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Premium hike could drive cover downgrade

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There are fears a surge in private health insurance premiums will drive more patients into downgrading or dumping their policies, leaving many with inadequate cover and increasing the pressure on stretched public hospitals.

The Federal Government has approved an average 5.59 per cent increase in premiums from 1 April – more than double the rate of inflation.

Health Minster Sussan Ley has claimed a victory of sorts after convincing 20 of the nation’s 33 private health funds to resubmit lower increases than originally planned, a move she said had saved consumers $125 million.

But the latest round of premium hikes, which range from 3.76 per cent to 8.95 per cent, are likely to feed mounting consumer dissatisfaction with the value of private health insurance, leading to more downgrading or dumping their insurance.

The AMA has raised the alarm on these and other developments in the private health insurance market that undermine the quality of cover and could disturb the important balance between private and public health systems.

AMA President Professor Brian Owler said in the past six years the proportion of people with policies that had exclusions had jumped from 10 to 35 per cent, often with serious consequences.

The AMA President said it had become virtually a daily occurrence for patients booked in for common treatments to discover upon arrival that they were not covered by their insurance.

He said all too often insurers made changes to a policy after it had been bought without informing policyholders, leaving many unexpectedly stranded.

“People are shocked to make this discovery only when they need a particular treatment, and doctors are seeing this happen on a daily basis,” Professor Owler said.

The AMA’s criticisms were echoed in an Australian Competition and Consumer Commission report highly critical of the quality and accuracy of information provided by the health funds, which the watchdog said served to confuse consumers about what they were covered for and hampered their ability to make informed choices.

Ms Ley has launched a review into the private health insurance industry to examine regulation of the sector, including the setting of premiums, as well as other issues including the industry’s push into primary health care; a possible relaxation of community rating principles; and a proposal to replace health insurance rebates with Medicare-style payments for hospital care.

The Health Minister said the review had received more than 40,000 submissions from the public, and flagged there would be “broader structural overhauls” made to current industry regulation.

Part of the Government’s focus is on the cost of medical devices in the private health sector, and the Minister has launched a separate review of the Prostheses List.

Ms Ley said the process for approving premium increases also need to change.

“The current premium approvals process isn’t providing the right checks and balances to ensure consumers get the best deal every year, and there are clearly significant additional costs and barriers blocking larger premium savings from being passed on,” she said. 

But whereas the Health Minister has put the focus on industry regulation as much of the cause of the problem, Professor Owler put much of the blame on the hunger for profit.

Since the privatisation of Medibank Private, the market share of for-profit insurers has surged to 63 per cent, something AMA Medical Practice Committee Chair Professor Robyn Langham said had been a “game-changer”.

“We now have an industry dominated by the interests of for-profit health insurers rather than not-for-profits, with a subsequent shift of focus from providing patient benefits to increasing profits for shareholders,” Professor Langham said.

In its submission to the Government’s review, the AMA warned that industry practices including downgrading existing policies, habitually rejecting claims, lumbering patients with bigger out-of-pocket costs, pressuring policyholders into reducing their cover and selling people cover they don’t need, were badly compromising the value of private health cover and could eventually upset the delicate balance between the public and private health systems.

“On their own, these activities reduce the value of the private health insurance product,” the AMA said in its submission to the Review. “Collectively, they are having a destabilising effect on privately insured in-hospital patient care and treatment.”

Professor Langham said the AMA was planning to produce an annual report card to given consumers clear and simple information regarding the health insurance policies on offer.

She said consumers would be able to check differences in benefits paid for a sample of common procedures, and identify exclusions and restrictions (including junk ‘public hospital-only’ insurance policies). Professor Langham said the report card would also help doctors to compare the gap arrangements of different insurers in order to work out who provided better cover for health costs.

The AMA’s submission to the Government private health insurance review can be viewed at: submission/ama-submission-private-health-insurance-consultations-2015-16

The only way is up

Health fund premium increases to take effect from 1 April



Average Increase with rate protection

ACA Health Benefits Fund Ltd


Australian Unity Health Ltd


BUPA Australia Pty Ltd


CBHS Health Fund Ltd


Cessnock District Health Benefits Fund Ltd


CUA Health Fund Ltd


Defence Health Ltd


Doctor’s Health Fund Pty Ltd, The




Grand United Corporate Health Ltd


HBF Health Ltd


Health Care Insurance Ltd


Health Insurance Fund of Australia Ltd


Health Partners Ltd

7.14% Pty Ltd


Hospitals Contribution Fund of Australia Ltd, The


Latrobe Health Services Ltd


Lysaght Peoplecare Ltd


Medibank Private Ltd


Mildura District Hospital Fund Ltd


National Health Benefits Australia Pty Ltd


Navy Health Ltd


NIB Health Funds Ltd


Phoenix Health Fund Ltd


Police Health Ltd


Queensland Country Health Fund Ltd


Queensland Teachers’ Union Health Fund Ltd


Railway & Transport Health Fund Ltd


Reserve Bank Health Society Ltd


St Luke’s Medical & Hospital Benefits Association Ltd


Teachers Federation Health Ltd


Transport Health Pty Ltd


Westfund Ltd





Adrian Rollins