Premium rebates for the young, alternative iv ve therapies out, better deal for the bush
Young people will be offered financial incentives to take out health insurance policies they are less likely to make claims on, providing insurers with extra revenue as they try to limit premium rises that have already led thousands of members to quit.
Higher excess levels will also be available to help moderate premium levels, after the federal government agreed to provide extra flexibility despite concerns higher-income earners would take out front-end deductibles just to avoid the Medicare Levy surcharge.
A series of other changes — including, for the first time, added benefits for regional members needing city hospital treatment — will also seek to improve the value proposition amid speculation premium increases will be kept below 4 per cent next year.
In the biggest insurance reform package in almost two decades, Health Minister Greg Hunt has offered a solution to problems that were considered by his predecessors Sussan Ley and Peter Dutton, and the former Labor government. As expected, hospital policies will be categorised into gold, silver, bronze and basic bronze from April 2019 to help consumers compare policies. Despite being on the agenda for months, the minimum requirements for each category have still not been finalised.
Amid the ageing population, insurers will entice customers aged 18-29 with premium discounts of up to 2 per cent for each year they are aged under 30, to a maximum of 10 per cent. This is separate to the Lifetime Health Cover penalties that apply to those who delay taking out insurance until they are older, and the new incentives will be phased out by age 40.
By mirroring Lifetime Health Cover, the government has sought to avoid the charge that the new incentives undermine community rating and the principle that members be charged the same regardless of health status.
The incentives also allow the government to take action over unproven natural therapies, which health funds insisted were vital to attracting and retaining younger members.
From April 2019, members will no longer be covered for 16 of the 17 natural therapies that an expert review in 2014-15 found little evidence to support. Massage, for reasons that were unclear yesterday, will still qualify for benefits. To help address the challenge of mental illness, waiting periods for mental health cover will be able to be lifted once per policy-holder when a hospital visit is required, and benefit limitation periods also removed, from next April.
For the first time, after Ms Ley and Nationals deputy leader Fiona Nash called for a better deal for the bush, insurers will be able to offer travel and accommodation benefits under hospital cover to help people in regional areas who do not have a local private hospital.
More than $1 billion in prostheses cuts between 2018 and 2021 will help insurers lower costs and reduce pressure on premiums, with manufacturers given the trade-off of reduced red tape and access to grants.
The Private Health Insurance Ombudsman will have the power to inspect and audit health funds, with a focus on verifying customer activity records and addressing complaints in relation to contractual arrangements.
There will be a new list of standard clinical definitions from 2019 to make healthcare easier to understand, while an expert committee will look at increasing transparency for out-of-pocket costs, and a separate committee will consider low-value services in mental health and rehabilitation.
“We know that every dollar matters to Australian families and these reforms will get better value for families and make policies easier to understand,” Mr Hunt said yesterday. The minister will seek to address the issue of public hospitals billing patients’ insurers in upcoming funding negotiations with the states.
Australia’s health insurers have backed the most comprehensive reforms to hit the industry in almost 20 years and promised to deliver lower premium increases after winning more than $1 billion in savings on the cost of medical devices.
Health Minister Greg Hunt will today announce a list of private health insurance reforms, including categorising policies as Gold, Silver, Bronze and Basic Bronze, a discount for young people and more power for the Private Health Insurance Ombudsman.
The key reform that will immediately translate to lower premiums next year is a measure to cut prices on the prostheses list, which sets the price insurers must pay for medical devices. The insurance industry has long argued they are overcharged, compared to Australia’s public system and comparable countries.
The prostheses reform is said to represent a $1.5bn saving to the private insurance industry over the next four years. That measure included a four-year agreement between the government and the Medical Technology Association of Australia.
Ian Burgess, chief executive of the MTAA, said the deal ended a long period of uncertainty for the industry but it came at a price.
“These cuts are significant and will impact on jobs and investment in the industry. However, the MTAA membership took the view the agreement was in the best interests of the industry and ultimately patients,” Mr Burgess said.
NIB chief executive Mark Fitzgibbon said the price cuts to the prostheses list would drive down the average annual premium increase to the “low end of 4 per cent”. Premiums rose by an average 4.84 per cent this year, the lowest in a decade.
Mr Fitzgibbon said consumers in private hospitals had been paying “wildly inflated” prices for medical devices.
“It’s bordering on a scandal and all credit to minister Hunt in taking on the self-interests that have perpetuated the madness,” he said.
Matthew Koce, chief executive of industry body Hirmaa, said the $188 million in savings to be realised in the first year of the prostheses price cuts equated to an average saving of just over $34 per policy.
“All our funds have provided an iron-clad commitment to pass on every single dollar of savings to consumers once they have been realised,” he said.
HBF chief executive John Van Der Wielen said the cuts to prostheses prices would save the insurer about $15m each year.
“That is significant but set against the $1.5bn in total health claims we paid members last year, it’s not a game-changer,” he said.
“The goal must be to bring the prices insurers are charged for prostheses down to parity with the public sector.”
Medibank chief executive Craig Drummond said the reform package was essential to
keep premiums affordable. “In an environment where the cost of healthcare continues to rise, reforms like this are paramount to addressing the issue of affordability,” he said.
Gerard Fogarty, chief executive of Defence Health, argued that while the reforms were a start, they were far from sufficient to result in immediate, significant reductions in premiums.
“Forming committees to look into matters like out-of-pocket expenses is just hand-wringing. The government knows the issues. It simply needs to act,” he said.
The insurers agreed that the new discount for young people, which will reduce premiums by up to 2 per cent for each year an adult is aged under 30, was a key victory.
Private Healthcare Australia chief executive Rachel David said the reverse Lifetime Health Cover policy would be a major factor in addressing membership rates and improving participation and affordability.
Bupa’s Australian health insurance boss Dwayne Crombie said it was a comprehensive package of reforms, developed in close consultation with all stakeholders.
“It is an important first step and we look forward to continuing to work with the minister on measures to increase participation in private health insurance, make it simpler and more transparent,” he said.
Sheena Jack, chief executive of HCF, said there was no question private health insurance had been in need of reform to ensure the industry was focused on the best outcomes for patients.
“Empowered consumers are a win for everyone. Consumers with the right policies will be better covered and have their expectations met when they come to claim,” she said.
How The Australian broke the story on January 2