Danger seen in health fund reforms
HE latest round of private health insurance reforms has sparked fears that community rating — the keystone of the system, ensuring members are treated the same regardless of their medical history — is under threat.
Under reforms fostered by Health Minister Tony Abbott, health funds will be able to cover more out-of-hospital services, doctors’ clinical independence will be supported, and members will be entitled to standard product information to enable them to compare funds.
‘‘ This package will create new opportunities for the private health sector, allowing greater innovation and even greater choice in private health care,’’ Abbott said when he introduced the legislation into Parliament.
When implemented the legislation will be a win for consumers, a win for private health insurers and a win for service providers — and a win for our public hospital system too.’’
But leading health analysts have warned the sick and disabled might be the losers in the reforms if health funds are allowed to circumvent community rating.
In a submission to a parliamentary committee inquiry, the Centre for Health Economics Research and Evaluation said the reforms would facilitate cream-skimming’’ by health funds.
Such activities can take many different forms and guises including marketing strategies aimed at younger cohorts, designing products that typically appeal to more healthy individuals, or making insurance products for consumers with specific conditions more expensive,’’ CHERE said in its submission.
The analysts, based at the University of Technology Sydney, warned the reforms might lead to higher premiums for the unhealthy, who would be forced to use
public hospitals caring for a sicker population’’.
The Consumers Health Forum raised similar concerns, but health fund Australian Unity downplayed the risk of community rating being eroded, and the Australian Health Management Group said the reforms would advantage members.
Shortly after the committee handed down its report, largely endorsing the legislation and avoiding the issue of community rating, the Department of Health and Ageing handed Abbott a report warning corporate products had already put community rating under threat.
The department heard evidence some health funds were deliberately selecting companies based on the age, or likely health, of their employees, while others went so far as to seek details of prior claims before offering membership, thereby reducing the financial risks to the health fund.
While there is, in theory at least, no impediment to corporate products being made available to the general public, funds have been loath to advertise them and some have actively discouraged non-staff from taking that type of insurance.
While the department re-endorsed corporate products and noted ‘‘ some criticisms about current practices appeared to be motivated, understandably, by a desire to protect market share’’, it still proposed reforms recently ticked off by Abbott.
The relevant legislation will be amended to give funds protection if they offer corporate products, avoiding the risk of punitive action for breaching the community rating policy — with one major caveat.
‘‘ This would be subject to the condition that all products, corporate or retail, must be available for purchase by all members of the community,’’ the department told health funds this week.
From April 2008 funds will be required to advertise their corporate products on the government’s planned consumer information website ‘‘ to increase transparency’’.
Employees would also be able to keep their corporate cover if they quit, although funds would have the flexibility to charge different premiums for corporate customers as opposed to members of the general public.
While the smaller health funds welcomed the move, Medibank Private managing director George Savvides avoided giving the Government his full support.
Medibank Private has been offering a corporate product, Priority, since 2005, and has built a market around its well-being program and the ability of employers to monitor their employees’ health.
‘‘ Opening the product to the market is an opportunity,’’ Savvides said. ‘‘ But what’s important to remember here is that Priority was tailor-made for the corporate market, so although we will make it available, it may not be the most appropriate level of cover for everyone. The fact remains that people have to choose the most appropriate level of cover for their life stage and lifestyle.’’