Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1697804363536.pdf (Ireland)
Health Insurance (Amendment) Bill 2021 Bill No.

154 of 2021 Anne Timoney, Senior Researcher (Social Science) 6 December 2021 Abstract The Health Insurance (Amendment) Bill 2021 seeks to adjust the Risk Equalisation Scheme (RES) that operates in the private health insurance market.

Amongst other measures, the Bill seeks to add a ‘high cost claim credit’ to the Risk Equalisation Scheme for the first time.
The whole RES, including this new element, is subject to approval by the European Commission under State aid rules.
Library & Research Service | Health Insurance (Amendment) Bill 2021 1 Contents Summary ........................................................................................................................................ 3 Glossary and abbreviations ............................................................................................................. 6 Table of provisions .......................................................................................................................... 7 Introduction ..................................................................................................................................... 9 Context to the Bill ............................................................................................................................ 9 Explaining risk equalisation ......................................................................................................... 9 Renewal of the Risk Equalisation Scheme ................................................................................ 13 A proposed High Cost Claims Credit (HCCC) – rationale and consultation .............................. 13 Impact of Covid-19 pandemic on health insurance .................................................................... 15 Broader policy context .................................................................................................................. 16 Key data on the health insurance market ...................................................................................... 21 Who has insurance?
................................................................................................................. 22 What do people see as the value in having health insurance?
.................................................. 23 Market shares ........................................................................................................................... 23 Price of health insurance ........................................................................................................... 24 Pre-legislative scrutiny of the General Scheme of the Bill.......................................................... 24 Principal provisions of the Bill ....................................................................................................... 25 Section 1: Definition .............................................................................................................. 25 Section 2: Amendment of section 6A of the Principal Act ...................................................... 25 Section 3: Amendment of section 7E of Principal Act ............................................................ 26 Section 4: Amendment of section 7F of the Principal Act ...................................................... 26 Section 5: Amendment of section 11C of Principal Act .......................................................... 27 Section 6: Amendment of Schedule 4 to Principal Act ........................................................... 28 Section 7: Amendment of Principal Act by addition of Schedule 5 - high cost claims ............. 29 Section 8: Amendment of section 125A of Stamp Duties Consolidation Act 1999 ................. 30 Section 9: Short title, commencement, collective citation and construction ............................ 32 Appendix: Overview of EU State aid rules ................................................................................. 33 This L&RS Bill Digest may be cited as: Oireachtas Library & Research Service, 2021, L&RS Bill Digest: Health Insurance (Amendment) Bill 2021.
Bill No.

154 of 2021.

Library & Research Service | L&RS Bill Digest 2 Legal Disclaimer No liability is accepted to any person arising out of any reliance on the contents of this paper.

Nothing herein constitutes professional advice of any kind.

This document contains a general summary of developments and is not complete or definitive.

It has been prepared for distribution to Members to aid them in their parliamentary duties.

Some papers, such as a Bill Digest, are prepared at very short notice.
They are produced in the time available between the publication of a Bill and its scheduling for second stage debate.

Authors are available to discuss the contents of these papers with Members and their staff but not with members of the general public.

© Houses of the Oireachtas 2021 Library & Research Service | Health Insurance (Amendment) Bill 2021 3 Summary The Health Insurance (Amendment) Bill 2021 was published on 1st December 2021.
The Bill seeks to amend the ‘Risk Equalisation Scheme’ (RES) that operates in the health insurance market.

Specifically, it seeks to: • Reduce the amount of money paid to insurers by way of risk equalisation credits based on age, gender and level of cover (also known a Age Related Health Credits), Introduce a new system of ‘High Cost Claim Credits’ (HCCC), and • • Reduce stamp duty payable on all health insurance policies.

This Bill is the latest in a series of annual bills seeking to amend the RES.
The Principal Act is the Health Insurance Act 1994.

A glossary of terms is provided at page 6 of this Digest.

Risk equalisation is the system that seeks to spread insurance risks across insurers based on their relative exposure to customers at higher risk of making claims.
It underpins the principle of ‘community rating’ – whereby all customers, regardless of their age or health status are charged the same price for a health insurance policy.1 The Risk Equalisation Scheme (illustrated in an infographic on page 12 of this Digest) raises revenue from stamp duty – this is levied on every health insurance policy purchased in the State.

The stamp duty is paid into a ‘Risk Equalisation Fund’ (managed by the Health Insurance Authority (HIA)).
At present, risks are equalised by way of two credits paid to insurers.

The first, the ‘Risk Equalisation Credit’ is paid prospectively (ahead of time) based on the age, gender and level of insurance cover of an insurers’ customers.

The second is a ‘hospital utilisation credit’ paid retrospectively (after claims have been settled) based on hospital stays and day case attendance.
Due to the historical position of the Voluntary Health Insurance (Vhi) organisation in the health insurance market, and the older age profile of its customers, Vhi Healthcare is the net beneficiary of the Risk Equalisation Scheme.

The Scheme is exchequer-neutral, i.e.

it is neither a cost nor a benefit to the State.

The Risk Equalisation Scheme is subject to EU oversight as a form of state aid.
It is currently viewed as compatible with the internal market and approved to operate up to 31 March 2022 (having been extended from January 2021 due to the pandemic).

The State is currently seeking approval for the Scheme to operate for five years from April 2022.

It is proposed that it operate largely as it is currently – though with the addition of a High Cost Claims Credit (HCCC) as an additional measure of health status.

A number of the provisions of the Bill seek to provide for the proposed HCCC.
The Department of Health has said it expects to “finalise the negotiations [on approval of the RES from April 2022] with the European Commission by the end of this year.”2 The take-up of health insurance is at its highest ever level.

At the end of September 2,357,000 people had health insurance policies.
Despite continued growth in the market the Department 1 This ‘community rating’ principle is limited by a late-entry loading, known as ‘lifetime community rating’ which means that people taking out health insurance for the first time later in life pay a higher premium for a period of up to ten years 2 Briefing to L&RS from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.
November 2021.

Library & Research Service | L&RS Bill Digest 4 of Health notes that the long-term impact of the Covid-19 pandemic on the health insurance market is uncertain at this time.

The provisions of the Bill can be summarised as follows: Section 2: High Cost Claim Credit definitions: Sets out definitions relevant to the proposed new High Cost Claim Credit.
Section 3: Amend section 7E of the Principal Act: Seeks to so that the Minister may require the Health Insurance Authority to provide a report on the high cost claims credit parameters.

Section 4: Amendment of section 7F of the Principal Act: Seeks to increase the benchmark amount of ‘reasonable profit’ from 4.4 per cent to 6 per cent.

This is the level used in the assessment of whether an insurer has been overcompensated by the Risk Equalisation Scheme.
It has particular relevance to Vhi Healthcare as it is the net beneficiary of the RES.

The Section provides for a gradual increase from 4.4 per cent to 6 per cent, within a three-year rolling method.

Section 5: Amendment of section 11C of Principal Act: Seeks to make 1 April 2022 the date from which the revised risk equalisation credits will apply.

It also seeks to introduce a time limit on the period in which risk equalisation credits can be claimed by health insurers.
Section 6: Age Related Health Credits: Seeks to reduce the level of all Age-related Health Credits.

The new rates would apply from April 2022.

Section 7: High Cost Claims Threshold and Quota Levels: Seeks to set the threshold for high cost claim credits at €50,000 and the quota level at 40%.
This means that (subject to the provisions in Section 2), insurers would receive a credit of 40% of the amount of a claim(s) by an individual in a given 12 month period that is over the €50,000 threshold (where that amount has been paid by the insurer).

For example, where an insurer has paid a claim of €110,000 it would receive a credit of 40% of the amount over €50,000 (40% x €60,000 = €24,000).
Section 8: Stamp Duties: Seeks to reduce stamp duties levied (under the Stamp Duties Consolidation Act 1999) on each health insurance policy.

The new rates would apply to contracts for health insurance taken out or renewed from 1 April 2022.

The proposed new rates are all reductions on current rates.
They are: • on non-advanced contracts set at €41 per child and €122 per adult (reducing from €52 and €157 respectively); and • on advanced contracts €135 per child and €406 per adult (reducing from €150 and €449 respectively) (see glossary for definitions).

The vast majority of contracts fall into the ‘advanced’ category – 92% at the end of 2020.

The remaining 8% of contracts are ‘non-advanced’ - those that provide mainly cover for private care in public hospitals.
Stamp duties are levied on insurance companies, not consumers.

Therefore, it is up to insurance companies to decide whether or not pass on any reductions in the level of stamp duty their customers.

The Hospital Utilisation Credit, which is also part of the RES, would not be affected by the Bill.
Library & Research Service | Health Insurance (Amendment) Bill 2021 5 Commencement and citation: If enacted, different sections of the Act would come into force on different dates: • Section 8 would come into operation on 1 January 2022; • Other sections of the Act would come into operation on a day or days ordered by the Minister for Health.

If enacted, the collective citation of the current Act and other health insurance legislation would be the Health Insurance Acts 1994 to 2021.
The Bill has not been subject to pre-legislative scrutiny.

Library & Research Service | L&RS Bill Digest 6 Glossary and abbreviations Term Definition Non-advanced health insurance policy Non-advanced policies: Broadly speaking, these policies provide a lower level of cover than advanced policies.

In general they provide cover mainly for public hospitals.
More specifically: Non-advanced cover is defined as a relevant contract which provides health insurance cover for: Not more than 66 per cent of the full cost for hospital charges in a private hospital, or Not more than the prescribed minimum payments within the meaning of the Health Insurance Act 1994 (Minimum Benefit) Regulations 1996 (S.I.

No.

83 of 1996), whichever of the two is the greater.


Advanced health insurance policy Advanced policies are all other policies – generally those that provide cover for care in private hospitals.

Community Rating Lifetime Community Rating (LCR) Risk Equalisation Scheme / System (RES) Risk Equalisation Fund (REF) Community rating means that the level of risk that a particular consumer poses to an insurer does not directly affect the premium they pay.
Everyone pays the same for the same cover – regardless of age, gender or health status.

The system is built on inter- generational solidarity – with the premiums paid by younger people subsidising those paid by older people.

Older consumers who have long held health insurance will themselves have subsidised the generation(s) before them.
Ireland’s system of community rating is now adjusted by ‘Lifetime Community Rating’ (see below) which applies different rules for ‘late’ entry and discounts for young adults.

LCR is a system of ‘late-entry’ loadings meaning that people who take out health insurance for the first time after a certain age (age 34 in Ireland) have to pay a higher premium than others.

This is intended to act as a disincentive to people who might choose to delay taking out health insurance until later in life.
The aim of the risk equalisation system is to fairly distribute the costs that arise for insurers as a result of the differing health status of all their customers.

Risk equalisation aims to make health insurance more affordable for older people.

It also aims to support competition within the market.

Administered by the Health Insurance Authority, the Fund is the pool of money that pays out the Risk equalisation credits / Hospital utilisation credit (HUC).
Monies come into the Fund from the Revenue Commissioners through Stamp Duties levied on all open market health insurance policies provided by insurers.

The Revenue Commissioners, in turn, pay the monies to the Health Insurance Authority (to the Risk Equalisation Fund).

The Health Insurance Authority pays out monies to health insurers by way of two credits – Risk equalisation credits and Hospital utilisation credit (detailed below).
Library & Research Service | Health Insurance (Amendment) Bill 2021 7 Table of provisions The table below explains the Principal Provisions of the Bill.

Table 1: Provisions of the Health Insurance (Amendment) Bill 2021 Section Focus Detail 1.

2.

3.

4.

Definition The “Principal Act” is the Health Insurance Act 1994.
Amendment of section 6A of Principal Act (definitions in the Principal Act) Seeks to amend subsection (1) of section 6A of the Principal Act to change the definition of risk equalisation credits to include payments from the risk equalisation fund in relation to high cost claims.
Section 2(b) seeks to insert definitions of “high cost claim” “high cost claim quota share” “high cost quota share” “high cost claim threshold” Section 2(c) seeks to amend the definition of ‘relevant amount’ of payment of the hospital bed utilisation credit to include credit is only payable where the hospital stay (number of nights’ or days’ accommodation) were paid for by the insurer.
Amendment of section 7E of Principal Act Seeks to amend section 7E of the Principal Act so that the Minister may require the Health Insurance Authority to provide a report on the high cost claims credit parameters.

Amendment of section 7F of the Principal Act Seeks to amend Section 7F of the Principal Act to increase the benchmark amount of ‘reasonable profit’ from 4.4 per cent to 6 per cent.

The Section provides for a gradual increase from 4.4 per cent to 6 per cent, within a three-year rolling method.
Section 4(c) provides for a benchmark ‘reasonable profit’ to apply at a rate of 4.9 per cent for the three- year period 1 January 2020 - 31 December 2022; and a rate of 5.5 per cent to apply for the three-year period 1 January 2022 - 31 December 2023.

Seeks to amend Section 11(c) of the Principal Act to make 1 April 2022 the date from which the revised risk equalisation credits will apply (they are set out in s.6 – see Table 5 on page 28).

5.
5.

Amendment of section 11C of Principal Act Library & Research Service | L&RS Bill Digest 8 6.

7.

8.

9.
7.

8.

9.

Section 6 – Amendment of Schedule 4 to Principal Act Amendment of Principal Act by addition of Schedule 5 relating to high cost claims Amendment of section 125A of Stamp Duties Consolidation Act 1999 Short title, commencement, collective citation and construction Section 5(c) seeks to introduce a time limit on the period in which risk equalisation credits can be claimed by health insurers (current or previous providers of health insurance).
It sets out that claims can not be made the HIA if the claim (or part thereof) more than six years before the 31 March in the year prior to the date of making the claim.

Seeks to substitute a new Table for Table 2 in Schedule 4 of the Principal Act.

The table sets out the amounts of risk equalisation credits for different age groups / genders.

Section 6 sets out the rates proposed to apply from 1 April 2022 – with each of them reduced from the levels currently applying.
Seeks to add a new schedule, Schedule 5, to the Principal Act.

The Schedule specifies the level of ‘high cost claim threshold’ to apply as €50,000 and the ‘high cost claim quota share’ at 40 per cent.

Seeks to amend section 125A of the Stamp Duties Consolidation Act 1999.

It provides for a continuation of the current rates from 1 January 2022 to 31 March 2022.

It then provides for a reduction in the stamp duty levied on each health insurance policy taken out or renewed from 1 April 2022.
Section 9 (1) provides that if enacted the Bill would become the Health Insurance (Amendment) Act 2021.

Section 9(2)(a) provides that, if enacted, different sections of the Act would come into force on different dates: • Section 8 would come into operation on 1 January 2022; • Other sections of the Act would come into operation on a day or days ordered by the Minister for Health.
Section 9(2)(b) provides that, if enacted, the collective citation of the current Act and other health insurance legislation would be the Health Insurance Acts 1994 to 2021.

Source: Oireachtas Library & Research Service, based on the Health Insurance (Amendment) Bill 2021 and acts referred to herein.

Library & Research Service | Health Insurance (Amendment) Bill 2021 9 Introduction This Digest examines the provisions of and context to the Health Insurance (Amendment) Bill 2021 (the Bill).
It is presented in sections as follows: • Table of provisions (above) • Context to the Bill • Broader policy context • Key data on the health insurance market • Principal provisions of the Bill The Library & Research Service has also published a Bill Briefing page on this Bill (available to internal Houses of the Oireachtas users).
Context to the Bill This section presents the context to the Bill as follows: • Explaining risk equalisation • Renewal of the risk equalisation scheme • A proposed High Cost Claims Credit (HCCC) • Impact of covid pandemic on health insurance Explaining risk equalisation The Bill seeks to adjust the Risk Equalisation Scheme (RES) that operates in the private health insurance market.

This section describes the mechanics of this Scheme.
Risk equalisation is a system of compensating insurers who carry heavy risk burdens (in proportion to their market share), by transferring payments from other insurers who carry lighter ones.

Heavy risk burdens include claims costs associated with policy holders who are older or less healthy than the rest of the population.

What is the purpose of the Risk Equalisation Scheme?

Ireland has traditionally adhered to a community rating system in relation to the health insurance market.
This system assumes a principle of intergenerational solidarity between all insured persons, whereby all consumers, irrespective of age profile, gender or likely future health status, pay the same price for equivalent levels of cover.

Risk equalisation is a common mechanism in countries with community rated health insurance markets.

The purpose of which is to make it easier for insurers who insure people with higher risk profiles, i.e.
people more likely to have higher medical costs, to compete with other insurers.3 The stated goal of the scheme is to ensure that private health insurance is affordable to as many people as possible in a sustainable, competitive market.

3 Community rating is an approach in which an insurer spreads the cost of insuring risks evenly across the entire group of people being insured, rather than those with a higher risk profile paying higher premiums than those with lower risk profiles.
Library & Research Service | L&RS Bill Digest 10 How does the Risk Equalisation Scheme work?

The information in Text Box 1 below describes in detail the operation of the Risk Equalisation Scheme (RES).

The key points of operation of the scheme are represented in an infographic on page 12.

Box 1: How the Risk Equalisation Scheme operates (see Glossary at page 6 for definitions) The Health Insurance (Amendment) Act 2012 provided for the Risk Equalisation Scheme (RES) from 1 January 2013.
The scheme applies to open-membership health insurance providers only and not to restricted membership providers.

The scheme takes account of sex, health status and type of cover as well as age.

The scheme involves a transfer of credits to health insurance providers in respect of older and less healthy customers and a stamp duty levied on health insurance providers in order to pay for these credits.
The Health Insurance (Amendment) Act 2012 sought to establish a permanent fund from which risk equalisation credits are payable.

The health insurance companies pay stamp duty on individual policies to the Revenue Commissioners, who then transfer the proceeds of the stamp duty to the fund.

The fund is administered by the Health Insurance Authority (HIA).

There are four rates of stamp duty.


The rate that applies to each policy depends on whether the policy provides for advanced cover or non-advanced cover and whether the insured life is that of a child or an adult.

The HIA can make regulations for the categorisation of health insurance products into advanced and non-advanced cover.

Risk equalisation (RE) credits are currently paid out to the health insurance companies in respect of the premiums of people aged 65 and over.
The amount of the credit depends on the person’s age, sex and the type of insurance cover (current and proposed rates are set out in the Principal Provisions section below).

Health status is also taken into account when calculating credits and a Hospital utilisation credit (HUC) is awarded based on each visit to hospital by an insured person.

In effect, a hospital visit is used as an indicator of a policy holder’s health status.
The greater the number of hospital visits and the longer the stay in hospital, the sicker an insured person is deemed to be (for the purpose of HUC) and as a result, the greater the number of credits their insurer receives.

At present, this credit is set at €125 for each overnight stay and €75 for each day case visit for insured people of all ages.

The health insurance provider claims the credits from the HIA.

They receive a greater amount in respect of policy holders who are older and less healthy.
The levels of credits and the stamp duty payable are reassessed annually.

The HIA makes recommendations to the Minister for Health on annual RE credit rates and on the corresponding stamp duty required to fund them under RES.

The Minister for Health takes this into consideration when proposing rates for RE credits and recommends the corresponding stamp duty levy to the Minister for Finance.

Source: Adapted from Citizens Information Board (2013) Relate, March 2013.
Available at: http://www.citizensinformationboard.ie/publications/relate/relate_2013_03.pdf Library & Research Service | Health Insurance (Amendment) Bill 2021 11 The text box above describes how the Risk Equalisation Scheme operates within a community rated health insurance market.

In addition to the above, in 2015 two new schemes intended to support the health insurance market by attracting more younger adults, were introduced.
These schemes altered the community rating system.4 They are: • The Lifetime Community Rating Scheme: This is a system of mandatory ‘late-entry loading’ which means that people who take out health insurance for the first time at age 35 or over pay a higher premium than others (2% per year of age up to a maximum of 70% for those aged 69 or over).
The loadings apply for a maximum period of ten years.5 • Discounted Schemes for Younger Adults: Health insurers may offer reduced premiums for young people between the ages of 18 and 25 years, on a sliding scale.

Also, health insurance premiums for children may not exceed 50% of the cost of an adult premium.

4 Lifetime Community Rating was first provided for in 2014 by means of regulations under the Health Insurance (Amendment) Act 2014.
Those regulations provided that Lifetime Community Rating would be mandatory for insurers and take effect on 1 May 2015.

5 Lifetime Community Rating | HIA – see information at this link for further details of terms and conditions.
Library & Research Service | L&RS Bill Digest 12 Figure 1: Infographic of Risk Equalisation Scheme operating in the health insurance market (at present) Library & Research Service | Health Insurance (Amendment) Bill 2021 13 Renewal of the Risk Equalisation Scheme The Risk Equalisation Scheme is subject to EU approval as a form of State aid.

The HIA 2020 Annual Report states: “The Risk Equalisation Scheme was due to be renewed in 2020.
Due to the Covid-19 pandemic and its potential to impact the private health insurance market the Department of Health decided to extend the existing scheme until 31 March 2022. the European Commission confirmed in December 2020 that they had no objections to the prolongation of the Risk Equalisation Scheme to 31 March 2022.”6 The Department of Health has said it expects to “finalise the negotiations [on approval of the RES from April 2022] with the European Commission by the end of this year.”7 Appendix One provides an overview of EU State aid rules.
A proposed High Cost Claims Credit (HCCC) – rationale and consultation The Bill proposes adding a High Cost Claims Credits (HCCC) system to the RES.

Like the rest of the RES, this is subject to approval of the European Commission.

This section explains what a HCCC is and how it is proposed it would operate in the RES.
It draws on information from the Department of Health and the Health Insurance Authority, including its analysis of submissions in received in a consultation on the risk equalisation scheme earlier this year (the 20 original submission available here8).

Box 2 below sets out the Department of Health’s rationale for the HCCC.

Box 2: Department of Health information on the Introduction of High Cost Claim Credits The new RES will differ from the current 2016 RES by introducing high cost claims credits (HCCC).
Similar schemes in other countries have achieved an increase in effectiveness by directly subsidising very high cost outliers.

The analysis of the Health Insurance Authority, based on submissions from the three registered undertakings (Irish Life Health, Laya Healthcare, VHI), shows this can be achieved by reducing differences between insurers net claims at each given age band to the average net claims for each age band in the market as a whole.
Treating these high cost claims separately will mean that risk equalisation subsidies provided to insurers will be more accurate and effective by removing distortive high cost claims.

High cost claims arise in the Irish health insurance market where an insured person is extremely ill and attends hospital for an extended period, and are closely linked to chronic conditions such as cancer.
Health insurers are prevented from charging higher premiums for these customers, and are required to renew cover for these customers, unlike other types of insurance where the premium can be increased or cover refused.

The addition of high cost claims credits into the 6 https://www.hia.ie/sites/default/files/HIA%20Annual%20Report%202020%20%28Final%29.pdf 7 Briefing to L&RS from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.
November 2021.

8 https://www.hia.ie/https%3A//www.hia.ie/publication/previous-public-consultation-papers Library & Research Service | L&RS Bill Digest 14 RES intends to target subsidies towards the claims costs of these sicker customers, to support the principal objective of the Health Insurance Act to ensure there is no differentiation made in health insurance coverage across young and old and healthy and sick.
The HCCC will operate by compensating a proportion (“quota share”) of health insurance claims that exceed a certain amount (“claims threshold”) within a calendar year.

The remainder of the claim not covered by the quota share will be covered by the insurer.

This acts as an incentive for insurers to be as prudent and efficient as possible in managing a claim.

Source: Briefing to L&RS from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.
November 2021.

In terms of the downsides of a HCCC, the Health Insurance Authority has stated that:9 “The main disadvantage of a HCCP is that if claims above a certain level are covered by the pool, then there is also a risk that insurers would be less likely to challenge and efficiently manage high-cost claims.” To counter this the Department of Health (above) highlights that only a portion of the high cost will be covered – thereby making it worthwhile for insurers to “manage” claims.
The introduction of the HCCC was included in a consultation carried out in 2021 by the Health Insurance Authority on the renewal of the Risk Equalisation Scheme overall.

The HIA received 20 submissions to this consultation.

Among those who responded to the consultation were the three providers of health insurance: Irish Life Health, Laya Healthcare and Vhi Healthcare.
Their response to the renewal of the RES, including the high cost claims element is summarised in the consultation report as follows:10 “…Irish Life Health…stated that,based on their understanding of how the HCCP would be implemented, its introduction would likely lead them to review their plans for innovation.
The introduction of a HCCP would also change how they would approach and invest in the market.Irish Life Health acknowledge that the HCCP, in theory, may increase the effectiveness of the RES, based on the current measure of effectiveness.

However, their view is that, based on the information available to them, it is likely to increase the cost of health insurance for those who can least afford it.
Irish Life Health were also of the opinion that the HCCP will share inefficiencies across the market and increase claims cost to the detriment of customers and cause further instability within the market.

They also state that they believe it will result in further over-compensation of the net beneficiary of the RES [Vhi healthcare].
9 Health Insurance Authority (2021) Report on a public consultation on the community rated health insurance market in Ireland and proposed changes to the Risk Equalisation Scheme 10 Health Insurance Authority (2021) Report on a public consultation on the community rated health insurance market in Ireland and proposed changes to the Risk Equalisation Scheme Library & Research Service | Health Insurance (Amendment) Bill 2021 15 Laya Healthcare confirmed that they are committed to the private health insurance market and although the introduction of a HCCP is likely tohave an adverse impact on Laya Healthcare,they accept that it would increase the effectiveness of the RES.
Vhi also stated that they remain committed to the market and that no proposed changes would affect that commitment.” [emphasis added] Among the many topics raised in this consultation was the issue of using Diagnostic Related Groups (DRGs) to further refine the Risk Equalisation Scheme.
DRGs are categories are patients/cases that offer what may be considered a superior measure of health status than the combination of the age/gender based credits and hospital utilisation credit in use currently or the High Cost Claims Credit proposed in the Bill.

The DRGs were identified as a possible method prior to the current Scheme being introduced.11 One prerequisite of using DRGs is good quality data (in order to categorise cases).
The HIA reported how it arose in the recent consultation and their response as follows:12 “All three of the insurers and other representative bodies in their submissions highlight the crucial need for a move to implement Diagnostic Related Groups (DRGs) in the near future.

The Department of Health and the Authority are supportive of DRGs and recognise the merits of the incorporation of DRGs within the RES as a means to increase its effectiveness.
Whilst it had been the hope that DRGs would have formed part of the new RES, it was recognised that it will take time to implement and a HCCP [high cost claims pool] was put forward as an interim step to improve effectiveness and increase the element of RES credits attributable to actual health status.
The Authority will continue to support the Department of health towards the goal of implementation of DRGs as a component of the RES.” Impact of Covid-19 pandemic on health insurance The pandemic had some immediate impacts on the usage of health insurance.

The longer-term impacts are uncertain.


Notable issues in this regard are: • The State take-over of private hospitals (April-Jun 2020) and general reduced non-Covid care resulted in an 18% reduction in the payout from health insurers (known as returned benefit) in 2020 (compared with 2019).

13 • Each of the three open market insurers (those in the Risk Equalisation Scheme) returned some monies to their customers by way of refund of premium/waiver of premium or a COVID-19 benefit payment.
11 See Health Insurance Authority (2014) Report on Incorporating Diagnostic Related Groups into the Risk Equalisation Scheme.

12 Health Insurance Authority (2021) Report on a public consultation on the community rated health insurance market in Ireland and proposed changes to the Risk Equalisation Scheme 13 Health Insurance Authority (2021) Market Report 2020.p.12 Library & Research Service | L&RS Bill Digest 16 • As a result of lower claims activity, the Risk Equalisation Fund built up a surplus of €100m.
Section 8 of the Bill (described in detail below) seeks to reduce the amount of stamp duties payable for one year from April 2022 to reduce this surplus.

• The take-up of health insurance dipped at the start of the pandemic but has recovered and indeed the current take-up is higher than at any time previously (as a total number of insured people – the proportion of the population is less than the peak, due to population growth in the meantime).
• The Department of Health has noted that disruption in healthcare due to the pandemic is continuing in 2021 and that: “The future impact on the private health insurance market and any long-term impacts it may have on the usage and provision of health care as well as any potential adverse economic effects is uncertain at this time.” 14 Broader policy context This section looks at the broader policy context to the Health Insurance (Amendment) Bill 2021.
It is organised into the following parts: • Equity in healthcare in Ireland; and • The Sláintecare report and its implementation – implications for private health insurance Equity in healthcare in Ireland Equity is a commonly occurring theme in debates on healthcare.
As noted above, the Risk Equalisation Scheme seeks to address issues of equity of access to private health insurance in Ireland, so that, in general, premiums can be (with the exception of young adult discounts and the loadings under Lifetime Community Rating) charged at the same price to all customers.

This is considered more equitable than charging older or sicker people more, i.e.

for premiums to be risk- related - like car insurance.
More broadly, the issue of equity of access to healthcare is also relevant to the Bill.

Ireland has a mix of public and private healthcare, in terms of both finance and delivery.

Despite there being universal eligibility for public hospital care in Ireland, a large minority of the population continue to pay for private health insurance (see figures above).

Due to the different levels of access provided to the insured and uninsured groups it has become known as a ‘two-tier health system'.
There is much literature around the pros and cons of private market provision, and issues relating to the gap between those with and without health insurance.

14 Briefing to L&RS from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.
November 2021.

Library & Research Service | Health Insurance (Amendment) Bill 2021 17 The international literature indicates that people have different motivations for taking up voluntary (private) health insurance depending on the type of cover it bestows.
In Ireland, cover is generally seen as ‘supplementary’15 – meaning that it: “…offers access to health care that is covered publicly, but gives policy holders greater choice of provider and level of amenity (usually including access to private providers) and may enable them to bypass waiting lists for publicly financed services.” 16 The motivations for people to take out supplementary health insurance are considered to be “perceptions about the quality and timeliness of publicly financed health services.” 17 As seen above, attitudinal studies in Ireland are in line with this, suggesting that people want health insurance to avoid delays in accessing care, and have some issues with the quality of care in public services.18 However, there are long-running concerns about fairness in the system.19 For example, Professor Brian Nolan, in an Economic and Social Research Institute (ESRI) paper, has argued that: “The…two-tier system is now widely regarded as problematic from an equity perspective.”20 In 2009, Dr Samantha Smith, ESRI, while acknowledging that there is no universally agreed definition of equity, noted that: “In health care, empirical investigation of equity has focused on adherence to two principles: that healthcare should be financed according to ability to pay, and delivered according to need.”21 The Sláintecare report – implications for private healthcare and insurance These principles (noted above by Dr Smith) were influential in the terms of reference of the Special Oireachtas Committee on the Future of Healthcare (2016-2017).
This cross-party Committee’s Sláintecare Report, concluded that the healthcare system must be: 15See Turner, B (2013) as before.

16 Saagan, A and Thompson, S (2016) Voluntary health insurance in Europe – Role and regulation.

Copenhagen: WHO Regional Office for Europe and European Observatory on Health System and Policies.

17 Saagan A and Thompson, S (2016) as before.p.29.

18 See: Nolan, B.

(2001) Health Insurance in Ireland: Issues and Challenges; ESRI Working Paper No.
10; and HIA commissioned Millward Brown Landsdowne Consumer Survey (2011) http://lenus.ie/hse/bitstream/10147/312355/1/xHIAConsumerSurvey2012Report.pdf ; also National Economic and Social Forum report (2002) Equity of Access to Hospital Care - Forum Report No.

25; http://files.nesc.ie/nesf_archive/nesf_reports/NESF_25.pdf 19 See for example, National Economic and Social Forum Report Equity of Access to Hospital Care - Forum Report No.

25 (2002) 20 Nolan, B.


(2001) Health Insurance in Ireland: Issues and Challenges; ESRI Working Paper No.

10 21 Smith, S (2009) Equity in Health Care – A view from the Irish Health Care System, Adelaide Hospital Society, and University of Dublin, Trinity College.
http://www.esri.ie/UserFiles/publications/20090406113247/BKMNEXT136.pdf Library & Research Service | L&RS Bill Digest 18 “Re-oriented to ensure equitable access to a universal, single tier system, and …[in which] the vast majority of care takes place in the primary and social care settings.” (p.14) The Committee envisaged that in a reformed system: “…everyone has equitable access to services based on need and not ability to pay.”22 A range of measures were recommended across all domains of healthcare – a re-orientation of care towards primary care, addressing understaffing, providing more timely access to public hospital care (including waiting times guarantees).
The Sláintecare recommendations of most relevance to health insurance are those that propose changes to the private / public mix of healthcare provision and funding – such as expanding eligibility to primary care to achieve universal coverage and the removal of private practice from public hospitals.

In relation to private hospital care (generally paid for, at least in part, by health insurance), the Committee recommended ceasing all private care in public hospitals.
Specifically, the Committee recommended: “…a model where private insurance will no longer confer faster access to healthcare in the public sector, but is limited to covering private care in private hospitals.” (p.28) Implementation of Sláintecare In the current Programme for Government, Our Shared Future, the Government said it would: “…accelerate the implementation of Sláintecare.” In June this year it published a new Sláíntecare Implementation Strategy and Action Plan for 2021-2023.
This document states that: “The removal of private practice from public hospitals is a core principle of Sláintecare, ensuring that public healthcare facilities are used for public patients only, and that public patients can access public hospitals based on clinical need.” The Implementation Strategy and Action Plan identifies the introduction of a Sláintecare Consultant Contract as key action in this regard.
The Government has also been explicit in its support of private healthcare as a consumer choice, stating it will: “Retain access to private health services, ensuring choice for those accessing health care.”23 22 Committee on the Future of Healthcare (2017) Press release: Future of Healthcare Committee publishes Sláintecare – a plan to radically transform Irish healthcare.

23 Government of Ireland (2020) Our Shared Future.


Library & Research Service | Health Insurance (Amendment) Bill 2021 19 Developments around removing private care from public hospitals – and the potential impact on private health insurance A number of reports (see table below) have been published looking at the removal of private care from public hospitals.
Table 2: Reports on private care in public hospitals Title and publication date Author Notes Assessing Private Practice in Public Hospitals (October 2018) OECD Commissioned by the Department of Health.
Report of the Independent Review Group established to examine Private Activity in Public Hospitals (February 2019) Independent Review Group Report on the possible impact of the removal of private practice from Irish public hospitals (June 2019) Deloitte Reassessing Private Care in Public Hospitals (2020) OECD Known as the ‘de Buitléir Report’ after Group Chairperson, Dr Donal de Buitléir.

Although published later, it is understood this analysis was available to the Independent Review Group.
A follow-up on 2018 study listed above.

Looks at Commissioned by the Department of Health.

The first OECD report listed above summarised the pros and cons of having private care in public hospitals.

See table below (negative points on the left, positive on the right).

Table 3: OECD summary of the negative and positives of having private practice in public hospitals Source: OECD (2018) Assessing Private Practice in Public Hospitals, p. 29.
Library & Research Service | L&RS Bill Digest 20 According to the Independent Review Group Report, it is very difficult to predict with great accuracy the full range of consequences of removing private care from public hospitals.

24 The 2018 OECD report highlighted that there would clearly be fewer providers for private patients, and that future demand for private health insurance would hinge on how reforms turn out in terms of public and private sector capacity/levels of service.
25 The key relevant findings of the Independent Review Group, are: 26 • The health insurance market would likely shrink by a minimum of 10% due to the exit from the market of people whose insurance covers only public hospital care (per Figure 3 above currently 9% of insured people have these policies).

• Currently about 810,000 people with health insurance receive all their care in public hospitals.

These people would be most directly affected by the proposed change.
If all these people gave up their health insurance, this would reduce the market size from about 45% of the population to 28% of the population.

• Initially there may be price reductions for consumers (as insurers would no longer have to pay for care received in public hospitals).

In the longer-run however, it is very difficult to predict the impact on consumer prices.

They may drop by 1% or rise by up to one-third.


• There are likely to be regional effects on who leaves the health insurance market – as there are not private hospitals in all areas of the country.

People without a local private hospital are not likely to see the benefit of keeping their health insurance.

The report identifies the regions with few or no private hospitals as: the Midlands and the North West.
• If the market shrinks, it will also age - as older people are considered more likely to want to keep their cover as they are more concerned about their health.

This would have implications for the cost of premiums and for the level of stamp duty levy required to maintain the community rating of the system.
(The Review Group also note that beyond the removal of private care from public hospitals, there are other factors likely to put upward pressure on the cost of health insurance premiums – population ageing and the rising cost of claims).

• Overall, if the public health system improves (especially through increased finance and human resources), the market for private health insurance is likely to reduce.
• A progressive and phased approach to the removal of private care from public hospitals should mitigate against the shock to the health insurance market.

The HIA has stated: “The Authority acknowledges that Sláintecare has cross-party approval and private health insurance may ultimately fulfil a different role with different regulatory supports within that 24 https://assets.gov.ie/26529/aed7ee0317ff49a7a609974772cf2191.pdf 25 OECD (2018) Assessing Private Practice in Public Hospitals, p. 34.
26 https://assets.gov.ie/26529/aed7ee0317ff49a7a609974772cf2191.pdf Library & Research Service | Health Insurance (Amendment) Bill 2021 21 model.

However, any transition should be planned over several years and carefully consider the fair treatment of health insurance consumers.” 27 Key data on the health insurance market Size of the market The health insurance market is very large - HIA describes it as follows28: “The health insurance market is the largest non-life insurance market in Ireland.
Premium income in 2020 was €2.64bn, which was lower than 2019 (€2.72bn).

The three main insurers, Vhi, Laya and Irish Life Health accounted for 94% of this amount.” €2.64 billion – Size of the health insurance market (premium income) in 2020.

The health insurance market is the largest non-life insurance market in Ireland.
The HIA explains the reduction in the size of the market in 2020 as follows29: “The decline in premium income [in 2020] was due to substantial refunds to customers due to the curtailment of access to private hospital treatment during the year on account of Government emergency healthcare measures in response to the Covid–19 pandemic.
This curtailment caused a substantial reduction in insurance claims.” Take-up of health insurance Some key points about the take-up of health insurance are: • The HIA highlights that there are 56,000 more people with health insurance at the end of September 2021 than a year previously.30 • The number of people with health insurance has never been higher.

There were 2,357,000 people with health insurance at the end of September 2021.

Based on CSO population estimates this represents 47% of the population.
This is lower than the peak in terms of proportion of the population – which was 50.9% at the end of 2008.

• It does not appear that the Covid-19 pandemic has had a negative impact on health insurance take up.

Though take up dropped back between March and June of 2020, at the start of the pandemic, the overall figures for last year showed an increase.
27 Health Insurance Authority (2020) Private Health Insurance Market continued to rise in 2019 but impact of Covid19 is yet to be quantified, Press release: 30 July 2020.

28 HIA Annual Report 2020 (Final).pdf p.15 29 HIA Annual Report 2020 (Final).pdf p.15 30 https://www.hia.ie/sites/default/files/Market%20Figures%20Sep%202021.pdf Library & Research Service | L&RS Bill Digest 22 • The figure below shows the trend in take-up of health insurance over the period 2005 to September 2021.
Figure 2: Number of people insured (in-patient plans) (2005 - Sept. 2021)* n o i l l i m 2.400 2.300 2.200 2.100 2.000 1.900 1.800 2.297 2.357 2.025 Date Source L&RS using data from: Health Insurance Authority, 2021 Note: *All figures relate to the total private health insurance market, i.e.

open enrolment and restricted undertakings.

Population figures are based on Central Statistics Office population estimates.

Except where specified, all figures are year end.

Who has insurance?
Who has insurance?

A nationally representative survey of adults, published by the HIA in early 2020, found that:31 • People with health insurance are more likely to be more affluent, white-collar workers / professionals.

• People in more manual professions are more likely to rely on state benefits – and not to have health insurance.
• Those with health insurance were more likely to live in Dublin than in other areas, suggesting that overall increases in health insurance coverage is being driven by this region.

This finding on the social divide is consistent with previous surveys commissioned by the HIA.
32 31 https://www.hia.ie/sites/default/files/17th%20January%20Kantar%20Report_0.pdf 32 Health Insurance Authority (2017) A review of Private Health Insurance in Ireland, 2017 Library & Research Service | Health Insurance (Amendment) Bill 2021 23 What do people see as the value in having health insurance?
The same survey found that faster access and better service are the major attractions for health insurance customers: “At an overall level, there is growing belief that having PHI allows people to skip queues (64%) and ensures they receive a better level of service (62%).

In line with previous years, it is also deemed a necessity, not a luxury by nearly six in ten (58%).”33 There is evidence to support the view that having health insurance means shorter waiting times.
Recent research (2020) by the Economic and Social Research Institute (ESRI) found that patients with private health insurance receive both out-patient and in-patient care more quickly than those without insurance.34 Market shares Figure 3 (below) shows that, in 2020, Vhi Healthcare remained the dominate provider in the private health insurance market – with almost half the market (49%).

Laya Healthcare is the next largest player, with 27%, followed by Irish Life Health with 20% of the market.
The remaining 4% of the insured population have their policies with ‘Restricted Membership Undertakings’ – in the main, these are vocational schemes that are open only to employees of particular organisations (e.g.

prison officers, ESB).

Because it insures more people, especially more older people, VHI Healthcare is the net beneficiary of the risk equalisation scheme.
Figure 3: Irish health insurance market shares, 2020 Source: Library & Research Service using data from the Health Insurance Authority, Annual Report 2020 33 https://www.hia.ie/sites/default/files/17th%20January%20Kantar%20Report_0.pdf 34 Whyte, R, et al (2020) Insurance status and waiting times for hospital-based services in Ireland.

Economic and Social Research Institute.

This research looked at data from 2007 and 2010.


Library & Research Service | L&RS Bill Digest 24 Price of health insurance Between the three open-market insurers there are over 300 insurance products to chose from.

On 1 January 2021, the price of these products ranged from €490 to €9,000 yearly.

35 This is the price a consumer pays and allows for tax relief available at source of up to €200 or 20% of the premium if less.
It does not take into account any discounts which may be offered to young adults or groups.

According to the HIA, the average premium/price being paid by policyholders at 1 January 2021 across all levels of products was €1,440 (based on prices at 1 January 2021 and the products held by the insured population at that date).

36 This is represents an increase of 1.8% compared to 1 January 2020.

This change is due to a mix of price increases, changes in population and product choice.
37 As noted, consumer prices are subject to tax relief.

The State subsidises private health insurance by providing consumers with ‘medical insurance tax relief’ on premiums at the standard rate of tax (20%).
The degree of subsidy has been reduced in recent years by a reduction to the standard rate of tax from the marginal rate and a cap placed on the premium price that will be allowed for tax relief (€1,000 for an adult, €500 for a child).38 Tax relief on private health insurance (held by fewer than half the population) cost the Exchequer €377m in 2020 (provisional figure).
Nonetheless, in 2020, the cost to the Exchequer of this tax relief was €377 million (figure from February 2021 based on provisional data for 2020).39 This has raised issues of equity – forgoing the tax is a public subsidy, the cost of which is spread across all taxpayers including those who cannot afford / do not purchase private health insurance.
Academics Brian Turner and Samantha Smith40 note that this tax relief on premiums has been justified on the basis: “…that those who opt for private cover effectively forgo a statutory entitlement while continuing to contribute to the funding of the public health service through taxation.”41 Pre-legislative scrutiny of the General Scheme of the Bill There was no pre-legislative scrutiny of this Bill.
35 Health Insurance Authority (2021) Market Report 2020.p.12 36 Health Insurance Authority (2021) Market Report 2020.p.6.

37 Health Insurance Authority (2021) Market Report 2020.p.6.

38 See Citizens Information webpage on: Taxation and Medical Expenses.

39 Written Answer to Parliamentary Question, 12 February 2021. https://www.oireachtas.ie/en/debates/question/2021-02-10/231/ 40 Turner, B and Smith, S (2020) ‘Uncovering the complex role of private health insurance in Ireland’ in Eds.
Thomson, S, et al, Private Health Insurance: History, Politics and Performance, World Health Organization, European Observatory for Health Systems and Policies and Cambridge University Press.

41 Turner and Smith cite this quote from Department of Health and Children (1999) White paper on health insurance.

p.24.
p.24.

(This document can be found on HSE’s Lenus database: https://www.lenus.ie/discover) Library & Research Service | Health Insurance (Amendment) Bill 2021 25 Principal provisions of the Bill This part of the Digest describes and examines the Bill, section by section.

The key provisions deal with risk equalisation credits and stamp duties in the Risk Equalisation Scheme (described above).

Each year the Health Insurance Authority (HIA) assesses the returns made to it from health insurers.
It then provides a report to the Minister making recommendations on the level of risk equalisation credits and stamp duty levies required to fund them for the following year.
This year’s report (October 2021) to the Minister is published here.42 The Department of Health has stated: “The Minister has accepted the HIA recommendations in relation to the required rates and in consultation with the Minister for Finance has agreed to the levies to operate from 1 April 2022.”43 Section 1: Definition Section 1 defines the ‘Principal Act’ as the Health Insurance Act 1994.
Section 2: Amendment of section 6A of the Principal Act is the first place in the Bill where the concept of a ‘high cost claims credits’ (HCCC) is introduced.

As noted above, the Bill seeks to introduce a high cost claims credit as an additional measure of compensation in the RES.

Section 2(1) seeks to amend section 6A of the Principal Act to change the definition of risk equalisation credits to include payments from the Risk Equalisation Fund in relation to high cost claims.
Section 2(b) seeks to insert definitions as described in Table 4 below.

Section 7 of the Bill specifies the amounts to apply to the threshold and quota – examples of how these will operate are provided in Figure 5 on page 30.
Table 4: Definitions set out in Section 2(b) of the Health Insurance (Amendment) Bill 2021 Term Definition High cost claim A claim, or more than one claim, arising in a prescribed 12 month period for an insured person where (under a contract with the same insurance company): • The amount or cumulative amount of the claim or claims is more than the high cost claim threshold (set in Section 7 of the Bill); and • Which has / have been paid for by the insurance company.
42 Autumn RES Report 2021_1.pdf (hia.ie) 43 Briefing from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.

[provided to the Oireachtas Library & Research Service] Library & Research Service | L&RS Bill Digest 26 High cost claim credit High cost quota share An exclusion applies to claims for the cost of drugs that are not listed on the reimbursement list published by the HSE under s.17 of the Health (Pricing and Supply of Medical Goods) Act 2013.
The amount of the high cost claim quota share (see below) multiplied by the amount by which the high cost claim is more than the high cost claim threshold.

The percentage as set out in paragraph 2 of Schedule 5 as the high cost claim quota share – it is the portion of a high cost claim above the high cost claim threshold payable from the Fund as a higher cost claim credit.
High cost claim threshold The threshold is the sum of the following amounts: • The amount specified in paragraph 1 of Schedule 5 AND • The amount (if any) of any other risk equalisation credits (other than high cost claim credits) claimed from the Fund relating to the same insured person in the same 12 months period (to which the high cost claim relates).

Source: L&RS analysis of the Health Insurance (Amendment) Bill 2021.
Section 2(c) seeks to add to the definition of the ‘relevant amount’ payable in the Hospital Utilisation Credit (HUC).

Specifically it seeks ensure that the HUC will only be payable where the insurance company has paid for the accommodation (in-patient or day-patient) concerned.
Section 3: Amendment of section 7E of Principal Act Section 3 seeks to amend section 7E of the Principal Act so that the Minister may require the Health Insurance Authority to provide a report on the high cost claims credit parameters.

The HIA already provides the Minister with a report each year on the parameters of the risk equalisation credits and hospital utilisation credit.
Section 4: Amendment of section 7F of the Principal Act In the Risk Equalisation Scheme, a benchmark of ‘reasonable profit’ is used to check whether any insurer has been overcompensated.

The profit is the return on sales gross of reinsurance and excluding investment activities.

It is calculated and assessed on a three-year rolling basis.

Section 4 of the Bill seeks to amend Section 7F of the Principal Act to increase the benchmark amount of ‘reasonable profit’ from 4.4 per cent to 6 per cent.
The Section provides for a gradual increase from 4.4 per cent to 6 per cent, within the three-year rolling method.

Benchmark of ‘reasonable profit’ – Bill proposes increase from 4.4% to 6%.

Section 4(c) provides for a benchmark ‘reasonable profit’ to apply at a rate of 4.9 per cent for the three-year period 1 January 2020- 31 December 2022; and a rate of 5.5 per cent to apply for the three-year period 1 January 2022 – 31 December 2023.
Library & Research Service | Health Insurance (Amendment) Bill 2021 27 According to the Department of Health, the proposal to increase the benchmark for ‘reasonable profit’ arises from a new benchmarking exercise among European and Irish insurers.44 The proposed change is subject to approval by the European Commission.

Box 3 below provides more details on this process and its results.
Box 3: Explaining Overcompensation and how it is assessed The [Health Insurance] Authority is…required to assess whether the Risk Equalisation Scheme overcompensates any insurer.

Each year, the Authority assesses if any insurer has been overcompensated by the risk equalisation scheme, enabling them to earn in excess of a reasonable profit.
The assessment as to whether the 2016 – 2020 Risk Equalisation Scheme results in overcompensation is based on whether a net beneficiary’s Return on Sales gross of reinsurance and excluding investment activities exceeds 4.4% per annum, calculated on a rolling three-year basis.

If the Authority determines under the Health Insurance Acts that an insurer (which is a net beneficiary of the risk equalisation scheme) has been overcompensated, the Authority must issue a draft report to the insurer.
The Authority will then take account of any submissions received from that insurer before making a final determination on overcompensation, which is provided to the Minister for Health, an insurer that has been compensated must then refund the amount of overcompensation to the REF.
For the period 2017 to 2019 inclusive, the Authority evaluated and analysed the information provided to it by the three participants in the RES and made a determination that the net beneficiary had not been overcompensated as a result of the risk equalisation scheme.

Source: HIA Annual Report 2020.


Section 5: Amendment of section 11C of Principal Act Section 5 seeks to amend Section 11(c) of the Principal Act to make 1 April 2022 the date from which the revised risk equalisation credits will apply(see table of credits below).

Section 5(c) seeks to introduce a time limit on the period in which risk equalisation credits can be claimed by health insurers (current or previous providers of health insurance).
It sets out that claims cannot be made the HIA if the claim (or part thereof) more than six years before the 31 March in the year prior to the date of making the claim.

The effect of this is to stop claims being paid that are not claimed within a six to seven year period.

The Department of Health has explained the rationale for this measure45: 44 Briefing from the Department of Health on the Health Insurance (Amendment) Bill 2021 (November 2021).
For further information: the Health Insurance Authority has published two documents on benchmarking ‘reasonable profit’ as follows: Health Insurance Authority (2021) HIA Recommendation for an Appropriate Benchmark for the Overcompensation Assessment; and Oxera Research Note (2021) Estimating the looking forward return on sales benchmark.

45 Briefing to L&RS from the Department of Health on the Health Insurance (Amendment) Bill 2021.

November 2021.p.3.
November 2021.p.3.

Library & Research Service | L&RS Bill Digest 28 “The Bill provides that there is a time limit placed on all elements of the Risk Equalisation Credits that can be claimed from the Fund.

There is currently no time limit/cut-off period in the legislation restricting how long a registered undertaking may have to make a claim to the Fund.
Introducing a cut-off time period for risk equalisation credit claims will result in many benefits from a data management, administrative and financial reporting perspective.

This section will be commenced by the Minister for Health following consultation and an agreed timeline for introduction with industry stakeholders.” Section 6: Amendment of Schedule 4 to Principal Act Section 6 seeks to substitute a new Table for Table 2 in Schedule 4 of the Principal Act.
The table sets out the amounts of risk equalisation credits for different age groups / genders (also known as Age Related Health Credits).

Section 6 sets out the rates proposed to apply from 1 April 2022.

The table here (below) shows the current rates and the proposed rates.
Table 5: Risk equalisation credits – current rates and those proposed in the Health Insurance (Amendment) Bill 2021 Advanced policies Non- Advanced policies Age Bands Men Now 64 & under Women Men Women From Now From Now From Now From 01/04/2022 01/04/2022 01/04/2022 01/04/2022 €0 €0 €0 €0 €0 €0 €0 €0 65-69 €1,025 €950 €550 €500 €350 €325 €200 70-74 75-79 80-84 85 and over €1,675 €1,575 €1,150 €1,075 €550 €500 €400 €2,500 €2,375 €1,800 €1,700 €825 €775 €625 €3,150 €2,975 €2,250 €2,125 €1,025 €950 €700 €3,750 €3,550 €2,550 €2,425 €1,250 €1,150 €825 €775 €150 €350 €575 €650 Source: L&RS using data from Health Insurance Amendment Act 2020 (current rates) and Table 2 of the Bill (proposed rates).
Table 5 shows that the proposed risk equalisation credits to commence in April 2022 are all reductions on the current rates.

This is unusual.

In most years, since the introduction of the RES, the Health Insurance (Amendment) Bills brought forward seek to adjust some rates upwards, others downwards and some may stay the same – in a unique recalibration of the RES.

The proposal to reduce all rates this year may be because of the proposed introduction of the HCCC.
The HCCC will bring a new dimension to risk equalisation in addition to the system of age/gender linked credits.

Library & Research Service | Health Insurance (Amendment) Bill 2021 29 The rates provided for in the Bill are those proposed by the HIA to be adopted alongside the HCCC.

However, the HIA also proposed rates in the case where the HCCC was not introduced.
These are set out in the HIA report to the Minister in its Report of the Authority to the Minister for Health on an evaluation and analysis of returns from 1 July 2020 to 30 June 2021, including advice on Risk Equalisation Credits.

Section 7: Amendment of Principal Act by addition of Schedule 5 - high cost claims Section 7 seeks to add a new schedule, Schedule 5, to the Principal Act.
The Schedule specifies the level of ‘high cost claim threshold’ to apply as €50,000 and the ‘high cost claim quota share’ at 40 per cent , as illustrated in Figure 4 below.

The Health Insurance Authority has estimated that:46 ”…the size of the credits to be distributed in respect of the HCCP for 2022/23 is €55m or 6% of the overall credits.” Figure 4: Amounts in proposed Schedule 5 – ‘high cost claim threshold’ and ‘high cost claim quota share.
High cost claim threshold High cost claim quota share €50,000 40 per cent Source: L&RS analysis of the Health Insurance (Amendment) Bill 2021 Figure 5 (below) shows how the cost claims credit system would operate, given the definitions set out in Section 2 of the Bill the high as follows.

46 Health Insurance Authority (2021) Report of the Authority to the Minister for Health on an evaluation and analysis of returns from 1 July 2020 to 30 June 2021, including advice on Risk Equalisation Credits.
Library & Research Service | L&RS Bill Digest 30 Figure 5: Examples of how the High Cost Claims Credit (HCCC) system would operate* at the levels provided for in the Section 7 of the Bill.

€49k claim(s) €110k claim(s) €50,000 threshold €50,000 threshold HCC Credit due at 40% of amount over €50k HCC Credit due at 40% of amount over €50k No credit due = 40% of 60K = €24k HCC Credit due to insurer is €20K *Examples are for illustrative purposes and do not describe all the conditions / exemptions applying.
See Section 2 of the Bill (described above) for details.

Source: L&RS analysis of the Health Insurance (Amendment) Bill 2021 Section 8: Amendment of section 125A of Stamp Duties Consolidation Act 1999 Section 8 seeks to amend section 125A of the Stamp Duties Consolidation Act 1999.

It specifies the rates of stamp duty to apply to each health insurance policy.

It specifies rates to apply from 1 January 2022 to 31 March 2022 (the same as the current rates) and for reduced rates to apply from 1 April 2022.
Both sets of rates are set out in Table 6 below.

It shows that the reduction in rates varies from €11 to €43 per policy.
Table 6: Current and proposed rates (from 1 April 2022) of stamp duty levied on health insurance policies Proposed rate Proposed rate Level of reduction 1Jan 2022 to 31 March 2022 1 April 2022 Advanced policies (under 18s) Advanced policies (adults) Non-advanced policies (under 18s) Non-advanced policies (adults) €150 €449 €52 €157 €135 €406 €41 €15 / 10% €43 / 9.6% €11 / 21.2% €122 €35 / 22.3% Library & Research Service | Health Insurance (Amendment) Bill 2021 31 Reductions of between 9 and 10 per cent would apply to the vast majority of contracts – as 92% of contracts fell into the ‘advanced’ category at the end of 2020.
Non-advanced contracts are generally those that provide mainly cover for private care in public hospitals – these accounted for 8% of contracts at the end of 2020 (unchanged from the end of 2019) (see Glossary for definitions).

Why are stamp duty reductions proposed?


As a result of lower claims activity by consumers of private health insurance, due to the Covid-19 pandemic, an estimated surplus of €100m has built up in the Risk Equalisation Fund.47 The Health Insurance Authority has recommended reductions in stamp duty rates to the Minister as a way of handling this surplus in the Fund.

Will the saving from the reduced stamp duty be returned to policy holders?
The Health Insurance Authority recommended reductions in stamp duty to the Minster.
It has stated that this would be a “once off reduction” that would allow the HIA “…to return this money surplus [in the risk equalisation fund] back to the consumer.” And also that its recommendation was made with the “…with the expectation that this reduction is passed on directly to the consumer.”48 Based on this expectation - of insurers reducing premiums by the amount of reduction in stamp duty - the HIA set out the following table showing the potential impact of the stamp duty change on the average premium: Table 7: Potential impact of proposed stamp duty reduction on price of average premium, if full reduction passed on to consumers.
Average Premium Average Price (€) Old Stamp Duty (€) New Stamp Duty (€) Revised Price (€) % Change Non-advanced Advanced 620 1,500 Source: Health Insurance Authority 49 157 449 122 406 585 1,457 -6% -3% However, previously, when stamp duties have been increased, Ministers have emphasised that it was not necessary for insurance companies to pass on such increases to their customers.
In 2016, for instance, then Minister for State at the Department of Health, Helen McEntee, TD stated: “It is important to note that increasing the stamp duty levies does not increase costs across the market.

This is a very important point and one which various commentators in the media need to remember.
We need to encourage our insurance companies not to use this 47 Health Insurance Authority (2021) Autumn RES Report 2021_1.pdf (hia.ie) 48 Health Insurance Authority (2021) Media Release: HIA propose a once off reduction to annual health insurance levy.

[accessed 02/12/2021] 49 Health Insurance Authority (2021) Media Release: HIA propose a once off reduction to annual health insurance levy.
[accessed 02/12/2021] Library & Research Service | L&RS Bill Digest 32 as an excuse to hike up insurance premiums and we certainly do not need people defending it as an excuse.”50 The Minister of State also stated that: “The amount of any increase or reduction that individual insurers pass on to consumers is a commercial decision for each of them.”51 In the same year, media reported that then Minister for Health, Simon Harris, TD, cautioned insurance companies to “think carefully” before passing on increases to consumers.52 Mr. Dermot Goode, commentator on health insurance market53, has said that reductions in stamp duty are likely to be offset by increases in premiums – so that consumers will not see the price of the policies drop.54 Section 9: Short title, commencement, collective citation and construction Section 9 (1) provides that if enacted the Bill would become the Health Insurance (Amendment) Act 2021.
Section 9(2)(a) provides that, if enacted, different sections of the Act would come into force on different dates: • Section 8 would come into operation on 1 January 2022; • Other sections of the Act would come into operation on a day or days ordered by the Minister for Health.

Section 9(2)(b) provides that, if enacted, the collective citation of the current Act and other health insurance legislation is the Health Insurance Acts 1994 to 2021.
50 Health Insurance (Amendment) Bill 2016: Second Stage – Seanad Éireann (25th Seanad) – Thursday, 8 Dec 2016 – Houses of the Oireachtas 51 Health Insurance (Amendment) Bill 2016: Second Stage – Seanad Éireann (25th Seanad) – Thursday, 8 Dec 2016 – Houses of the Oireachtas 52 https://www.rte.ie/news/2016/1111/830876-harris-urges-insurers-to/ 53 Mr Goode also runs a health insurance related business - Health insurance Ireland | About totalhealthcover.ie.
54 Health insurance prices to rise, despite stamp duty cut (rte.ie) [accessed 02/12/2021] Library & Research Service | Health Insurance (Amendment) Bill 2021 33 Appendix: Overview of EU State aid rules This is a general overview of the functioning of State aid rules.

It is provided as background material.

It is not specific to the Risk Equalisation Scheme.

What is State aid?
What is State aid?

Under the EU rules, State aid is provided where a company receives government support and obtains an advantage over its competitors.

The Treaty on the Functioning of the European Union (Treaty) prohibits State aid unless it is justified (e.g.

for overriding economic development reasons).

The Commission ensures that State aid complies with EU rules (subject to decisions of the EU Courts) and the Irish Courts also have a role in supervising aspects of State aid.
What are the elements of State aid?

State aid is an advantage in any form conferred on a selective basis to undertakings by public authorities of the Member States.

Subsidies granted to individuals or general measures open to all companies are not covered by this prohibition and do not constitute State aid (e.g.

general taxation measures (and there will be a decision on taxation measures and Ireland which will shortly be provided by the Commission) or employment legislation).
To be State aid, a measure needs to have the following features: • a measure taken by the State or the provision of State resources which can take a variety of forms (e.g.
grants, guarantees, interest and tax reliefs or providing goods and services on preferential terms); • the intervention gives the recipient an advantage on a selective basis, for example to specific companies or industry sectors, or to companies located in specific regions; • competition has been or may be distorted; and • the measure is likely to affect trade between Member States.

In some circumstances, State measures can be regarded as necessary for a well-functioning economy.
Therefore, the Treaty allows for a number of policy objectives for which State aid can be considered compatible with the Treaty rules.

However, illegal State aid can result in all such aid being repaid by the recipient to the State (plus interest).
Source: A&L Goodbody Solicitors, Contact: Houses of the Oireachtas Leinster House Kildare Street Dublin 2 D02 XR20 www.oireachtas.ie Tel: +353 (0)1 6183000 or 076 1001700 Twitter: @OireachtasNews Library & Research Service Tel: +353 (0)1 6184701 Email: library.and.research@oireachtas.ie