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10 Nov 2015

Charging smokers and the obese higher health insurance premiums is the first step toward a US-style system in which the poorest and sickest are shunted into over-stretched public health services while insurers book big profits, AMA President Professor Brian Owler has warned.

Professor Owler has launched a full-blooded attack on the Federal Government over a survey it has launched which asks consumers whether they think insurers should be given the discretion to charge different premiums according to smoking habits, obesity and other health risks.

The AMA President said the Government’s move played into the hands of health funds keen to offload customers with serious and chronic illnesses onto the public system in order to boost their profits, and would do nothing to cut down on smoking or otherwise improve health.

“We all know that non-smokers are going to say ‘Yes, I want to pay less for my premiums,” the AMA President said. “This is not the way to tackle smoking.”

He said the bigger policy question was whether people were prepared to let health funds pick and choose who they insured, taking into account that procedures like genetic screening for potentially fatal diseases would soon be a reality.

“If you’re positive for a genetic test, are you going to be denied cover? These are the sorts of questions that we need to be asking,” Professor Owler said.

Health Minister Sussan Ley seized on figures showing health insurance policies covering 500,000 people were dumped or downgraded in 2014-15 to argue insurers need to provide much better value.

Ms Ley said the Government was committed to “recalibrating” the private health system to make it value for money following a succession of premium increases that have outstripped inflation and the proliferation of junk policies that offer nothing more than a public hospital bed.

“Consumers are angry, confused, and I’m concerned that simply shopping around is no longer enough to get the best value for money,” she said, inviting them to take part in an online survey being run by the Health Department.

Premium increases outstrip costs

The private health insurance market is dominated by five big funds and the industry recorded an after-tax profit of $1.1 billion in 2014-15. Premium revenue surged by 7.3 per cent, leading the regulator to note that “the increasing cost of health services and growing utilisation rates have been more than offset by higher premiums”.

But the Minister has been forced on to the defensive amid criticism that her approach puts the interests of insurers ahead of patients, particularly the sickest and most vulnerable.

Shadow Health Minister Catherine King said suggestions in the survey that insurers be allowed to charge different premiums according to age and gender as well as lifestyle habits like smoking showed that women and the elderly were in the Government’s sights.

Ms King said it was alarming that the survey highlighted the higher benefits paid out to patients 75 years or older, while asking about gender was a “clear sign” that women of child bearing age would be required to pay higher premiums.

Community rating under attack

Professor Owler said the private funds wanted to undermine community rating, the principle under which insurers must offer the same price of health cover to all, regardless of their health risk, in order to boost their bottom line.

This was the intention behind the push to have smokers charged a higher premium, he said, warning the idea would eventually be extended to policyholders with other health risks.

“Where does it stop, because we know that genetic testing is coming down the track. You know that obesity and all sorts of other issues are going to be brought into play in the future, and…the insurers are only going to want to insure those people that are fit and healthy and don’t need anything done to them,” Professor Owler said. “That is all about maintaining their bottom line and…improving their margins.”

His concerns were given added weight when Mark Fitzgibbon, Chief Executive of insurer NIB, told Fairfax Media that although higher premiums for smokers would be the first move, insurers might eventually monitor the habits of policyholders to reward healthy behaviour like exercise  (and, by implication, to punish unhealthy activity).

But Ms Ley said it was not the Government’s intention to impair access to health care, and its starting point was that Medicare and public hospital system remain universally accessible.

“It’s important we’re able to ask consumers what they expect from their private health insurance, and there’s plenty of room to do that without moving towards US or UK models that exclude sick people, or make it only available to rich people, which we don’t support,” she said.

But the Minister flagged changes to industry regulation, remarking that a succession of the above-inflation premium increases suggested there was “something wrong” with its regulatory foundations.

Professor Owler said this was worrying.

“I find it very concerning when the Health Minister makes statements like she’s concerned that the health insurers are wrapped up in regulation or being restricted by regulation,” he said. “Those regulations are there to protect the public health system, and they’re there for a good reason.”

Adrian Rollins



Published: 10 Nov 2015