I thank the Deputy for his contribution and for his proposed amendment. I remember being here this time last year and having the exact same debate. I must, however, reject the amendment and I will outline the reasons for this rejection.
Section 7F of the Health Insurance Acts provides that if a beneficiary of the risk equalisation scheme makes more than a reasonable profit, the excess will be returned to the risk equalisation fund. This legislation was introduced in order to fulfil the requirements of the European Union state aid rules under the services for general economic interest framework. In 2015, the rate for a reasonable profit at 4.4% was agreed with the European Commission under state aid rules. The Deputy should be aware that in 2021 a reasonable profit figure of 6% was recommended to the Minister for Health by the Health Insurance Authority, the statutory regulator of the private health insurance market. The recommendation was based on a new benchmarking exercise among European and Irish insurers.
Significant work was carried out in this regard. Independent advice was obtained from external consultants, Oxera Consulting, which was commissioned with the aim of verifying whether a return on sale of 4.4% was still appropriate for the 2022 risk equalisation scheme. Oxera Consulting advice was based on comparators with other European insurance companies and reflected recent trends in profitability of insurance sectors across a range of countries. The Oxera Consulting report concluded that the rate for overcompensation at 4.4% did not allow for reasonable profit, and noted an appropriate return on sales in a range between 5.5% and 8.6%. The report concluded that the benchmark should be adjusted to account for the changes in the financial reporting requirements and to ensure that the return on sales benchmark does not facilitate excessively high premiums in the market leading to unnecessarily high levels of profitability.
The Health Insurance Authority's recommended figure of 6% return on sales was on the lower end of the range proposed by Oxera Consulting, taking into consideration the sustainability of the market and the maintenance of fair and open competition. The Deputy should be assured that the updated reasonable profit rate of 6% has again undergone due consideration as part of Ireland's state aid application which received European Commission approval under state aid rules in March 2022.
It is not appropriate to progress with the proposed amendment as it would undermine the approval received from the European Commission earlier this year, which included approval of the benchmark of reasonable profit and the basis of the overcompensation assessment. As provided for under the Health Insurance Acts, the Health Insurance Authority carries out the overcompensation assessment every year, reports to the Minister and publishes the report.
