Making health insurance more attractive

Health funds bleating on about the risks to the health system of political decisions that make private health insurance less attractive are often dismissed as transparently self-serving. But consider the facts.

This next round of federal policy changes will clearly make private health cover less attractive for Australians and there are no policy concessions being made to health funds that would allow them to make cover more attractive.

All this is happening while the spectre of ‘managed care’– where insurers determine what medical procedures are eligible for private coverage – is offering up fodder to commercial radio shock jocks.

Fear of ‘managed care’ has hung over the sector for decades. When the private health sector was dominated by mutual, not-for-profit health funds, the principle of health professionals determining what was appropriate care for a person was held as sacrosanct, an inviolable aspect of the doctor/patient relationship.

Over more recent times, the private health insurance sector has become dominated by Medibank Private and BUPA. They are in effect the Coles & Woolworths of the health industry, controlling almost 60% of the market.

In an industry where Government controls premium rates, it is clear these insurers need to reduce health costs to maintain financial return objectives. The BUPAs and Medibanks collectively have the market power now to start dictating what health services they will and will not cover, and it is not a stretch to imagine them driving the health sector the same way as the retail sector under the Coles/Woolies regime – dictating (metaphorically) what products they will stack on their shelves and what price they will pay for them, offering their own branded products in competition with other suppliers etc – all with the aim of maximising profits and stifling competition.

How ironic it is that we have a health sector groaning under financial burden while commercial operators are able to extract profits from healthcare and distribute them to their owners.

We need to recognise that health is not a commodity market – the consumption and funding of healthcare has deep societal and moral implications that need to be balanced with commercial drivers.

Less than 50% of the population currently has private hospital insurance. While the Federal Health Minister makes much of the fact that participation has remained stable despite her Government cutting the private health insurance rebate, the reality is that the range of hospital services covered by private health insurance is reducing as insurers seek to offer lower priced health insurance products by excluding certain types of treatment (eg cardiac procedures, and treatment for a range of conditions typically required by older aged people). The theory is that at certain life stages people don’t require this type of coverage. While that is true, this type of approach fundamentally contradicts the principles of community rating that underpin how private healthcare funding is intended to operate. The growth of these ‘exclusionary’ products – an increase of more than 500,000 exclusionary policies in the last three years – means that as the population ages and becomes more susceptible to health conditions, the value of private cover will be further eroded as people seek to utilise private healthcare for which they are not covered due to exclusions.

So, on one hand we have commentators highlighting the move of certain insurers to disqualify some procedures from coverage, while on the other hand insurers are openly promoting insurance products where consumers are forced to elect to exclude specified procedures in order to get a lower premium.

Neither of these augurs well for health consumers in the long run. An unhealthy mix of wayward government policy settings and commercial self-interests threatens to send our already out-of-balance health system into further chaos. At the end of the day it is consumers who will be faced with higher gap payments and further disincentive to privately insure.

The answer is to make private health insurance more attractive by (1) legislating to enable funds to cover ‘out-of-pocket’ expenses and (2) allowing funds to offer incentives to people who choose not to engage in high health risk behaviours, or who seek to improve their health status.

Being able to offer non-smokers a better health insurance deal should be an easy win.

Indeed at Westfund we’d love to be able to provide non-smokers with a lower premium. This might even provide an important new incentive for smokers who are thinking of quitting.

Imagining a pricing regime where this was possible, it would drive another important outcome that the Federal Government should take note of – it would encourage more healthy people into the insured pool therefore spreading the risk and cost across a larger premium pool, allowing premiums for all to be reduced in the long term.

But this seems yet another example of where our national policy on preventive health is strangely at odds with the legislation that prevents individual funds improving the attractiveness of private cover.