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Banking & Finance | Healthcare

Debunking the myths around private health insurance

24 Apr 2018, by Informa Insights

The Australian Labor Party recently announced a policy commitment to imposing a 2% cap on private health insurance (PHI) premiums, for at least two years pending a productivity Commission review.

The proposal was designed to increase affordability within the sector, as flat income rates fail to keep up with premiums rising above CPI. As expected, the announcement while superficially popular with consumers, was met with industry-wide skepticism –health funds are rightly concerned capping premiums, while not addressing the actual drivers of rising premiums, will be counter-productive.

In light of this, the Health Insurance Summit – due to take place 31st May – 1 June in Sydney – takes a balanced look at government and industry perspectives on PHI regulation and discusses how the industry should best move forward.

Summit speaker Dr Rachel David, of Private Healthcare Australia, spoke to us in an exclusive interview, in advance of her presentation at the Summit. She challenges the grounds on which the 2% cap proposal was put forward and asserts many of the public statements made in conjunction with this are myths that surround perceptions of value for money in the sector.

“The statement that health funds make 20% profit is just not true’, she says. “The average net margin of Australian health funds has remained stable at 4.5-6% for many years. The Australian Prudential Regulation Authority (APRA) has specifically called out that health fund profits are not the driver of premium increases”.

She also challenges the comments of anti-industry activists who argue the PHI rebate should be removed, and diverted to other parts of the health system.

“The proposal was based on the assumption that the $6 billion rebate could cover the cost of the ‘Denticare’ scheme and the two-thirds of non-emergency surgery funded by PHI. But if you take $6 billion and spread it across 24 million Australians, it wouldn’t even cover the cost of a scale and clean”.

“People with PHI are prepared to make a contribution to the cost of their own health care, but with average disposable incomes of less than $50 000, the rebate is essential to keep health fund premiums affordable”.

Private Healthcare Australia is also working with the University of Sydney to address the concept of low value care. “We need better transparency throughout the supply chain”, she says. “Every dollar that is spent on low value care is putting pressure on premiums”.

“With rising utilisation of the health system, the only way to put sustained downward pressure on premiums is to ensure not one dollar of members’ funds is wasted on low value care, over-priced medical implants and consumables, or fraud and inappropriate practice”.

Dr David will outline details of these collaborative initiatives and what they mean for the future of PHI in Australia at the Health Insurance Summit – due to take place 31 May – 1 June in Sydney.


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