Minister for Health James Reilly is under pressure because of a decision to increase the risk equalisation charge on health insurance products from next March. He had little choice because of ongoing problems at the State-owned Voluntary Health Insurance (VHI) company and long-standing demands by the European Commission. To be formally licensed by the Central Bank, the VHI requires a sustainable business plan and reserves of 40 per cent. It has operated without both for decades. The risk equalisation charge will effectively penalise its competitors while increasing VHI reserves. Additional funding will, however, be required.
Leaving things to the last moment appears to be Dr Reilly’s hallmark. Central Bank authorisation will be required by the end of this year if EU financial penalties are to be avoided. His delay in announcing the risk equalisation charge increased pressure on the VHI to produce and implement a sustainable business plan. The timing also allowed critics to link this charge with a budgetary cut in tax relief for insurance premiums and to target their message at young families and individuals.
Health system reform was always going to be difficult because of conflicting political approaches. But nobody realised it would lead to such a shambles. Faced by an increasingly expensive and inefficient system, the Government decided to end VHI’s monopoly on private health insurance in 1994. The two-tier nature of the health system, where those with private insurance jumped the queue, had prompted 35 per cent of the population to join the State company. In keeping charges low, however, VHI reserves had fallen to 20 per cent.
Reassuring older VHI customers that they would not face premium charges under a privatised insurance system, the Government pledged to introduce community rating and risk equalisation. The legislation was, however, successfully challenged in court and its implementation was delayed for more than a decade. As access to healthcare became more difficult, the two-tier system continued to discriminate. In spite of rising premiums, the take-up of voluntary insurance grew. Recession, job losses and higher charges have reversed that trend, but health insurance is still regarded by many as a necessity.
The VHI has a hole of about €200 million in its reserves. Its efforts to reduce that shortfall over many years brought higher premiums and an in-built advantage for its competitors. Those issues must be resolved if a viable universal health insurance system, based on medical need, is to operate. In the meantime, necessary decisions are being avoided. Dr Reilly has yet to open negotiations with the Irish Medical Organisation concerning the provision of free GP healthcare. The Minister should get on with it.