‘Gold, Silver and Bronze’ Health Insurance

The government is considering ‘streamlining’ our health insurance system; but what are the ramifications of such a change?

Ever found yourself confused or overwhelmed by a health insurance policy? Whether it’s the product disclosure statement or even just the wording of the policy, it can be hard to wrap your head around a single policy, let alone several if you’re shopping around.

There are currently more than 40,000 policy variations available to the average Australian, a level of complexity which the Australian Competition and Consumer Commission has repeatedly expressed concern over.

Compounding the problems facing the industry is the fact that rising premiums have seen many policy-holders reduce their level of cover for financial purposes, with many even cancelling their policies outright. This has both reduced the number of Australians with private health cover and left many Australians under-covered, a situation which bodes poorly for both consumers and the public health system.

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The government’s plan to simplify health insurance

Back in June 2016 the Turnbull Government, in an attempt to combat these issues of complexity and expensive premium prices, proposed a major revamp of Australia’s private health insurance system. Their plan involves creating just three simple categories for health insurance policies: gold, silver, and bronze.

While not much came of the proposal in mid-2016, The Australian revealed the Turnbull government is considering implementing the plan “as early as next month”.

The private health ministerial advisory committee has already met twice since the federal election to map out the three new categories, and their proposal has reportedly been sent to government actuaries, whose job it will be to examine and model the potential impact on premiums.

However even before the government actuaries reach a conclusion, the committee has made it clear that “any solution to improve the design of private health insurance will require the development of standard definitions and terminology for medical procedures across all insurers to enable consumers to compare policies more easily”.

The currently suspended Health Minister Sussan Ley agrees, having previously stated that the “murky world” of health insurance policies would be simplified by the introduction of gold, silver, and bronze categories. The government is reportedly eager to reform private health insurance in ways that will:

  • Help policy-holders secure value for money.
  • Work towards improving transparency and competition in the private health sector.

Despite the potential for industry-rocking changes and reforms, the government is adamant that they remain supportive of the private health insurance sector.

Unfortunately, the specifics concerning the requirements for each category remain unclear, and attempts to obtain information concerning the reforms and the committee’s work under Freedom of Information laws have been unsuccessful.

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Why these are reforms needed

It’s become rather taxing to be an Australian with a private health care policy. Premiums won’t stop rising – they’re set to increase by about another 5% in April – and these increases in price are coinciding with decreases in coverage and an increase in the number of fees and charges associated with policies.

As mentioned, this is leading to many consumers either reducing or giving up their private health cover. This in turn has led former health official Shaun Gath to warn that insurers may increase the price of entry-level health insurance products to compensate for the widespread decreases in cover.

Mr Gath says that “as more members move into these (cheaper) categories of cover, it will force insurers to reprice ‘entry level’ products to better reflect the …underwriting risk.”

Both the Private Health Insurance Ombudsman and the Australian Competition and Consumer Commission have also voiced concerns. The Ombudsman has been ringing alarm bells over the high number of complaints received over the year concerning private health insurance policies. The ACCC has raised concerns over the increasing number of policies and the increase in exclusions, restrictions, excesses, and co-payments.

What are health bodies saying?

Lobby group Private Healthcare Australia has signaled that they are willing to help examine policy categories, but desire a minimum level of private health cover to be put in place.

However, the Health Insurance Restricted and Regional Membership Association of Australia (HIRMAA) has suggested taking it a step further by coupling any potential reforms with incentives for consumers to take out higher-quality policies.

The private health ministerial advisory committee will next meet on the first of February to have a closer look at premiums, and examine the options of increased regulation, modified regulation, price monitoring, and deregulation (all options suggested by the committee’s secretariat).

The committee has members from the following bodies:

  • Private Healthcare Australia
  • HIRMAA
  • The Australian Medical Association
  • Australian Private Hospitals Association
  • Consumers Health Forum
  • Medical Technology Association of Australia
  • Royal Australasian College of Surgeons

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