Speech by Minister for Health in response to Private Members’ Health Insurance (Reform) Bill 2014

Check Against Delivery

Seanad Éireann 25th June 2014

I thank Senator Quinn for bringing forward the Health Insurance (Reform) Bill 2014 and I welcome the opportunity to participate in the debate this morning.

I believe that the Senator and I share the same objective for the private health insurance market – that of achieving a viable and sustainable system, affordable to all, which operates in the best interests of the public.  I want to make sure that this happens, but I think that there are different ways of achieving it.

The Bill before the House today proposes a number of changes to the regulatory infrastructure underpinning the private health insurance market.  While I appreciate the intentions in bringing forward this Bill, I think that any changes we make must be in the context of moving to Universal Health Insurance.  There have been many important, positive developments in the private health insurance market in recent times and I think that any legislation must take account of these.

In summary, I believe that the VHI’s position has already advanced considerably towards authorisation by the Central Bank, and the Bill now proposed does not take account of these developments.  Similarly the Health Insurance Authority will be the engine for reform of the private health insurance market, and to implement the provisions of this Bill would be entirely inconsistent with the new role that I see for the Health Insurance Authority under Universal Health Insurance.

I think it would be helpful to inform the House of the progress achieved to date in respect of sustaining the private health insurance market.  In addition, I will set out the policy supports that I will introduce very shortly, and the planned reforms in respect of private health insurance before addressing the three key proposals contained in the Bill.

Reforms in the Private Health Insurance Market

I take Senator Quinn’s concerns about the decline in the numbers insured in the private health insurance market since its peak in 2008.  The current private health insurance coverage stands at 44.2% of the population.  I am keen to create the best possible environment within which more people will want to obtain and retain private health insurance cover that is affordable, competitive and meets consumers’ needs as we prepare to move to Universal Health Insurance.

I am taking a series of steps to support the private health insurance market. With all respect to Senator Quinn, I consider that these initiatives, rather than those proposed in his Bill, are the most appropriate to promote a sustainable and competitive private health insurance market.

In June 2013, I appointed Pat McLoughlin, to work with insurers, the Health Insurance Authority and my Department to identify effective strategies for costs management in the market. Mr. McLoughlin’s first report, published at the end of December 2013, made a number of important recommendations, including the introduction of Lifetime Community Rating as a measure to encourage younger people to buy health insurance.

Lifetime Community Rating is intended to encourage people to join health insurance schemes early and to retain their private health insurance cover.  Late entry loadings will be applied to those who join later in life.  There will, of course be a grace period to allow people take out insurance without loadings and a strong communications campaign to give everyone adequate notice of the change.

The introduction of Lifetime Community Rating will provide a mechanism to discourage people from only taking out private health insurance as they get older (by allowing commercial insurers to charge higher premiums to “late entrants” to the market) and thus provide an incentive for people to take out private health insurance at a younger age. This is important as the health insurance market requires a sizeable cohort of younger members, who are generally healthier, to offset the high cost of older and less healthy members, which is critical to the sustainability of our system of community rated health insurance.

Officials from my Department, in consultation with the Health Insurance Authority and the health insurers, have been working to finalise Regulations to provide for Lifetime Community Rating.  I intend to sign the Regulations to make this a reality very shortly.

I also wish to help to address the substantial reduction in market penetration rates between the ages of 20 and 25 by providing for sliding discounts for all young adults up to age 24.    I propose to introduce phasing-in of full adult rates to smoothen the dramatic price increase currently experienced when student rates no longer apply, usually after the age of 21 years at present. I propose that this measure will be introduced in legislation later this year, for implementation in 2015.

Reducing Costs in the Market

In addition to the measures I have outlined, I have consistently emphasised the need for much greater cost control in the private health insurance industry so that premiums are affordable for as many people as possible.

I have urged all the private health insurers to do everything possible to keep down the cost of private health insurance.  I am determined to address costs in this sector in the interest of consumers and I have made it clear to insurers that I believe significant savings can still be made, the effect of which can be to minimise the need for premium increases.

In addition to the introduction of Lifetime Community Rating, significant progress has also been made on the implementation of the other recommendations in Mr McLoughlin’s Phase I Costs Review report.  For example, the HSE and insurers are now working together to implement a number of the report’s recommendations on claims processing and admission and discharge issues.

In relation to Fraud, Waste and Abuse, the private health insurers have agreed to use existing anti-fraud and confidential hotline structures under the auspices of Insurance Ireland to facilitate combatting fraud in the private health insurance market.

The particular recommendations in relation to Case Based Charging will be incorporated into the work already underway by my Department under Money Follows the Patient.

Work on Phase II of Mr. McLoughlin’s report, which will deal further with the factors driving costs in health insurance, is progressing well. This second phase report is expected to be finalised and published in the coming weeks.

 UHI and reforms in the market

Under Universal Health Insurance, competing health insurers will form the backbone of the new purchaser/provider split: the insurers will be the commissioners of a wide range of primary care services, acute hospital services and acute mental health care.

I recognise that in advance of UHI, we need an affordable, competitive market that meets consumers’ needs. I want to create the best possible environment within which more people will want to take out and keep health insurance cover.

Risk Equalisation

Community-rated health insurance systems across the world use risk equalisation as a mechanism to distribute fairly some of the differences that arise in insurers’ costs due to the differing health status of all their customers.

I am committed to making further improvements to the Risk Equalisation Scheme as a mechanism to support community rating in the private health insurance market.  In January 2013 I introduced a permanent Risk Equalisation Scheme which takes greater account of the extra cost of treating older and sicker patients, compared with younger and healthy lives. The Scheme encourages insurers to focus on product innovation, efficiency and customer service. Subject to expert advice and in line with existing legislation and other requirements, I am committed to:

maintaining the current level of effectiveness and, where possible, over the period of 2014-2016 increasing the effectiveness of the scheme to 85% for those in their 70s and to 90% for those over 80 years of age;

adjusting the hospital bed utilisation credit as a proxy for health status;

introducing a more refined health status measure through the use of diagnosis-related groups on a phased basis between 2016 and 2018.

A robust Risk Equalisation Scheme is also required as a foundation stone to delivering services under Universal Health Insurance.

The House will appreciate the progress as I have outlined, together with the proposed reforms, are in line with the Government’s commitment to maintaining a viable and sustainable private health insurance market.

I will now address each of the Bill’s three key proposals.



The Bill proposes to transfer responsibility for VHI to the Minister for Public Expenditure and Reform.

As Minister for Health, I have responsibility under the Health Insurance Acts for maintaining the stability of the health insurance market. The Government recognises that the maintenance of a healthy and functioning voluntary private health insurance market is an essential step to facilitate the transition to a market based Universal Health Insurance system, under the remit of the Minister for Health.  VHI and the other open market insurers will play a key role in the delivery of services in a multi payer Universal Health Insurance model.  In my view, therefore, transferring responsibility for VHI to any other Minister would not be appropriate.

In addition, I would remind the House that the VHI, as a commercial body, recently announced that it does not expect to require Exchequer funding to achieve authorisation.  In these welcome circumstances it is unclear what role is envisaged for the Minister for Public Expenditure and Reform.


REGULATION OF STATUS OF VHI PART 3 Section 6.-Regularisation of status of VHI:

Part 3 of the Bill deals with the regulatory status of the VHI.

I am pleased to note that VHI submitted its application for authorisation to the Central Bank on 16th May.  A consultation period with the Bank is now underway.  Subject to authorisation, which is of course a decision for the Central Bank, VHI will be subject to the same regulatory and solvency requirements as other health insurers.  In addressing VHI’s regulatory status to the satisfaction of the EU Commission, officials from my Department, Ireland’s Permanent Representation to the EU and VHI Officials have held regular and positive meetings with Commission officials.  The latest meeting was held on 20th May 2014.  The Commission were pleased that VHI’s application had been submitted and I am confident that the deadline for addressing the regulatory status of the VHI by 31 December 2014 will be met.

VHI has recently announced positive annual results for 2013 with €65m profit after tax. This is an improvement of €10.7m over the corresponding period last year (when reported profits were €54.3m) and represents a marked improvement on the figures for 2011 (€7.4m).  This is a positive indication of the future sustainability of the Irish private health insurance market.

Additionally, I welcome the fact that VHI has negotiated a further reinsurance deal for a four-year period 2014-2017.  VHI believes it can achieve the solvency levels required by the Central Bank for authorisation without the need for capital from the Exchequer and a consequential State aid application to the EU Commission.  The improved profit level reported recently for 2013, the new reinsurance deal and a reported fall in claims costs of 2.1% for 2013 will, I believe, strengthen the VHI case for authorisation by the Central Bank of Ireland.

I think that the section of the Bill regarding VHI meeting solvency requirements by end 2015 is unnecessary as I have already set an earlier target date of 31 December 2014 by Regulation.


TRANSFER OF RESPONSIBILITY FOR THE REGULATION OF HEALTH INSURANCE Part 4 Section 7(1) Dissolution of the Health Insurance Authority

Part 4 of the Bill proposes the dissolution of the Health Insurance Authority and a transfer of its functions to the Central Bank of Ireland.

The Central Bank is the financial regulator and as such, it regulates matters governing the prudential and solvency requirements for financial markets, including the health insurance market.

The Health Insurance Authority is the independent regulator for the health insurance market and performs a range of specialist functions as set out in the Health Insurance Acts which include monitoring the market, advising the Minister for Health, operating the Risk Equalisation Fund, provision of consumer information and maintenance of registers.

In the White Paper on UHI, the Government proposes that the Health Insurance Authority will have substantially increased responsibilities and powers which will include a range of important measures.  For example,

Under UHI the State will make a financial support payment for those on low incomes.  The Health Insurance Authority will have a key role in recommending the ‘efficient market rate’.

The Authority will ensure compliance by insurers with the UHI standard plan.

It will play a critical role in regard to cost controls of the insurance market.

It will be responsible for managing a public complaints process for the health insurance market.

The HIA will manage the Insolvency Fund to be established to ensure that costs associated with insurer insolvency could be met.

In my view, therefore, it is appropriate to retain the Health Insurance Authority given its considerable expertise in the health insurance area and the expanded role proposed for it under Universal Health Insurance.  It would make no sense to abolish the Authority, and transfer its powers to the Central Bank, at a time when we will need a strong presence dedicated to regulating the private health insurance market effectively.


I have consistently indicated the importance of maintaining a sustainable private health insurance market and I have detailed the significant progress made in this regard.  Taken together, the market reforms I have outlined to the House will help to ensure that private health insurance remains affordable in the lead up to Universal Health Insurance.  The Government will continue to work intensively to ensure a well-functioning insurance system.

Finally, I wish to thank the Senator for his contribution and acknowledge the work involved in preparing this Bill.  However, I do not believe that the Bill’s proposals are appropriate or necessary given the work already completed, and the planned reforms as I have outlined to the House today.