Competition in the Irish Private Health Insurance Market

4.74 The Authority had a specific statutory role to advise the Minister in
relation to the introduction of risk equalisation payments on foot of any
risk equalisation scheme made by the Minister.
4.75 As noted above, under the Act, the Authority has a specific
responsibility with regard to risk equalisation and to advise the Minister
on matters relating to the functions of the Minister or the Authority and
health insurance generally. On 19th February 2002, the Authority
published a Consultation Paper on Risk Equalisation in the Private
Health Insurance Market in Ireland. There was a wide ranging
consultation process conducted in order to seek representations on
issues relating to risk equalisation from stakeholders and interested
parties in the private health insurance market in Ireland and, in
particular, to seek views as to how the Authority should exercise its
powers and duties in relation to risk equalisation.
4.76 Having considered the submissions made, the Authority published a
Policy Paper on Risk Equalisation in the Private Health Insurance
Market in Ireland in September 2002. In that Policy Paper, the
Authority set out its preliminary views with regard to the
appropriateness of commencing risk equalisation payments and
identified a number of factors that it would consider when considering
whether or not risk equalisation payments should be commenced in the
best overall interests of health insurance consumers.
4.77 The European Commission delivered its State Aid verdict in 2003
concluding that “the Risk Equalisation Scheme is necessary to underpin
the principles enforced by the Irish authorities.... it ensures that risks
are shared appropriately across the market and allows for a level
playing field in respect of the particular constraints of the Irish system.
If, as an alternative, the Irish PMI market was risk rated, the Risk
Equalisation Scheme would not be necessary.” It concluded that the
scheme passed both the necessity and the proportionality test.
4.78 Most articles of the Risk Equalisation Scheme 2003 (the “Scheme”)
came into operation on 1 July 2003 and in July 2003, the Authority
published a Guide to the Scheme 2003. That document set out the
regulatory structure of the Irish private health insurance market, the
role of the Authority, its views as to why risk equalisation payments
might be required and how risk equalisation calculations would operate
in practice.
4.79 In July 2003 the Authority commissioned York Health Economics
Consortium (a firm of consultants specialising in the area of health
economics) in conjunction with the Office of Health Economics in the
UK (“York”) to undertake an independent review of the
competitiveness of the private health insurance market in Ireland.
4.80 In November 2003, York presented its report entitled “Assessment of
Risk Equalisation and Competition in the Irish Health Insurance
Market” to the Authority. The overall conclusions reached by York from
its study of the private health insurance market and the competitive
forces in that market were (as set out at page 97 of the report):
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Risk equalisation is one of several factors which are deterring
potential entrants to the Irish health insurance market;
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