Rise in health pre­mi­ums likely low­est in decades

The Weekend Australian - - THE NATION - SEAN PAR­NELL HEALTH ED­I­TOR

Health fund mem­bers are be­ing promised the low­est av­er­age premium rise in al­most two decades.

How­ever, the in­tro­duc­tion of gold, sil­ver, bronze and ba­sic cat­e­gories of in­sur­ance may com­pel some mem­bers to pay even higher pre­mi­ums or dump their poli­cies.

Health Min­is­ter Greg Hunt told The Week­end Aus­tralian he ex­pected to ap­prove an in­dus­try av­er­age be­low the 3.95 per cent an­nounced this year. That would be the low­est since 2001, when in­sur­ers agreed not to raise pre­mi­ums in ex­change for gov­ern­ment re­forms.

Mr Hunt is due to make a de­ci­sion on in­sur­ers’ 2019 premium ap­pli­ca­tions by early Fe­bru­ary. The in­creases will come into ef­fect in April, when in­sur­ers will also start rolling out the new cat­e­gories.

It has now emerged the gov­ern­ment did not model the im­pact of its fi­nal cat­e­gory de­sign, even though Mr Hunt claimed it had been shown to have a neu­tral or slightly ben­e­fi­cial im­pact on pre­mi­ums, in line with a pre­vi­ous com­mit­ment.

Doc­u­ments ob­tained un­der Free­dom of In­for­ma­tion laws re­veal Deloitte mod­elled seven pos­si­ble de­signs, with dif­fer­ent al­lo­ca­tions of hospi­tal treat­ments and ser­vices be­tween cat­e­gories, and re­ported vary­ing im­pacts on pre­mi­ums and mem­ber­ship.

It is not clear why Deloitte, which had also worked with the Pri­vate Health In­sur­ance Min­is­te­rial Ad­vi­sory Com­mit­tee for more than a year, was not asked to model the fi­nal de­sign.

The last four de­signs mod­elled in Au­gust were found to have an over­all im­pact on pre­mi­ums that var­ied be­tween -0.3 per cent and 1.4 per cent — just from cur­rent poli­cies be­ing re­set­tled into the new cat­e­gories. Be­tween cat­e­gories, the im­pact on pre­mi­ums ranged from -0.1 per cent to 15.5 per cent, with Deloitte hav­ing to also pre­dict any shift in mem­bers.

When Mr Hunt an­nounced the fi­nal de­sign in Oc­to­ber, he pointed to an over­all im­pact of zero to -0.3 per cent on pre­mi­ums. The mod­el­ling on the out­dated de­sign that re­ferred to a -0.3 per cent over­all im­pact had un­derly- ing cat­e­gory im­pacts rang­ing from -5.9 per cent in bronze to 5.9 per cent in sil­ver. How­ever, that may no longer be rel­e­vant.

Af­ter the lat­est mod­el­ling was done, the gov­ern­ment made sig­nif­i­cant changes to the cat­e­gories un­der which cer­tain orthopaedic surgery and de­vices would — and would not — be cov­ered.

Mr Hunt de­fended the de­ci­sion not to model the fi­nal de­sign, say­ing “we knew roughly what it would be be­cause we then went straight to mar­ket”, re­fer­ring to last month’s call for health funds to ap­ply for premium in­creases.

The de­sign process had taken six months longer than ex­pected, with late lob­by­ing from some spe­cial­ist groups and ex­ten­sive con­sul­ta­tion. Asked about some of the vari­a­tions shown in the other mod­el­ling, Mr Hunt was con­fi­dent they achieved the right bal­ance, help­ing to achieve the low premium rise he had been aim­ing for.

“The ac­tual out­comes are go­ing to be lower than the mod­elled out­comes, in all like­li­hood,” he said.

Early in the process, the gov­ern­ment agreed to add a ba­sic cat­e­gory to pro­vide in­sur­ers with more premium rev­enue to pay for ben­e­fits in higher cat­e­gories.

Its fi­nal changes to the de­sign in­cluded shift­ing spinal fu­sion from gold to sil­ver, where it will now be cov­ered along­side back, neck and spine surgery, and split­ting pain ser­vices into gen­eral pain man­age­ment in bronze and pain man­age­ment de­vices in gold.

In­sur­ers will also be able to of­fer “plus” poli­cies, with more than the man­dated level of cover, and have 12 months to im­ple­ment the new cat­e­gories.

The shake-up comes amid a con­tin­u­ing fall in the pro­por­tion of the pop­u­la­tion with pri­vate hospi­tal cover. The Septem­ber quar­ter rate of 44.9 per cent was the low­est since 2009, and Mr Hunt would not be drawn on whether, or when, it might be sta­bilised.

The de­sign op­tions con­sid­ered in the Au­gust mod­el­ling were all ex­pected to has­ten the ex­o­dus of mem­bers, with Deloitte con­ced­ing it was “more likely to be un­der­stat­ing than over­stat­ing the mem­ber­ship im­pacts”.

With an elec­tion due within months, the Coali­tion has yet to pro­pose its next wave of health in­sur­ance re­forms. A La­bor gov­ern­ment would cap premium rises at 2 per cent from 2020 to 2022 and hold a Pro­duc­tiv­ity Com­mis­sion in­quiry.

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