Harney defends risk equalisation legislation

Minister for Health Mary Harney today defended rushing emergency legislation through the Oireachtas to close a legal loophole allowing new entrants to the health insurance market to avoid expensive risk equalisation payments.

Ms Harney said the Government's aim was to protect more than two million people who have private health insurance in Ireland, especially the sick and old.

The minister admitted that the new legislation was not announced until after the close of business last night to stop Vivas Health from re-registering itself as a new company and availing itself of a three-year exemption of making risk equalisation payments.

President Mary McAleese this morning signed into law the Health Insurance (Amendment) Bill 2007 which was passed by the Cabinet and Seanad last night.

Ms Harney said she had no alternative but to draw up the new law, but stressed that she hoped the takeover of Bupa Ireland by Quinn Direct would still go ahead.

"When Quinn Direct announced they were acquiring Bupa, they didn't acquire Bupa's insurance business. What they acquired was the service company Bupa Ireland, which services the insurance business, and therefore under the law they would not have had to pay risk equalisation for three and a half years," said Ms Harney.

"Vivas made contact with the Department of Health and said if Quinn are going to be excluded from risk equalisation payments, then they didn't believe they should pay at the end of the year and last Friday they put the Health Insurance Authority on notice that they were in discussions with another insurer to avail of the same legal difficulty.

"The enactment of this legislation was to close a loophole that was never attended by the Oireachtas in the first legislation in 1996 to protect community rating and provide for risk equalisation.

"The reason I did it last night after the close of business was that it was open to Vivas to go in to the HIA and reregister. Therefore I couldn't give notice of this legislation because it would have been irresponsible to do so."

The controversial risk equalisation scheme was designed to bring fairness to the health insurance market, forcing insurers to compensate competitors with older clients, with both Bupa and Vivas having to pay the VHI Healthcare.

Bupa claimed the move would have seen it pay €161m over three years and announced it was to pull out of the Irish market with the loss of 300 jobs in Fermoy, Co Cork.

The Quinn Group, which revealed last month it was to take over Bupa Ireland, said it was now reviewing its options.

It is not authorised to enter the health insurance market until February 28 when the Financial Services Regulatory Authority next meet.

"I am committed to reforming the insurance market," continued Ms Harney.

"Bupa had 18 young people for every older person, VHI have three younger people.

"Effectively if I did not have that legislation passed last night there would be no risk equalisation payments made in Ireland before the end of 2010 or 2011, other than the liabilities that Bupa owe.

"If next week Vivas had availed of the loophole, and it became clear we had no more risk equalisation payments till the end of 2010 or 2011, I would have been accused of failing to act in the public interest to protect the private health insurance market and particularly to support older and sicker people.

"I believe there was no alternative.

"I believe what we did last night is what we couldn't have done in a couple of months because companies would have had a legal entitlement to a legal exemption."

Vivas Health said it had no immediate plans to exploit a legal loophole, although it had been examining the issue so it could compete on a level playing field.

Vincent Sheridan, chief executive of VHI Healthcare, said he did not know about last night's move but added that he was not surprised by it.

In the Dáil, Tánaiste Michael McDowell denied there was any 'sleight of hand' involved in rushing the emergency legislation through the Oireachtas.

Labour Party leader Pat Rabbitte claimed that yesterday morning's Order of Business agenda was fraudulent because it changed after tea-time.

"The Order of Business yesterday was fraudulent and it led to another Order being put to the House after Private Members' Business last night when a very urgent matter had to be taken at minimal notice.

"Can we rely on this agenda this morning as the real Order of Business?" he asked.

Mr McDowell, who was representing the Taoiseach in the chamber, said the Government only made a decision to proceed with the legislation yesterday afternoon.

"It is the real Order of Business. I just want to say in relation to yesterday's Order of Business - the decision to bring the legislation before the House yesterday on an emergency basis was not made until the afternoon of yesterday.

"Therefore I reject the suggestion that there was any fraudulence or sleight of hand involved."

Labour spokesperson on health Liz McManus said the lack of proper debate will see incomplete legislation on medical practice passed into law.

"What can happen here is that this Minister may well be confusing ministerial meddling with democratic accountability," she said.

"If she's not afraid to debate this, then she should see the sense of insuring that there is full, comprehensive scrutiny and debate about this important measure."