Dáil Éireann debate -
Wednesday, 29 Nov 2023

I move amendment No. 1:

In page 3, between lines 14 and 15, to insert the following:

“Amendment of section 7F of Principal Act

2. Section 7F of the Principal Act is amended, in section 4A, by the substitution of the following paragraph for paragraph (c):

“(c) In respect of each of the following applicable 3 year periods—

(i) the 3 year period from 1 January 2020 to the end of 2022,

(ii) the 3 year period from 1 January 2021 to the end of 2023, and

(iii) the 3 year period from 1 January 2023 to the end of 2025,

the reference in paragraph (a) to 6 per cent per annum shall, as respects the applicable 3 year period referred to in subparagraph (i), to be read as a reference to 4.9 per cent per annum and, as respects the applicable 3 year period referred to in subparagraph (ii), be read as a reference to 5.5 per cent per annum, and, as respect the applicable 3 year period referred to in subparagraph (iii), be read as a reference to 4.4 per cent per annum, and paragraph (a) shall apply accordingly.”.”.

I will not hold up the Minister of State. I flagged this amendment on Second Stage, when I stated that it was an issue we should consider. The purpose of the amendment is to limit the reasonable profit for insurance providers to 4.4%. This was the level of reasonable profit from 2016 to 2020, after which point the Government decided to increase it to 6% by 2024. The amendment replicates the existing section, which sets the level of reasonable profit over rolling three-year periods, and adds subparagraph (iii) to stipulate that for the period from 1 January 2023 to the end of 2025, the level of reasonable profit should be 4.4%.

There is a cost-of-living crisis in many areas and we have to limit where we can any increases that would have an impact on ordinary working families. Approximately 47% of people have private health insurance for all sorts of reasons. Unfortunately, many people take it out not because they want to spend money on it, but because they need a comfort blanket and do not believe they can depend on the public system. Any additional cost in premiums will be borne by the insurance holders. For this reason, I will press the amendment.

I thank the Deputy for his contribution and for his proposed amendment. I must, however, reject the amendment. I will outline the reasons for this rejection.

Section 7F of the Health Insurance Act 1994 provides that if a beneficiary of the risk equalisation scheme makes more than a reasonable profit, the excess will be returned to the risk equalisation fund. This legislation was introduced to fulfil the requirements of the European Union state aid rules under the services for general economic interest framework. In 2015, a rate of reasonable profit of 4.4% was agreed with the European Commission under state aid rules.

As the Deputy is aware, a reasonable profit figure of 6% was recommended to the Minister for Health in 2021 by the Health Insurance Authority, the statutory regulator of the private health insurance market. The recommendation was based on a new benchmarking exercise among European and Irish insurers. Significant work was carried out in this regard. Independent advice was obtained from external consultants, namely, Oxera Consulting, which was commissioned with the aim of verifying whether a return on sale of 4.4% was still appropriate for the 2022 risk equalisation scheme. Oxera Consulting's advice was based on comparators with other European insurance companies and reflected recent trends in the profitability of insurance sectors across a range of countries. The Oxera Consulting report concluded that the 4.4% rate for overcompensation did not allow for a reasonable profit and noted an appropriate return on sales in a range between 5.5% and 8.6%. The report concluded that the benchmark should be adjusted to account for the changes in the financial reporting requirements and to ensure the return on sales benchmark did not facilitate excessively high premiums in the market, leading to unnecessarily high levels of profitability.

The Health Insurance Authority's recommended figure of 6% return on sales was on the lower end of the range proposed by Oxera Consulting, which was between 5.5% and 8.6%, and took into consideration the sustainability of the market and the maintenance of fair and open competition. The updated reasonable profit rate of 6% underwent due consideration as part of Ireland's state aid application for approval of the current risk equalisation scheme. I assure the Deputy that, during this process, the proposed rate and the likelihood of overcompensation were thoroughly reviewed. The rate of reasonable profit of 6% received European Commission approval under state aid rules in March 2022. On that basis, I am rejecting the proposed amendment.

Currently, 46.8% of the population holds private health insurance. This amounts to 2.48 million people and represents a total annual premium income of approximately €3.18 billion.

Health insurance is provided according to four principles: open enrolment, lifetime cover, minimum benefit and community rating. The risk equalisation scheme is the mechanism designed to support the objective of a community-rated health insurance market. Under the scheme, funds are distributed in the form of credits to commensurate insurers for the additional cost of insuring older and sicker members. The credits are funded by stamp duties payable by health insurance providers for each health insurance policy issued. The risk equalisation credits and stamp duties are updated annually to ensure they align with the estimates of the insured population and the type, number and cost of claims that will be made on the health insurance plans.

This Bill will ensure we can continue to provide the necessary support so that the costs of health insurance are shared across the insured population.

Risk equalisation credits based on age have been reallocated to those based on health status without increasing the stamp duty payable. Increasing the proportion of credits associated with health status helps to share risk more effectively.

Private health insurance policy aims to progressively align with Sláintecare reform objectives. The Government is fully committed to the Sláintecare vision of a universal single-tier health and social care system. Work is continuing within the Department of Health and HSE to progress work on Sláintecare. The Minister for Health, the Minister of State, Deputy Naughton, and I are fully committed to the continued delivery of Sláintecare reform. However, it is important to maintain the effectiveness of the community-rated health insurance market and the risk equalisation scheme that underpins it while that work is ongoing.

The programme for Government commits to retaining access to private healthcare services, ensuring choice for those accessing healthcare. This Bill continues our policy of insurance solidarity with, and affordable premiums for, sicker and older people. On behalf of the Minister, Deputy Donnelly, I commend the Bill to the House.

I thank the Minister of State for all that. I also thank her officials for the work that has gone into this Bill. It is debated annually. It seems to be Groundhog Day in that we have the same discussion on it every year. It has to be done; it is going to be on our annual cycle of Bills. Its purpose is to review the risk equalisation mechanism. As the Minister of State said, it deals with the stamp duty levy on policies and risk equalisation credits payable to insurers for 2024. We support the substance of the Bill because of what it does.

When we have this debate every year, we need to reflect on why so many people have private health insurance. Many people will always take out private health insurance, possibly irrespective of how good or bad the public health service is. Many of them take out private health insurance because it is a comfort blanket and they cannot depend on the public system. Most people that I talk to who have private insurance – I do not – have it for elective procedures. It is to get care quicker. I very much hope that when we build the elective centres, the elective-only hospitals where we will have volume, there will be a lot of elective planned procedures. There are to be four centres: one in Galway, one in Cork and potentially two in Dublin. I hope the centres will separate scheduled care from unscheduled care.

I have spoken to senior people in the Department about this. The logic of the elective-only hospitals entails reform of healthcare with a big R because, in reality, they would take a lot of the private care out of public hospitals. Much of what is done involves consultants doing private work in hospitals. While this is profitable, it involves high-volume and necessary planned surgeries and procedures. If they are done at volume and on time, including in short periods in which people have rapid access to the types of treatments in question, I hope we can reduce the need for people to take out private health insurance. The tenet of Sláintecare was to have a public system with public-only hospitals. We are moving in that direction and more needs to be done. Not only that, but we should also make sure we have a truly universal system across the board. I recognise the moves we have made but we have to go further.

I support the Bill and its principle and thrust. I am sure we will come back next year and have exactly the same discussion and make the same points, possibly with the same amendments, but that is the nature of this Bill.