Press release
Publication of the Health Insurance (Amendment) Bill 2021
From Department of Health
Published on
Last updated on
From Department of Health
Published on
Last updated on
The Minister for Health, Stephen Donnelly TD, has received Government approval to publish the Health Insurance (Amendment) Bill 2021, which provides a mechanism for on-going sustainability of the private health insurance market, while also maintaining health insurance policies at an affordable price for all citizens, young or old, sick or healthy.
The Health Insurance (Amendment) Bill 2021 provides for a reduction in stamp duty levies on advanced health insurance contracts which will decrease from 2021 to €406 (decrease of €43); and on non-advanced health insurance contracts which will decrease from 2021 to €122 (decrease of €35).
Commenting on the Bill, Minister Donnelly said:
“COVID-19 has had a major impact on the private health insurance market in Ireland, as it has on the entire public and private health sectors. As a result of lower claims activity due to COVID-19 and restricted utilisation of hospital services, a surplus has built up in the Risk Equalisation Fund. With this in mind, I am pleased to announce a material reduction in the stamp duty on health insurance contracts commencing 1 April 2022.
“It is hoped that this reduction can benefit customers by way of a reduced premium charged by insurers next year. This reduction ensures that all persons, young and old, sick and healthy, can avail of affordable health insurance.”
The stamp duties collected on health insurance contracts do not go to the Exchequer, instead they are collected into the Risk Equalisation Fund and redistributed in the form of credits, to compensate for the additional cost of insuring older and less healthy people.
The Bill also provides for an additional type of credit which will subsidise high claims costs which health insurers incur through providing cover for customers with complex healthcare needs. This improvement is expected to increase the effectiveness of the Risk Equalisation Scheme in supporting the claims costs of sicker customers. The Bill is expected to be enacted by the Oireachtas before the end of this year.
ENDS
Risk equalisation is a mechanism designed to support the objective of a community rated health insurance market. In a community rated market, all customers pay the same amount (adjusted to reflect any loadings applicable under lifetime community rating) for the same health insurance product, irrespective of their age, gender or health status.
The Risk Equalisation Scheme has operated in the health insurance market since 1 January 2013 and is provided for under the Health Insurance Acts 1994 to 2020. Under the Scheme, insurers receive risk equalisation credits from the Risk Equalisation Fund to compensate for the additional cost of insuring older and less healthy members. The credits are funded by stamp duty levies payable by open market insurers for each policy written. The stamp duty levies are collected by the Revenue Commissioners and transferred to a Risk Equalisation Fund which is administered by the Health Insurance Authority (HIA).
The Scheme is designed to be exchequer neutral i.e. the credits are funded entirely by the stamp duties raised annually.
Amending legislation is required each year to revise this support which is provided by risk equalisation credits and the corresponding stamp duty levies necessary to fund them under the scheme.
In October 2021, the HIA submitted an evaluation and analysis of market data and provided advice to the Minister on the required adjustment to risk equalisation credits. This Bill implements the HIA’s recommendation and adjusts the rates of credits and stamp duties to apply from April 2022.
This Bill provides for the setting of the revised risk equalisation credits and community-rated stamp duty levies which will apply to the market from 1 April 2022 taking consideration of the Health Insurance Authority's recommendations under the Health Insurance Acts, and in consultation with the Minister for Finance.
In Ireland’s community-rated health insurance market, individual customers are not risk-rated. Instead, risk equalisation supports community rating by spreading the cost of insuring older and sicker people across the health insurance market. A stamp duty levy on every health insurance contract is collected by the Revenue Commissioners, transferred into a Risk Equalisation Fund which is administered by the Health Insurance Authority, and risk equalisation credits are paid to insurers to reduce some of the additional costs they incur when insuring older, less healthy members.
Credits are currently paid to insurers for all insured persons over 65 years of age, based on age, gender and type of insurance cover. A hospital utilisation credit (HUC) is also paid in respect of all insured members for each overnight stay in hospital and for day case admissions.
This year’s Bill also provides the legislative basis for the introduction of high cost claims credits to the Risk Equalisation Fund. The addition of high cost claims credits intends to target subsidies towards the claims costs of 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 introduction of high cost claims credits to the existing Risk Equalisation Scheme will strengthen the effectiveness of the new Scheme by targeting credits towards insurance customers with complex healthcare needs.
The Bill also provides an adjustment to the parameters of the overcompensation test, which is a test carried out for each three year period to ensure that any net beneficiary of the Scheme does not make more than a reasonable profit as a result of the subsidies paid out under the Scheme. This test is required by the European Commission, and the Bill provides that the 4.4% return on sales figure used previously is being increased to 6% on the basis of a recent benchmarking exercise conducted among European and Irish health insurers.
The Bills also introduces a cut-off time period for risk equalisation credit claims.
The amendments relating to the high cost claims credits, the new levels of age-based risk equalisation credits, and the amendment the parameters of the overcompensation test are all subject to approval with the European Commission. Negotiations are ongoing and are expected to be finalised by the end of the year. Commencement of these provisions will be by Ministerial order.