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13 Nov 2019


Recently, on behalf of the entire AMA, I released our Private Health Insurance Report Card for 2019.

Despite its release on what eventually turned out to be a crowded health news day (the release of the Mental Health Productivity Commission Report and the interim Aged Care Royal Commission report also were released same day), the Report Card was the subject of significant media attention reflecting the fundamentally pivotal timing that is facing one of the key pillars of our health system.

The AMA has recently begun preparing this report every year to try and focus on improving the clarity and transparency required for patients to better understand what is, despite the recent changes, still quite a complex sector. Our Report Card tries to address some of the issues that remain in private health insurance. The Report Card allows insurance products offered to be compared, uniquely providing the cut-through to the complexity of the multiple products on offer.

In this Report Card, I have referred to private health insurance (PHI) as being on a precipice. PHI is on a precipice because of diminishing affordability, diminishing transparency and a lack of clarity.

What we have seen over the last four years is an increasing proportion of the population making the decision to opt out of private health insurance. The large majority of those opting out are young people. That has a twofold effect. Not only does it mean that premiums will continue to increase because the insurance pool becomes smaller, but it also creates a pool of higher risk people to cover – older Australians with more complex and chronic disease, which requires more expensive treatment.

But we need to remember and emphasise the importance of PHI to our overall health system. It is an important point to remember that 60 per cent of elective surgery today occurs in the private health system. And if that private health system is no longer robust and sustainable, it is all going to rebound back onto the public system. The public system is one of the best systems in the world, but it’s under stress. It is doing it really tough with insufficient resources, and any further burden on the public system will only create further delays and further impact on access and equity.

We need to address affordability in PHI now. We need to ensure that more people maintain that decision to stay covered. We need to increase the attractiveness of PHI, especially for the young.

When I say we, I am talking about all the stakeholders involved. The insurers have a massive responsibility to ensure that they are providing transparent and value-for-money products. They need to ensure that they return more of the premiums they collect to the members they cover. They need to ensure that less of the premiums they collect are spent on administration and marketing and, for some,  excessive returns to shareholders. They haven’t been too good at convincing Australians that they are providing that.

The Government has a responsibility to ensure it happens. Governments need to also bring the MBS rebate in line with the cost of providing care. Is it any wonder that consumers are having to pay more for services and for the delivery of care when the MBS and the allied  private health insurance rebate aren’t contributing to that cost?

Young people make a decision based on the value of the product, the usability of the product, and the cost of the product. At the moment, the cost of PHI is far too excessive in comparison to their perceived need or use. We have a world class public hospital system they can rely on in case of emergency, and they run the risk on their belief that they will not fall ill now.

We need to ensure that insurance affordability is brought back and that can only happen through a suite of Government measures, as well as the private health insurers returning more of members’ premiums in the form of payouts. Cost pressures on premiums must continue to abate, rather than  increase faster than the rate of inflation.

If this can happen – if the PHI sector does the right thing and if the Government steps up and insists on it – then we can create a future-proofed viable system that allows that symbiotic relationship between public and private to continue to underpin our world class hospital system that we have here in Australia.

Let’s see how serious the Government is about fixing this problem. The future of our healthcare system and the health of all Australians depends on getting this right – and very soon.


Published: 13 Nov 2019