Private health insurance reforms

Sweeping reforms to private health insurance announced by Health Minister Greg Hunt have the potential to make insurance more sustainable and affordable, but concerns remain about the continuation of ‘junk’ policies, according to Australian Private Hospitals Association (APHA) CEO Mr Michael Roff.

Mr Roff said the APHA had long campaigned for a number of the consumer benefits announced in the Government proposals – including improved affordability, transparency and comparability of policies, increasing maximum excess levels and improved access to mental health services.

“This package should result in simpler private health insurance products that are easier to compare, are more affordable and give Australians a better understanding about what services their insurance covers.

“The moves to improve access to mental health services are a welcome change, particularly during mental health week. Private hospitals make a significant contribution in mental health, caring for more than 37,500 Australians each year.

“Instant upgrades for people requiring in-hospital mental health treatment are essential, as the majority of products do not currently provide this level of cover. Until now, people have had to wait two months before they could access care,” he said.

The Government’s reform package aims to incentivise younger Australians to take up health cover by offering a discounted rate on policies for under 30s, which should improve the sustainability of the system for everyone.

“Initiatives to encourage more Australians to take up or retain cover will make a huge difference to the system.

“Discounts to attract young people into private health will improve sustainability and affordability of the product for all members. We also welcome the increase to maximum excess levels which will mean people can reduce their premium without having to exclude services from their cover, he said.

The reform package will also create categories of health cover – Gold, Silver, Bronze and Basic to make it easier to understand what cover policies offer. The minimum cover for each has not yet been determined and the new categories will not come into effect until April 2019.

Mr Roff said that while the categories have the potential to make the system easier to understand, there remain concerns about the retention of junk policies.

“It’s disappointing. Not only has the Government not addressed the issue of junk policies, it has, in fact, entrenched them with the new ‘basic’ category. Junk policies are a major cause of consumer dissatisfaction when they discover they don’t have cover for private hospital treatment when they need care.

“If the intent of the private health insurance rebate is to take pressure off public hospitals, then there is no policy justification for applying the rebate to junk policies,” he said.

Mr Roff said the next cab off the rank in terms of private health insurance reform must be to address the growth of private patients in public hospitals.

“This has the potential to moderate premiums by a larger amount than cuts to the prostheses benefits and we support Minister Hunt in his efforts to address this issue.

“This reform package provides a framework for change. It is now up to the health insurance companies to deliver simpler, more transparent products and of course, lower premiums,” Mr Roff said.

 

Reform package overview:

Gold, Silver, Bronze, Basic policies to be introduced April 2019. Details to be worked through by the Private Health Ministerial Advisory Committee (APHA is a member).

Mental health: patients with limited mental health cover will be able to upgrade their cover to access in-hospital care without serving a waiting period. From April 2018.

Discounts for 18-29 year olds: Insurers will be able to offer discounts of up to two percent for each year a person aged under 30 to a maximum of 10 percent. The discounts will be phased out once someone turns 40. Implemented Monday 1 April 2019.

Increase maximum excess levels: consumers will be able to choose higher excesses to lower the premiums they pay for health insurance. Implemented Monday 1 April 2019.

Prostheses List Benefit Reductions: Minimum benefits payable for most medical devices will be reduced on 1 February 2018. Further reductions will occur on Friday 1 February 2019 and Saturday 1 February 2020.

Natural therapies dropped: private health insurance will no longer cover certain natural therapies including pilates, homeopathy and tai chi. This change will take effect from Monday 1 April 2019.

Standard clinical definitions: private health insurers will be required to use standard clinical terms across all their documentation. Consumer tested 2017-18 for implementation April 2019.

Maintain Basic cover private health insurance.

Second Tier: There will be administrative improvements to Second Tier default benefit arrangements to ease red tape for private hospitals and insurers.

Private patients in public hospitals: the impact of private patients being treated in public hospitals will be part of the broader National Health Agreement discussions

Travel and accommodation benefits for regional and rural Australia. Provides an incentive to insurers to offer these benefits, but is not compulsory. Implemented Monday 1 April 2019.

Private Health Insurance Ombudsman (PHIO) increased powers. PHIO will be able to conduct inspections and audits of private health insurers around regulatory obligations to protect consumer interests.

  • PHIOs website will also be updated to help consumers choose the right policy for them.

Out-of-pocket costs: an expert committee will be formed to examine best practice models to improve transparency of billing. Committee will be established in 2017.

New expert committee to address low value care: this committee will provide advice to Government on options to eliminate or replace admitted mental health and rehabilitation services which deliver low value or inefficient care.

Information provision:

  • Along with the PHIO website changes a minimum data set will replace the standard information statement insurers provide to consumers.
  • Product data provided by insurers to PHIO will be made publicly available.
  • It will be optional for insurers to provide consumers with a Private Health Insurance Statement.
  • Insurers will be able to provide the annual Lifetime Health Cover Statement with the premium change communication instead of as a separate item.

Agreement with Medical Technology Association of Australia: an agreement to maintain Prostheses List benefits for a period of four years.

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