for Health and Children will propose to insurers that a working group, including consumer interests, be formed, under the aegis of the Health Insurance Authority, to devise guidelines for the industry as regards meeting the information needs of the public.


Lifetime Community Rating

  • The Government have decided to introduce the principle of “lifetime community rating” to underpin the future viability of community rating. Lifetime community rating will be introduced on the basis of allowing insurers the discretion to apply, or waive, late entry premium loadings as their business needs and plans require. Late entry loadings will not affect persons currently insured, except to the limited extent where they may increase their level of cover at a later date.

Risk Equalisation

  • The Government have decided to make changes to the risk equalisation scheme to encourage further competition.
  • The Government are committed to implementing, as quickly as possible, a risk equalisation system based on a casemix approach. They have decided that the Minister for Health and Children should immediately commission a feasibility study on full implementation of such a system by the earliest reasonable date, but in any event not later than June 2002.
  • Pending the move to a casemix-based system, an interim risk equalisation scheme will apply. This will be based on factors of age, gender and hospital utilisation (as a proxy for the resource intensity of claims). The utilisation measure to be adopted will be 50&percent; based on an insurer’s own hospital bed night experience and 50&percent; based on the market bed night experience.
  • In view of the particular circumstances of the long-established ‘restricted membership undertakings’ (i.e. schemes limited to particular vocational/employee groups such as Gardai, Prison Officers and ESB staff), the Government have decided to make provision for them to be given a ‘once off’ choice to be excluded from risk equalisation.
  • The Government have decided that a new insurer, offering cover to the general public, will be afforded the option of not being liable to fully participate in risk equalisation for a period of 18 months following commencement of trading.

Minimum Benefit

  • The Government consider that the arrangements relating to minimum benefit, which currently involve extensive statutory schedules listing medical procedures and benefits payable, should be simplified and they have decided that the Minister for Health and Children should arrange for minimum benefit to be expressed in broad terms.
  • The Government have decided to increase the minimum benefit applicable to the treatment of psychiatric illness. Accordingly, they will require entitlement to specified minimum payments for 20 day-patient days, in addition to the minimum of 100 in-patient days currently prescribed.

Ancillary Health Services

  • The Government will change the regulatory framework to remove ‘ancillary health services’ from the scope of the Health Insurance Act, 1994. The effect of this will be to free insurers from regulatory requirements in this area and to encourage the development of new products to cover such services.

Tax Relief on Health Insurance Premiums

  • As a general principle, there are no plans to alter the available standard rate tax relief on health insurance premiums, as one of the main supports to a community-rated private health insurance system.

Hospital Services:

Public Hospital Waiting Lists

  • The Government’s aim in relation to the impact of initiatives and strategies in the area of public hospital waiting lists is that no adult should have to wait for more than 12 months and that no child should have to wait for more than 6 months in the specialities targeted for attention.

Public Hospital Bed Stock

  • The Minister for Health and Children will undertake a study and bring forward a Report which will assess the adequacy and appropriateness of the acute bed stock.

Public Hospital Bed Designation

  • The Government are determined that the extent of private health insurance coverage should not impinge upon the position of public patients. The Minister for Health and Children will, therefore, retain the responsibility for designating the number of beds in public hospitals which may be used to treat private patients.

Public Hospital Bed Charges

  • The Government consider that there is a need to address the unsatisfactory situation relating to the pricing of private beds in public hospitals at less than the full economic cost. The Minister for Health and Children will therefore implement a process to move to a system of charging which more fully reflects the economic cost of the services provided. The progression towards more economic pricing will, however, be determined in a way which is sensitive to maintaining stability in the market for private health insurance.

Hospital Accreditation

  • The Minister for Health and Children is pursuing with private hospital interests the potential for a uniform approach to the development of hospital accreditation arrangements.

Health Technology Assessment

  • The Minister for Health and Children will disseminate information arising from national and European-wide initiatives on Health Technology Assessment to public and private hospital interests and to insurers.

Hospital Management Information Technology

  • The Government are committed to increasing the level of resources available for the further development of management information technology in the public hospitals.
  • The Minister for Health and Children will explore and facilitate, as far as possible, the desire of private hospitals to participate in the patient activity information systems currently available across the acute public hospital system.