Equalisation Development

New Scheme 2012

The Government, on 27th May 2010, announced a comprehensive strategy and set of actions for the health insurance market. These actions included the development of a full, robust, new risk equalisation scheme to start in 2013. The Health Insurance Authority published a consultation paper on risk equalisation on 21 June 2010 and submitted a report to the Minister for Health in December 2010.The Government announced details of the scheme in January 2012. Legislation was published in October 2012 and enacted in December 2012 to apply from January 2013.

The legislation creates a Risk Equalisation Fund administered by the Health Insurance Authority. The Risk Equalisation Fund supports the community-rated market by providing age-related health credits in respect of those over the age of 60 that help to meet their higher claims costs. The health credits vary by age, gender and by Level of Cover. Credits are also provided in respect of each overnight stay in a hospital bed in private or semi-private accommodation. These credits are funded by a community rating health insurance levy paid by health insurers which vary by Level of Cover.

The health credits and the community rating health insurance levy are administered by the health insurance companies and the Risk Equalisation Fund. Community rating health insurance levy payments for renewals from 1 January 2013 are paid by insurers to the Revenue Commissioners who in turn pass the money to the Risk Equalisation Fund. Health credits are paid out of the Fund to the insurers. Any surpluses or deficits in the Fund are carried forward and allowed for in setting future levy amounts.

Under the Health Insurance (Amendment) Act, 2012 a permanent Risk Equalisation Scheme (RES) in the Private Health Insurance Market, was introduced with effect from 1 January, 2013 which replaced an Interim Scheme of Age-Related Tax Credits/Levy introduced in 2009. The Risk Equalisation Scheme aims to ensure that, in the interests of societal and intergenerational solidarity, the burden of the costs of health services is shared by insured persons by providing for a cost subsidy between the more healthy and the less healthy, including between the young and the old.

The scheme operates by providing risk equalisation credits at source (based on age, gender and level of cover) — that is, the cost of the policy is reduced by the amount of the applicable credit. In turn, the registered undertaking (insurer) will submit a claim to the Health Insurance Authority for reimbursement of the credit from the Risk Equalisation Fund (REF), on behalf of qualifying policy holders.

This mechanism provides that health insurers receive higher premiums in respect of insuring older and less healthy people, but these people, through their insurer, receive risk equalisation credits equal to the amount of the additional premium so that all people continue to pay the same amount for a given health insurance product. In this way community rating is maintained but insurers receive higher premiums in respect of higher risk members, to partly compensate for their higher level of claims. In addition, the 2012 Act provided for a measure of health status, by introducing a hospital bed utilisation credit payable from the REF in respect of each hospital stay involving an overnight stay in private hospital accommodation (as defined in the Act), by an insured person whose insurance contract was effected on or after 30 March 2013.

The risk equalisation scheme is funded by a stamp duty, collected by the Revenue Commissioners and transferred to the REF. There are four rates of stamp duty, depending on the level of cover provided (advanced cover or non-advanced cover) and whether the insured life is a child or an adult.

Objects of 2013 Act

The main purpose of the 2013 Act  is to specify the amount of the hospital bed utilisation credit and the amount of risk equalisation credits in respect of age, gender and level of cover that is payable to insurers from the REF from 1 March 2014 and make consequential amendments to the Stamp Duty Consolidation Act 1999 to revise the stamp duty levy required to fund the risk equalisation credits for 2014. In addition, some technical amendments to the Health Insurance Acts are also included.

Section 8 of the Finance (No 2) 2013 Act  introduces new ceilings on medical insurance premiums that will qualify for tax relief as €1,000 per adult and €500 per child. This has implications for the manner in which community rating is applied under the Health Insurance Acts. This amendment clarifies that community rating applies to the gross premium less any risk equalisations credits and excludes any applicable tax relief.

The 2013 Act reflect and amendment to the  Health Act 1970 whereby private patients will incur a hospital charge in respect of an overnight stay in a public ward. The timeframe by which a registered undertaking (insurer) who wish to vary the benefits payable under a type of health insurance contract, are required to notify the HIA is extended to 1 March (from 1 January).

An overcompensated registered undertaking is required to make a payment to the Risk Equalisation Fund if it has made more than ‘reasonable profit’. The independent regulator, the Health Insurance Authority (HIA), carries out the overcompensation test on a three year rolling basis as provided for in the legislation.

The 2013 Act  specifies that the HIA will take what would constitute ‘reasonable profit’ for an insurer in respect of its relevant health insurance business as a ‘return on equity’ not exceeding 12% per annum on a rolling three year basis using approved accounting standards and having regard to the European Union Framework for State aid in the form of public service compensation (2011)(2012/C8/03).

An insurer is not deemed to have made a profit in excess of reasonable profit, if its return on equity exceeds 12% per annum in respect of that business for part of that period (the 3 year period) but not for all of that period. Further, it defines ‘relevant health insurance business’ as ‘all of the registered undertakings health insurance business in the State’ and ‘return on equity’ in the case of an insurer or former insurer established otherwise than under the Companies Acts as the equivalent, using approved accounting standards, of a return on equity of an insurer which is a company established under those Acts.

Where the HIA is satisfied that a ‘changed existing contract’ is now a contract which it classifies as not providing for advanced cover (now providing non-advanced cover), it will make regulations accordingly. Where the HIA is satisfied that a ‘changed existing contract’ no longer satisfies the classification of not providing for advanced cover, the HIA will make regulations to amend the relevant specification (now providing advanced cover).

In addition provision is made for the HIA to review any evaluation and analysis of sample types of contracts and where an error occurred in the classification of a product, the HIA will amend regulations and the register of Health Insurance contracts accordingly.The revised amount payable from the REF in respect of the hospital bed utilisation credit will decrease in respect of health insurance contracts renewed or effected from 1 March 2014. The applicable risk equalisation credits payable from the REF in respect of certain classes of insured persons are revised.

Stamp Duties Act 1999 amendment specifies the accounting periods as ‘3 consecutive months beginning 1 January, 1 April, 1 July and 1 October’. It defines the due date for returns to the Revenue Commissioners as the 21st day of the second month after the end of an accounting period. It then specifies the applicable stamp duty rates for (i) 1 January to 28 February 2014 and (ii) 1 March 2014 onwards.

Health Insurance (Amendment) Act 2015

The 2016 Risk Equalisation Scheme is similar to the 2013 Scheme except that risk equalisation payments would also be payable in respect of admissions to hospitals that did not involve an overnight stay in the hospital.

The Health Insurance (Amendment) At 2015 revises the applicable rates for risk equalisation credits payable under the scheme. The Act also revises the community rating stamp duty levy required to fund the risk equalisation credits for 2016.

The Act strengthens the existing proxy health status measure by expanding the circumstances where a utilisation credit is payable to include day cases.

The Act specifies the amount of premium to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 March 2016, to substitute a definition of ‘hospital utilisation credit’ for the definition of ‘hospital bed utilisation credit’, to specify the amount of hospital utilisation credit applicable from 1 March 2016, and to make consequential amendments to the Stamp Duty Consolidation Act 1999 to revise the community rating stamp duty levy required to fund the risk equalisation credits for 2016.

The RES provided for a HBUC as a proxy for health status whereby health insurers receive €90 per night for an overnight stay in hospital by one of its members. The  Health Insurance (Amendment) Act 2015 expanded this credit to include day case in-patient admissions and will redefine HBUC as a ‘hospital utilisation credit’, under which insurers l receive a payment from the fund of €30 for day case inpatient admissions and €90 for in-patient admissions on an overnight basis.

Health Insurance (Amendment) Act 2016

 Health Insurance (Amendment) Act 2016 specifies  the amount of premium to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2017 and to make consequential amendments to the Stamp Duty Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

In addition, the Act clarifies the conditions under which an insurer may withdraw a health insurance product from the market, provides a definition of reasonable profit for the purposes of assessing overcompensation under the scheme from 2016 onwards and provides for an additional objective in relation to the projected net claims costs that the Health Insurance Authority and the Minister for Health must have regard to when considering creditsto be provided under the scheme.

Unlike previous years, the changes in the rates of credits and stamp duty came into effect on the 1 April rather than the 1 March.

Insurers may change the benefits payable under a contract in such a manner which results in an advanced contract becoming a non-advanced contract or a non-advanced contract becoming an advanced contract with effect from the 1 April each year from 2017 onwards. This is to align the date of any change in contract type with the date from which revised stamp duty rates become applicable.

 The Health Insurance Authority must have regard to the objective that the projected net average insurance claim payment per insured person for a relevant age group should not be less than 125 per cent of the projected net average insurance claim payment per insured person for all age groups when recommending the level of credits that should apply. This is a State aid requirement.

Health Insurance (Amendment) Act 2017

 Health Insurance (Amendment) Act 2017 specifed the amount of risk equalisation credits to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2018 and amended the Stamp Duty Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

Health Insurance (Amendment) Act 2017 made changes to  the operation of Lifetime Community Rating (LCR) in the health insurance market, two years after the scheme was introduced. It gave the Minister for Health the power to introduce regulations whereby loadings may be applied to health insurance premiums in certain circumstances. The Minister invoked this power in  the Lifetime Community Rating, which resulted in loadings applying in certain circumstances in respect of  policies commencing from 1 May 2015.

Health Insurance (Amendment) Act 2018

Health Insurance (Amendment) Act 2018 specified the amount of risk equalisation credits to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2019 and made make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

Health Insurance (Amendment) Act 2018 Act to provide for the expansion of the membership of the Board of the Health Insurance Authority from five to seven and an increase in the quorum from three to four.

Health Insurance (Amendment) Act 2018  replaced  Table 2 in Schedule 4 to the Principal Act with effect from 1 April 2019 whereby the applicable risk equalisation credits are payable from the Risk Equalisation Fund in respect of certain classes of insured persons.

 Health Insurance (Amendment) Act 2018 amended  the Voluntary Health Insurance (Amendment) Act 1996 to provide for a change in the composition of the VHI Board. This amendment will remove the existing restriction on the number of health care providers on the VHI Board, and includes a new provision that the Minister will give due consideration to the mix of skills present on the VHI Board when making appointments, thus ensuring the highest standards of governance.

Health Insurance (Amendment) Act 2018 amended the VHI’s  function as an agent for the provision of international healthcare plans, to permit the VHI to sell international plans directly without an intermediary.

Health Insurance (Amendment) Act 2019

Health Insurance (Amendment) Act 2019 specifies the amount of risk equalisation credits to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2020 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

Section 4 replaces Table 2 in Schedule 4 to the Principal Act with effect from 1 April 2020 whereby the applicable risk equalisation credits payable

Health Insurance (Amendment) Act 2020 specified  the amount of risk equalisation credits to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2021 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

Health Insurance (Amendment) Act 2021

The purpose of the  2021 Act is to specify the amount of risk equalisation credits to be paid from the Risk Equalisation Fund in respect of age, gender and level of cover from 1 April 2022 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the community rating stamp duty levies required to fund the risk equalisation credits.

The Act also strengthens the health status measure and thus the effectiveness of the Scheme by introducing a high cost claims credit to the Risk Equalisation Scheme. In addition, technical amendments to the Health Insurance Acts relating to the overcompensation test and the addition of a time limit to claim risk equalisation credits are also included.

The the definition of risk equalisation credits was amended  to include high cost claim credits which the insurer is entitled to have paid on behalf of an insured  person. It also provides for a new definitions for high cost claim, high cost claim credit, high cost claim quota share and high cost claims threshold.

In the case of high cost claims the Minister may require the Authority to furnish a report relating to the high cost claims credit parameters.

It provides for the substitution of the amount for the benchmark for reasonable and amended provisions for the purposes of assessing if an insurer has been overcompensated by the scheme.

1 April 2022 is the effective date for revised credits payable from the Risk Equalisation Fund. There is a a time limit for which Risk Equalisation Credits can be claimed from the Risk Equalisation Fund

The applicable risk equalisation credits  payable from the Risk Equalisation Fund in respect of certain classes of insured persons were revised in 2021.

Health Insurance (Amendment) Act 2022

Ireland has a community-rated voluntary private health insurance market, meaning all people pay the same price for the same health insurance policy. The Risk Equalisation Scheme is the mechanism designed to support the objective of a community-rated health insurance market.

The Risk Equalisation Scheme has been provided for under the Health Insurance Acts 1994 to 2021 since 1 January 2013. Under the Scheme, insurers receive risk equalisation credits 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 in respect of each insured life covered.

The stamp duty levies are collected by the Revenue Commissioners and transferred to a Risk Equalisation Fund administered by the Health Insurance Authority. Legislation is required each year to revise the applicable risk equalisation credits and the corresponding stamp duty levies necessary to fund them. The rates of credits and levies are based on recommendations from the Health Insurance Authority following an evaluation and analysis of health insurance claims.

The Risk Equalisation Scheme is designed to be Exchequer neutral, with the amount of the stamp duty levy calculated to offset the costs associated with the provision of the risk equalisation credits (age-related health credits, high cost claims credits and the hospital utilisation credits). Any surpluses or deficits that arise under the Scheme are rolled over to the following year and are taken into account when recommending revised risk equalisation credits and corresponding stamp duty levies.

Health Insurance (Amendment) Act 2023

The purpose of Health Insurance (Amendment) Act 2023 is to specify the risk equalisation credits to be paid from the Risk Equalisation Fund from 1 April 2024 and to make consequential amendments to the Stamp Duties Consolidation Act 1999 to revise the stamp duty levies required to fund the risk equalisation credits.

It provides for 1 April 2024 as the effective date for revised credits payable from the Risk Equalisation Fund. It amends the Amount specified for the purposes of the Hospital Utilisation Credit in Schedule 3 to the Principal Act. This applies to health insurance contracts entered into or renewed on or after 1 April 2024.

It revises the applicable risk equalisation credits payable from the Risk Equalisation Fund in respect of certain classes of insured persons. The amounts are applicable on or after 1 April 2023.

The 2023 Act  amends section 125A of the Stamp Duties Consolidation Act 1999 to specify the applicable stamp duty rates for (i) 1 January 2023 to 31 March 2023 and (ii) 1 April 2023 onwards.

Various 2023 Provisions

The 2023 Act  specifies the end date of the act of entrustment (the legislative mechanism under which the Risk Equalisation Scheme (RES) operates), as required by the European Commission in its approval of the RES. Approval from the European Commission is required as the RES is deemed to be a State Aid. The Act will also make further provision for the appointment and powers of authorised officers of the Health Insurance Authority.

There is an  order making power for the Minister to specify a new date after consultation with the European Commission and the Minister for Finance. This power provides the Minister with the authority to extend the duration of the period of entrustment in exceptional circumstances to ensure the continuity of the Risk Equalisation Scheme. 1 April 2023 is the effective date for revised credits payable from the Risk Equalisation Fund.

The 2023 Act extends the powers of enforcement for authorised officers of the Health Insurance Authority to non-registered undertakings purporting to be carrying on health insurance business in Ireland. An authorised officer may require persons whom the officer believes is committing an offence under the Act to provide a name and address.An authorised officer may provide a report to the Authority which is a transitional section inserted to provide for persons currently authorised officers.