Why you should prepare for more private health insurance pain

Funds blame an ageing population and a failure to attract new members.

knee replacement

The likelihood of limiting next year’s private health insurance increases to an average three per cent has been labelled “extremely challenging” with “hefty” increases forecast.

That’s the view of Private Healthcare Australia chairman John Hill. He was reacting to news that Health Minister Greg Hunt, who had been aiming for a three per cent ceiling, had hit a significant hurdle due to the cost of such devices as knee and hip replacements soaring by 8.6 per cent.

Australians with private health insurance would face hefty premium increases next year that were likely to be twice the rate of inflation, Mr Hill said.

“Without putting downwards pressure on those costs (medical devices), you can’t put downward pressure on premiums,” Mr Hill told The Age. “It’s simple mathematics.”

Insurers would have “no other option” but to pass on their rising costs to consumers, he said.

In November, private health insurers will submit their proposed premium hikes, which must then be approved by the Health Department. Mr Hunt will announce the approved price increase in late December, with new premiums to apply from 1 April.

An increase of 3.2 per cent would be double the current rate of inflation.

Industry experts warn that the private health industry is in a “death spiral” with increasing numbers of younger Australians dropping their coverage due to cost and a perceived lack of value.

Data from the Australian Prudential Regulation Authority (APRA) shows 65,000 fewer Australians had health insurance in December 2018 compared with a year earlier.

“Inflated prices for established medical technologies must come down in line with the rest of the world,” Mr Hill said on Wednesday.

“The most commonly used implants – cardiac stents – are five times the price in Australia as in New Zealand.”

The Age reports that insurers agreed to this year’s average premium increase of 3.25 per cent – down from 3.95 per cent in 2018 and the lowest increase in 17 years – on the basis that a deal struck by Mr Hunt with the Medical Technology Association of Australia (MTAA) would slash device costs by $250 million this year, with a total of $1.1 billion to be saved by 2021.

This has not happened and costs have risen by 8.6 per cent this year.

MTAA chief executive Ian Burgess said that the volume growth was “as anticipated” due to new medical device technologies being added to the government’s prostheses list and an ageing population.

“That compares with a 10-year average of 7.8 per cent. It’s not a significant increase,” he said.

Medical devices, including joint replacements, insulin pumps and human tissue items such as corneas, bones and heart valves, make up eight per cent of insurers’ costs.

A spokesman for Mr Hunt said the government was implementing “the most significant improvements to private health insurance in over a decade” and that reforms had delivered record-low premium rises.

The Consumers Health Forum (CHF), meanwhile, says the possibility of further taxpayer help for private health funds requires a searching inquiry into the cost benefits for the whole health system.

Chief executive Leanne Wells said: “The lesson of history is that after 20 years of government subsidies and regulatory shelter, consumers have experienced years of above-inflation premium increases and shrinking coverage, while health funds profits have tended to remain buoyant.

“The pressure from health funds makes it timely for a thorough, independent inquiry by the Productivity Commission to examine the effects of private health insurance subsidies on the health system as a whole and how it serves the interests of healthcare for all Australians.”

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    COMMENTS

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    Horace Cope
    24th Oct 2019
    10:36am
    What I'd prefer is for the health insurers to be open and transparent with their increases. In the past there have been increases trumpeted at a "low 4%" but this is an average. Our worst increase was 13.8% whilst our best was 9.24%. I'd love to have an increase of 4% as opposed to the truth. Instead of giving the mythical average could health insurers release a list of which premiums are increased and by how much. Surely in this age of computers that would be a simple task.
    older&wiser
    24th Oct 2019
    2:22pm
    I'm with you..sick of hearing the same. My increases have always been double the PHI boasted 'average increase'. I know enough about maths that if my increase is more than double the touted average, this means some premiums have decreased. Which I seriously doubt. Has anyone had their rate decrease?
    floss
    24th Oct 2019
    10:38am
    Bail out time is getting closer for most people just not worth it any more.
    elephants
    24th Oct 2019
    11:19am
    Well the waiting list is becoming sooo much longer over 1yr just to have a camera down ur throat .Over 1yr knee replacment .With the increase of refugees arriving on passenger planes now over 30.000 inthe last few yrs. Of course waiting list are terrible.. LOOK AT OTHER COUNTRIES THAT HAVE A WONDERFUL HEALTH SYSTEM DENMARK FOR 1.WITH GOOGLING COUNTRIES THAT HAVE TERRIFIC SYSTEMS IN PLACE AT YOUR FINGERTIPS. NO NEED TO SEND A GROUP OF POLLIES OUT TO ENJOY THEIRSELVES. IF NEW ZEALANDS COST IS 5 TIMES CHEAPER HOW ARE THEY DOING IT LOOK LEARN FROM THESE COUNTRIES
    Anonymous
    25th Oct 2019
    8:51am
    Relocating to NZ is not a problem. The other places won't let you in. Switzerland has a good system because everyone has to be
    in health insurance, fund is your choice. But compulsory it is.
    Red 13
    24th Oct 2019
    11:20am
    Bloodsuckers!!!
    We stay in because we are pensioners with more than just the usual ailments age brings. We have not made claims yet, but that may soon change. But if the rising costs keep outpacing what our pension brings us,how long can we continue to afford these bloodsuckers?
    Gary
    24th Oct 2019
    11:30am
    Considering the number of people buying health insurance and the relatively small group requiring medical devices, I do not understand how this is driving up the price of insurance so dramatically.

    Would like to know the total cost of the devices and the total cost of revenue from our policy payments.
    Sal
    24th Oct 2019
    11:49am
    Exactly, they mention "knee and hip replacements soaring by 8.6 per cent" which are now usually only in Top Hospital cover. So maybe they should increase top cover by more than the lower levels.
    GeorgeM
    24th Oct 2019
    2:47pm
    Good point, Gary, in fact I was thinking further. The article says "Medical devices, including joint replacements, insulin pumps and human tissue items such as corneas, bones and heart valves, make up EIGHT PER CENT of insurers’ costs." These (the Eight percent) costs have gone up by 8.6%. Let's say that 5% of the Members have one of these operations in a year. The Maths works out as follows:

    The overall percent of cost increase for Insurers due to these device prices increasing = 8.6 * .08 * .05 = 0.0344 %. Seriously??? Is that the problem?
    Also, this calculation assumes there are NO GAPS, and Insurers pay the full costs - something which is not true and which further destroys their argument for price increases.

    Obviously, the bureaucrats in Greg Hunt's Department do not know Maths. The above impact of these device costs increasing is NEGLIGIBLE on the overall Insurer costs! Give them all the sack! Even the Consumer Health Forum seems to be sucked in by this pathetic argument from the Insurance industry and HASN'T checked the Maths.
    Karl Marx
    24th Oct 2019
    12:42pm
    1st April, would have to be a fool to have an outrageous money gouging for profit health fund. I can understand peoples anxiety as they get older in retaining their health cover but bottom line is that health funds care far more about profits & shareholders than they do about members & their well-being.
    An ABC story just today highlights that fact.
    https://www.abc.net.au/news/2019-10-24/private-health-insurance-and-cancer-treatment-under-microscope/11621884
    roy
    24th Oct 2019
    1:18pm
    Stop moaning about shareholders Skid and join a mutual fund that has no shareholders, sheesh, shakes head.
    thommo
    24th Oct 2019
    12:49pm
    It's time the federal government nationalised the health system as is the case in the UK.
    That will put an end to the private health insurance bloodsucking monsters which our LNP government supports..
    Better still, get rid of them both asap.
    roy
    24th Oct 2019
    1:20pm
    Private health insurance is very alive and kicking in the UK Thommo.
    80 plus
    24th Oct 2019
    1:09pm
    my wife is 84 I am 81, our health insurance package includes reproductive health and reproductive (IVF) assistance, we cannot opt out of this, we are also offered subsidized gym and fitness membership, it seems the elderly are subsidizing the young!
    roy
    24th Oct 2019
    1:21pm
    Change your provider, how difficult is that?
    80 plus
    24th Oct 2019
    1:40pm
    we are in middle of a cancer treatment programme so it is very difficult.
    roy
    24th Oct 2019
    2:54pm
    You have my deepest sympathy, good luck with the treatment. Other people on here complain but do nothing about shopping around.
    Priscilla
    24th Oct 2019
    1:11pm
    I am a retiree and have paid for top private health insurance since I commenced employment, over 60 years ago. Before Medicare private health insurance covered all your expenses. Over that period of time I have seldom accessed my health cover. Now that I am in my 80s the likelihood of using it more is possible. Why should I be penalised after paying all these years when a younger person, who has barely contributed expects better access than myself. It is greedy medical companies etc., who put up the price of health care and lack of contribution from the government.
    GeorgeM
    24th Oct 2019
    2:53pm
    John Hill's arguments are a complete fraud. As i have detailed in response to Gary's comment above, the impact of these cost rises are NEGLIGIBLE on overall costs. Greg Hunt needs to get smarter advisers to check the Maths - as I have pointed out.

    Even the concept of limiting "average" increases is yet another FRAUD (never seen increases less than or equal to it), the cap should be Maximum increases on ALL policies.

    Better still, get a Royal Commission started into the profiteering in this FRAUD Industry - it is NOT real Insurance, otherwise there should be NO GAPS.
    Katz
    24th Oct 2019
    3:57pm
    Another increase?? I have been waiting for a decrease considering that a lot of extras that covered were removed from all policies. I pay $130 a fortnight for single cover, I am on the top table due to my medical needs, I can’t afford this but I also can’t afford to be without it.
    I have had private health since I started work and covered by my parents prior to that. Prior to Medicare and Medibank before that, private health was affordable and covered everything. Since the introduction of Medicare premiums sky rocketed and continued to do so whilst coverage has continued to decrease.
    Last year I was taken to emergency in a major public hospital where the staff encouraged me to be admitted as a private patient. What a mistake that was! I was in a ward with six patients instead of a private room that insurance would have covered, I had to pay all of my accounts and claim them myself for pathology instead of them being automatically bulk billed. The only benefit if signing in as private was being given a toiletries pack with sample size products, daily newspaper, free tv rental and six vouchers to go to the cafeteria ... big deal!! Not worth it. On another hospital admission as a private patient, different hospital, the nursing staff told me that the public section of the hospital was actually better than the private!!
    This system needs a major overhaul, it’s not working!! I welcome an independent inquiry, make it soon and make it quick!!
    Katz
    24th Oct 2019
    4:00pm
    Please excuse some of the typos and grammatical errors, I should have proof read it before I submitted it lol
    Eddy
    25th Oct 2019
    11:31am
    Katz, similar story except for a few things. A few years ago I was admitted to a public hospital (because that was where the ambulance took me when I collapsed on the street) I was asked, after a couple of days when I had recovered my senses, if they could put me in as a private patient as they got more money from a fund than they got from medicare, but I was told it would not get me any extra privileges apart from free TV. I consented. I was in a 4-bed ward and the treatment I received was first class (my wife, a nurse, confirmed this). I had no out-of-pocket charges for pharmacy, x-ray, MRI or physiotherapy or anything else. I have no complaints whatsoever at my treatment in a public hospital as a private patient.
    Eddy
    24th Oct 2019
    11:06pm
    Question: if the cost of medical implants are rising for privately insured patients, who pays the bill for public patients? Medicare? This raises the next question, if Medicare funds public patients implants why do they not fund private patients implants? We all paid the same levy, why ae we not entitled to the same benefits? The only difference is private patients get a limited choice of surgeon and/or hospital and are possibly attended to earlier.
    Loza
    24th Oct 2019
    11:31pm
    Health insurance must have government on their payroll. When government introduced the 30% payment by the government the insurers put their rates up because they said because it is cheaper by 30% more people will join so there will be more payout on claims. And no government minister at the time commented on it
    Aussiefrog
    25th Oct 2019
    12:19pm
    I guess it's time to cancel my private cover
    I'm sure that increasing premiums year in and year out is going to attract potential new customers! NOT


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