Government approves reform measures for Private Health Insurance market
The Minister for Health and Children, Mary Harney, T.D., today (Wednesday, 25th April) announced that the Government has approved a range of reform measures for the private health insurance market to create a level playing field and enhance consumer choice.
The Minister brought the measures to Government yesterday, arising from the reports of the Competition Authority, the Health Insurance Authority and the Barrington Group.
The Minister stated, “This package of measures and announcements represents a major reform of the health insurance market. The fundamental issue of creating a level playing field in the market is being brought forward to the earliest possible date.
‘There are also a number of important new pro-consumer measures being taken to make it easier for people to understand and select insurance plans and to switch between insurers.
‘In recent years the market has been subjected to a significant degree of uncertainty because of legal challenges to the regulatory framework and threats to leave the market.
‘The changes will remove uncertainties for existing operators and will hopefully encourage new entrants into the market.
‘These are steps to place the VHI on a more secure and stable footing.
‘It is not in the interests of VHI staff or customers or the wider health insurance market that it should continue to occupy its current anomalous status as an unauthorised insurance undertaking.
‘The Government has an open mind on the future capitalisation and ownership of VHI. Specialist technical advice will be sought on this issue in the context of authorisation being achieved.’
‘I wish to thank the members of the Barrington Group, the Health Insurance Authority and the Competition Authority for their analysis and suggestions.’
Summary of measures decided by Government
Position of VHI
- The VHI should become a conventional insurer authorised by the Financial Regulator by the end of 2008. The derogation from solvency requirements which the company enjoys will cease when it is authorised. The Departments of Health and Children and Finance are to report to Government by mid-December on how this is best achieved.
- The two Departments are to appoint legal and corporate finance advisors to assist in this process.
- A process of consultation should be initiated on how the existing regulatory framework might be changed in the short term to anticipate pending changes at EU level.
- The immediate publication of a VHI Bill. On enactment it will allow the VHI to establish subsidiaries to operate its ancillary activities such as travel insurance, the Swiftcare clinics etc. This measure will also remove the remaining powers of the Minister in relation to product development, pricing etc.
- This Bill will place a statutory obligation on the VHI to take the necessary steps to achieve authorisation in the timeframe set by the Minister.
- The VHI will be directed to comply with the Financial Regulator’s Consumer Protection Code in the same manner as if it were an undertaking already regulated by the Financial Regulator.
- That the Minister for Health and Children will ask the appropriate authorities to implement the various recommendations of the Barrington Group that do not require legislation or the making of statutory orders, including
- Providing health insurance customers with clear statements of consumers’ rights and standardised renewal notices;
- Requesting companies with payroll deduction schemes to offer at least two companies’ products to employees;
Having group schemes put out to tender on a regular basis.The waiting periods imposed on older people should be reviewed to ensure that they comply with equality legislation.
Risk Equalisation and Community rating
- The amendment of the Risk Equalisation Scheme to give effect to the Health Insurance Amendment Act, 2007. This abolished the three year exemption from risk equalisation payments for new entrants. The scheme will also be amended to implement some of the recommendations of the Barrington Report. These changes should encourage more competition in the market. To encourage competition and new entrants, and having regard to proportionality, risk equalisation payments will be discounted by 20 per cent. These changes should encourage more competition in the market.
- The circulation of draft Lifetime Community Rating Regulations to insurers for consideration. These are designed to encourage people to take out health insurance at an early age by introducing loadings for later entrants.
- The Health Insurance Authority (HIA) initiate a process of consultation with the health insurance industry and private healthcare providers on defining the level of health insurance which should be subject to community rating. The HIA will also be asked to look at the feasibility of introducing a prospective Risk Equalisation Scheme.
As part of the Towards 2016 Social Partnership Agreement the Government is committed to actively engaging with the social partners on the future of commercial semi-State companies. In considering the most appropriate structure for the future ownership of the VHI the Government will work with the social partners in accordance with the principles and processes set out in the Agreement.
Private health insurance coverage
Private health insurance makes an important contribution to the provision of healthcare in Ireland. Over 50% of the population has private health insurance cover. This level of coverage allows the private hospital sector to make an important contribution to the provision of health services in Ireland. For this reason the Government must ensure that the market operates in an efficient manner and in the interest of consumers. The Government is strongly committed to maintaining community rating as the basis on which health insurance is offered to consumers. It is also strongly committed to facilitating increased competition in the health insurance market. Greater competition should offer more choice and better value to consumers. The Minister also announced the publication of the Report of the Market Review Group. The Report is available on the Department’s website at the following link.
Private Medical Insurance in Ireland
Private Health Insurance Advisory Group Recommendations
The advisory group made a number of recommendation listed below. Some of these are administrative in nature and the Minister is proposing that they be swiftly implemented where possible. Others will require legislation and be the responsibility of other Government Departments and statutory bodies.
- The functions of the Financial Regulator’s Consumer Director be extended to private health insurance.
- Health insurance companies should agree on, and commit themselves to, a “Declined Cases Agreement”. This would set out consumers’ rights in relation to refusals of cover and related issues.
- Renewal notices and new contracts should include a standard statement of consumer rights.
- The rights of older consumers in relation to switching etc. should be highlighted in information supplied to consumers.
- The waiting periods imposed on older people should be reviewed to ensure that they comply with equality legislation.
- Following the enactment of legislation providing for the licensing of private hospitals private health insurance subscribers should be entitled to avail of services in any licensed facility.
- Consumers should be given greater scope to opt for an element of self-insurance by accepting an excess.
- Consumers should be given the option to purchase Limited Cover Plans.
- The discounts offered to members of group schemes and those purchasing via the internet should be abolished.
- Consumers should be given more information on the claims settled on their behalf.
- Employees’ contractual entitlement to private health insurance should be described in generic terms, i.e. not by reference to a specific provider.
- Companies which operate group health insurance schemes should put them out to informal tender every three years.
- Companies which operate group schemes should offer employees a choice of at least two health insurance providers.
- The Financial Regulator should agree a switching code with the health insurance industry.
- Private health insurers should be obliged to issue customers with a standardised renewal notice at least 30 days prior to the renewal date.