Fine Gael plan will cost health insurers €7bn, Harney claims
HEALTH insurance companies may have to provide up to €7bn in extra reserves to take part in Fine Gael's plan for universal health insurance (UHI), government documents claim.
In its 'FairCare' health document, Fine Gael proposes moving away from the State as the main provider of healthcare to a set-up where every citizen would have private health insurance, with some of the premiums paid by the State, and where health providers would compete for business.
At present, half the population has health insurance, but this covers only €2bn in healthcare, out of the total €17bn spent each year.
A briefing document sent by Health Minister Mary Harney to her colleagues in Government says current regulation will require a huge increase in insurance companies' reserves if they are to cover the total €17bn.
A Fine Gael spokesman said the document misrepresented, or even misunderstood, their proposals.
At present, an Irish health insurer is required to have reserves equal to 40pc of premiums -- or some €800m -- in the Irish market. The Government is to invest at least €200m in the VHI to bring its reserves up to the regulatory requirement.
"At this level, there would be a once-off cost of more than €7bn in moving to universal, compulsory, private health insurance under the Fine Gael scenario," states the document, which has been seen by the Irish Independent.
A sudden increase in reserves on this scale would make the scheme unattractive, or even unaffordable, for the insurance companies, unless it was matched by a huge rise in premiums or state support.
But Andrew McDowell, economics adviser to Fine Gael, said the government document misrepresented the FG policy.
"Most of the cost of healthcare will still come from the taxpayer. It will be paid into a central fund, which will be distributed among insurers according to the risk profile and income level of their customers.
The FG health document states: "Around 75pc of funding for healthcare would continue to come from taxation on income, paid into a new Risk Equalisation Fund, and to pay for the insurance subsidies for children and lower-income groups. This fund would compensate insurance companies for covering higher-risk, higher-cost patients."
Fine Gael believes this taxpayer funding would not require reserves to be held against it. This is the case in the Netherlands, on whose system the Fine Gael proposals are based.
There, companies keep just 8pc of premiums -- less than half the EU minimum requirement of 17pc, under a special derogation from EU law.
The Harney document says Ireland is unlikely to get such leeway from Brussels. "The EU would require evidence that a fully functioning risk equalisation scheme was working (ie, sharing costs of older customers between companies).
"This will not be the case in Ireland for several years beyond 2013, when a new risk equalisation scheme will be in place," it states.
"Since one cannot base policy on future easing of reserve requirements by the Central Bank, the Fine Gael plan would require several billion euro of additional reserves," the briefing document states.