There’s a lot of big media outlets and personalities from the health insurance industry speaking out on the current state of private health insurance premiums and the alarming rate at which people are dropping out of coverage altogether. Health economist Stephen Duckett sparked seven degrees of widespread panic with his short and sharp article titled “Can private health insurance escape the jaws of death”. Soon after, NIB head-honcho Mark Fitzgibbon took the opportunity to publicly announce that Australia should “Shoot Bambi” by abolishing Medicare and go the way of the United States health care system, forcing people to take out private health insurance (funny that, coming from a health insurance company CEO).
Most of the blame is placed on health insurance premiums increasing annually at a rate higher than normal inflation, and therefore the younger demographic of insured Australians are cancelling out of cover completely. There are several media moguls broadcasting similar articles, all echoing the same opinion: that rising costs and policy value are to blame.
So, what is the big deal about more and more younger Aussies dropping out of private hospital cover? Just like any economy, the health insurance economy is built like a house of cards: take away any foundation and you disrupt the balance of the entire structure. You see, the younger demographic are generally more healthy and less likely to require surgery (let alone major surgery) in comparison to the aged population. It’s no secret that it’s the older folks that cost health funds the most, what with big-ticket surgeries along the likes of joint replacements, open-heart surgery, cancer treatment and cataracts. The new guard props up the old and keeps the field level by paying into their private hospital cover premiums and generally not needing to use it all that often. You take away young, fit and healthy premium-payers and all private health funds are left with (generally) are high costing baby-boomers and their seniors.
If this were to continue, there is a two-pronged fork lodged deep into the Australian healthcare system. Firstly, premiums for private hospital cover would sky-rocket, which would further aggravate the number of people dropping out of cover – young and old and everyone in between. Secondly, all the people who dropped their health insurance would put additional pressure on the public health system, the public hospital waiting lists and the cost to fund Medicare.
We health insurance advisers spend a lot of time on the frontlines talking to insured Australians of all ages. We hear the pain-points first hand. Yes, rising health insurance costs have always been, and will continue to be a point of complaint regarding value versus returns on any policy. However, we disagree that rising premiums are the cause.
Rising premiums are just a symptom.
The causes of these symptoms arise from continual, annual dismemberment of the government rebate on private health insurance, and from impressive private doctor’s gap bills that insured Australians are being hit with when they receive surgery from a private doctor. Another major cause is likely Community Rating.
The Government Rebate
The Government has been chipping away at the rebate on health insurance for several years now. The rebate tiers have been quietly dismantled precisely and conveniently on April 1st of each year, stealthily bundled-in with, and hidden behind, the normal inflation of April 1st rate rise. If you’re wondering why the private health insurance price hikes in April feel like their stinging more and more each year, it’s because they are. Not only are the policies increasing by their natural 3% to 5%, but the governments’ contributions in the way of a rebate are also reducing by about half a percent annually.
The Medical Gap
We’ve found that it’s not always the rising costs that break the camels back when people drop out of private hospital cover. More often it’s when they finally go and utilize the cover, after months and years of paying significant premiums, and they still end up with a gratuitous out of pocket ‘gap’ bill from the health provider. You wouldn’t have to spruik too loudly on social media in search of anyone from your immediate network of friends and family that has had such an experience. We hear all too often about our clients going for in-patient surgery and being stunned by a medical gap fee that broke the bank, on top of the sting of hefty annual health insurance premiums. More often than not, it’s the reason they dropped out of health insurance.
A feature of health insurance that legally ensures that all Australians are offered the same policies at the same prices despite their current or pre-existing bill of poor health. Unlike personal insurance, no Australian citizen or resident can be denied health insurance coverage based on any pre-existing health conditions. Here is likely one of the major causes of steady premiums increases year-on-year.
Could it be said then, that we ought to focus less on the symptom of rising health insurance premiums and focus more on the causes? Should we question the Governments incessant plucking away at the rebate each year? When will it stop? Should we ask the AMA to invent some shiny red tape around how much a private doctor can charge above the Medicare Benefit Schedule fee (which is currently uncapped)? Or perhaps tighter rules regarding disclosure of gap fees before private surgery is booked, with strict compliance regarding the patients understanding of potential gap charges, and clarity of gap reducing options, such as medical-gap-cover participation by the doctor?
Is it time to consider a reform of private health insurance that borrows a little from personal insurance, particularly life insurance and income protection? The sicker you are and the more surgery you require, the higher your private hospital cover premiums become. This could be implemented lightly, with a reasonable cost ceiling on the suggested levy to maintain at least an element of the healthy propping up the unwell. (We feel that this is a crucial feature of a good society which shouldn’t be completely abolished).
We specialize in giving clear advice regarding not just health insurance comparison options and ways to reduce premiums while increasing benefits, but also by helping you learn and understand important features of your cover such as medical gap cover. We want you to be informed when next you visit a private doctor for potential surgery, so that when you walk (or are wheeled) out of the hospital doors there might be minimal damage to your pockets. We want you to feel like your health fund has your back, and that your policy brought to you some great value for the spend…or reasonable at the very least.