Gorilla Jobs Logo

Trouble in the Private Health Insurance Industry

August 7, 2019 0 Comments

Private Health Insurance in Australia is a hot topic for politicians and it has been for many decades. Regardless of whether you have private health insurance, negative implications from this industry will impact everyone.

In recent months however, the future of the industry has been up for debate. Unprecedented new findings have caused the industry bodies such as The Australian Prudential Regulation Authority (APRA) and Private Healthcare Australia to step in with recommendations and guidelines for a more sustainable future.

There are a lot of medical jobs in demand in Australia, and for our GPs we know that Private patients can be a great source of your income. But most importantly the private patients allow you to spend time with them and to exercise your knowledge and skills in more ways.

As the Grattan Institute recently reported, there are 3 key areas.

Trouble for Private Health Insurance 

What exactly is the purpose of private health insurance in a public and universal system?

Do the current features of the private health insurance industry support its overall role in the healthcare system?

Is government support for the private health insurance industry an effective and efficient use of its resources?

Blue Stethoscope Next To IPhone

What exactly is the purpose of private health insurance in a public and universal system?

In Australia, there are 37 Private Health Insurers. It is estimated 80% of the consumers are with 5 of the main players – Bupa, Medibank, HCF, NIB and HBF, in no particular order.

The public and private healthcare sectors and the reforms they have gone through date back to as early as the 1940s and throughout each decade since then have been updated with new governments and coalitions.

It seems there is an unhappy mix of what the purpose of private health insurance can be. On the one hand, private health insurance can Compliment the public health services. But it can also Substitute.

Complimenting happens when you add-on additional covers in your insurance for areas that the public sector and Medicare currently do not cover. And for those that can afford it, Substituting happens when you fully take on the private care options available (separate from the public sector) such as access to special doctors, waiting times and quality of patient rooms to only name a few.

Focus too much on complimenting? There can be negative effects to the public sector. Focus too much on substituting? There are already problems with the affordability of health insurance and this can make it worse.

Man In Arm Bandage Giving Thumbs Up Ok Sign

Do the current features of the private health insurance industry support its overall role in the healthcare system?

Firstly, the problems with encouraging complimenting private health covers will impact the long term public health sector. With complimenting, patients are using their private health cover in a public setting such as hospitals and surgeries. To encourage this could lead to negative side effects.

For the patients? This can create a ‘queue jumping’ scenario whereby the private patients’ needs are looked at first. And this itself also has a negative impact for the remaining public patients, whereby it encourages the businesses to use ‘skimming’ practices – prioritise your patients according to the ones you have the highest profit margin on with the lowest average cost of care.

For the doctors? Encourage them to provide more services in the private sector and it creates an opportunity cost of fewer resources being allocated to the public space. A direct impact for this can be the waiting times in a public hospital if the Specialists also have a lot of their time booked for private patients.

Secondly, the problems with encouraging substituting private health covers will impact its affordability. And this is currently already a hot topic issue.

APRA reported that more than 64,000 people in 2018 dropped out of their private health insurance. And there is also a large number of people who have reduced or downgraded their private cover to only pay for the basics and limit their add-ons.

Similarly, the Grattan Institute report this year about The History and Purposes of Private Health Insurance highlights that yearly since 2011, premiums for private cover have been increasing significantly more than the average wages and health expenditures.

This has created an interesting problem for the industry. A problem that has escalated this year to the point of the regulatory bodies weighing in with their thoughts for a sustainable future.

It’s mainly the younger people who are dropping out while the population over the age of 65 are increasing their private cover and subsequently also use it more. Similar out-of-pocket expenses are happening for patients just like we previously highlighted in GP practices and their bulk billing through Medicare. And this makes it tough for everyone.

As in this example, an 84-year-old with top-level private insurance still had to pay over $10k out of his own pocket, due to a rebate for his particular surgery that only covered a certain amount and due to his doctors making him undergo several MRI scans which were also not covered.

Emergency Department Sign At Hospital

Is government support for the private health insurance industry an effective and efficient use of its resources?

The government has been trying to support the industry both currently and in the past.

It created the Private Health Insurance Incentive Scheme, which later became a simplified Rebate that would support different income levels of its patients. This is where the Medicare Levy Surcharge comes into play when everyone does their yearly tax returns. But as the previous example showed, this Rebate won’t always help you.

It also introduced a Lifetime Health Cover – where different premiums could be charged to people who took out their private insurance covers early on. To give you an example, those who join a private insurer for the first time after the age of 30 could experience a loading of 2% on their premium each year.

The subsidies the industry receives are estimated to be $9 billion a year – $6 billion for the Rebate and $3 billion for inpatient private medical services. And evidently, the government can boast about their recent reforms leading to the lowest premium price change in a decade, only 3.25% increase this year. This is still higher than the % increase of wages but it is a step in the right direction for now.

But, according to the regulating bodies the government’s efforts are not sufficient enough for the long term sustainability of the private health insurance industry.

APRA compiled facts and figures from all of their private insurers in Australia. They wanted to see how everyone was managing the risks of affordability and policy changes and they were not happy with the results.

So unhappy, they expressed their concerns for a sustainable future and will closely monitor certain insurers that face the highest risks. Their fear is that the government will not sufficiently help struggling insurers and some may have to merge with others or risk closing down due to tough profit margins for the insurers themselves – recently only an average of 5% and shrinking.

And Private Healthcare Australia’s chief executive has similarly warned that if the government wants to help more, they need to act sooner rather than later. They argue there have been enough official Inquiries already into different aspects of the industry, now is a time for action!

Two possible calls for action they recommend:

  • Increasing the insurance Rebate
  • More effective management of claims costs

Increasing the Rebate will be a politically loaded issue, as that will be an increase in expenses for the government. We will need to wait and see what will happen with this issue.

Effective management of claims costs seems to be a more realistic starting point. This is one of the biggest factors for the younger generation to opt out from private health insurance.

For health insurance you can choose between a set number of Covers from low to high and when overall healthcare costs increase the burden is shared among all members. Compare that to the car insurance industry, where individual circumstances of the person and the car will determine the insurance premium.

And finally, a more silent recommendation that also goes hand in hand with the Future of Health recommendations in Australia we wrote about, is to focus more on Preventative measures. The more people we can treat without repeated visits, the better the workload, spreading of costs and funding can be for the healthcare industry to those that need help the most.

Stethoscope And Heart Shape

What do you think will help to improve the insurance industries in Australia? Will the private sector be the future or will it be the public sector? Or a more streamlined, effective combination of both? We would love to hear from you.

A lot of doctors that we support either currently still work in hospitals or have done so prior to joining a practice. We hear about the challenges of not only the medical centres but also the GP Superclinics, surgeries, pharmacies and medical imaging providers. And that is where being educated on the right career and recruitment advice suited to your situation is key!

Schedule a call Today with one of our friendly and experienced consultants and find out how we can help you in your next GP Jobs.

This week’s newsletter update also includes information for our Pharmacy and Medical Imaging divisions. For more useful information and tips please visit our Blog page.