Private Healthcare Australia has welcomed the recommendations of the Senate inquiry into out-of-pocket medical costs and the value and affordability of private health insurance but cautioned against unnecessary regulation.
According to CEO Dr Rachel David, “It is encouraging to see that decision makers across the political spectrum have a genuine understanding of the importance of PHI in the Australian healthcare system and acknowledge that rising input costs, over which health funds have limited control, are the key drivers affecting affordability of premiums and out-of-pocket medical costs.
“Health funds also welcome the recommendations seeking greater transparency across the private health sector of both the drivers of consumer out-of-pocket costs, and input costs driving up health fund premiums.'
The committee's report included 19 recommendations, including that the Department of Health publish the fees of individual medical practitioners in a searchable database, a requirement for insurers to publish all rebates by policy and item number, as well as disclose executive remuneration and other administrative costs. It also recommends intermediaries be required to disclose any commissions.
“PHA member funds have already informed the Senate they support calls for greater transparency on executive remuneration and benefits across the private health supply chain,” said Dr David.
“Health funds are consistently paying out the highest percentage of the premium back to customers of all insurance types – an average of 86c in the dollar (it has been above 85% for 15 years). This compares with 67c for property insurance and 64c for general insurance.
“Profit margins have remained stable over the last decade running between 4.5 and 6%. This is a modest return when compared with other forms of insurance and significantly below the returns made by private hospital groups and medical specialist practices. Health funds are not hiding a pot of gold, they are committed to keeping premiums affordable for members and recognise the importance of working with hospitals, specialist health professionals and medical suppliers to establish premiums at a level which ensures members’ care can be funded if and when it is needed.”
According to Dr David, “Premium affordability is the main reason deterring people from PHI and premium increases the main driver behind dropouts and downgrades. Health funds take the responsibility of keeping premiums affordable very seriously. Our research shows there is concern among Australians about the issue of health system sustainability and costs, driven by the fact that the inflation of health input costs has risen at a rate much higher than CPI and household wages.”
“While the transparency measures outlined in the Senate recommendations are welcomed in principle, it is critical implementation does not introduce additional red tape which in itself will increase health fund input costs and put upward pressure on premiums.
“A detailed legislative and regulatory framework, overseen by at least five regulators, governs private health insurance. There is simply no need to introduce any more.
“The introduction of a simpler product classification to ‘Gold/Silver/Bronze/Basic’ will reduce complexity and simplify consumer choice. It is vital that consumers know what they are buying, what they are not buying, and that their policy of choice is not only affordable, but meets their health and life-stage needs. There has always been a ‘basic table’ health fund product range, which is both affordable, and permits patients living in regional areas and with special health needs requiring treatment in a public hospital, to access their choice of doctor and continuity of care. We strongly recommend this tier be retained to avoid unfairly penalising these consumers.
“Under Australian law health funds are unable to control what doctors charge, and furthermore, are restricted from covering out-of-pocket costs for services provided out-of-hospital where a Medicare benefit is also payable. Unexpected medical costs can cause serious pain to consumers who are already dealing with the burden of illness. Of the services provided in hospital, only 12-15% attract a gap, but these gaps are growing at 4% per annum, which is above CPI.
“Health funds recognise the urgent need for consumers and their GPs to have easy access to information enabling them to compare medical specialist skills and costs, including the costs of anaesthetists and assistant surgeons. The health sector is lagging behind other sectors in the economy as a result of its inability to achieve this level of transparency for consumers, and health funds are investing in new ways to make this easier.”