Private health insurance has been on ‘set and forget’ for too long

The AMA is concerned many Australians are effectively being priced out of private health insurance policy products that meet their needs, as reports reveal some providers are increasing Gold health premiums by up to 8 per cent.

In a submission to the Department of Health and Aged Care, the AMA welcomed proposed reforms to ensure private health policies better meet consumer needs, but acknowledged there was still much more work to be done.

AMA President Professor Steve Robson said the submission renewed calls for a Private Health System Authority to protect patients and drive reform in what remains a highly complex system.

“Private health policy has been on the ‘set and forget’ mode for some time now, meaning the system is falling behind changing customer needs and demographics,” Professor Robson said.

“There is currently a policy reform black hole in the private health sector, leading to a system that doesn’t properly balance the needs of hospitals, medical device manufacturers, doctors, insurers, and most important of all — patients.”

Professor Robson said the AMA would continue advocating for private health to adapt to more innovative and efficient models of care, such as home-based and community-based care, but do so in a way that ensures patient choice remains the hallmark of the system.

“The recent reports on the excessive cost of Gold insurance policies demonstrate just how important reforms to our current policy settings and subsidies to premiums are,” Professor Robson said.

“With private birth and psychiatric care only fully covered in Gold packages, the declining take-up rates or increasing costs could lead to troubling implications for our whole health system.”

The AMA’s submission was made in response to the final reports on private health insurance incentives and hospital default benefits, written by Finity Consulting and Ernst and Young respectively.

The AMA’s submission agrees with many of the reports’ recommendations, including the need to update and annually index the Medicare Levy Surcharge after years of zero or inadequate indexation, which has led to unfair settings that negatively impact people on lower incomes.

Importantly, it also recommends more frequent reviewing of private health policy settings which has been a key call from the AMA since the launch of the AMA prescription for private health in 2020.

The submission rejects a recommendation that high income earners should be required to purchase Gold or Silver policy products to avoid having to pay the Medicare Levy Surcharge, given the rising costs of these products and inequitable access to private services across the country.

The AMA also put forward other policy levers to better integrate the health system and ensure customers get better value from their private cover.

These include calling for the extension of private health insurance coverage to hospital substitution care without resorting to vertical integration, as well as legislation to require all providers to return 90 per cent of premium dollars paid each year back to the consumer.

“Patients rightfully have an expectation to receive real value from their private health insurance policies, and the AMA believes the government should mandate a minimum amount that every insurer is required to return to patient care in the form of claims benefits,” Professor Robson said.

“If we truly want reform, including better models of care and private health insurance that is affordable amid Australia’s cost-of-living crisis, we need to come together as an industry — with government — to make that change. A Private Health System Authority can be the mechanism to make that happen.”