720 ABC Perth Interview with Private Healthcare Australia CEO Dr Rachel David with regards to the increase in private health insurance premiums

Station: 720 ABC Perth
Program: Mornings
Date: 3rd March 2016
Time: 8:51 AM
Compere: Geoff Hutchison
Interviewee: Dr Rachel David, CEO of Private Healthcare Australia
JEFF HUTCHINSON: Now Private Healthcare Australia is that organisation, the umbrella organisation of the insurers, and when we’re talking about that five to six per cent increase in premiums from April, the organisation has said look it represents the lowest increase in four years and it demonstrates the industry’s commitment to keeping premiums affordable for its members.Dr Rachel David is its Chief Executive; Dr David good morning.
RACHEL DAVID: Good morning Jeff.
JEFF HUTCHINSON: As you might imagine, and I know you’ve been a little late to this conversation, most of it so far has been about an important part of our healthcare system, but one which is expensive, complex, hard to move around and does not deliver satisfactorily enough, and we had an example of a caller earlier who said I thought I had top cover, but – something that you’d be very familiar with. How do you reflect on those premium increases and why do we have to have them?
RACHEL DAVID: Look, I think the first point to make is that health funds do not put up their costs, their prices lightly. It’s something that’s very carefully considered every year because health funds do not want to see their members leave. That’s one of the most damaging things that can happen to a health fund. The reason that premiums go up is because a number of health costs are going up that the health funds have no control over. So hospital costs are going up at eight per cent a year. The cost of medical devices are going up at ten per cent a year and the costs of covering medical specialists are going up somewhere in between.So with all of that, with that level of inflation, it’s very hard to keep prices down. Health funds will try and save every dollar they can. Their management expense ratios have dropped dramatically over the last ten years from 14 to 8 per cent, so they are making efficiencies to avoid passing all of those costs on to consumers. But we have to be aware that health costs are going up for all of us, not just the private sector – the public sector as well has hinted at the conversation we’re all having about the tax system.
JEFF HUTCHINSON: Okay. My guest opening the program was Leanne Wells, Chief Executive of the Consumer Health Forum, and I said how many of us left private health insurance in the last year and she said half a million of us. Is that true?
RACHEL DAVID: Look, we’ve maintained a remarkably stable level of membership for private health insurance. At the moment, over about 13 million Australians have some form of health insurance, and in fact recently those numbers have even gone up a little bit.
JEFF HUTCHINSON: Okay, but can I just return to that actual question. She said that half a million Australians had decided to do away with it in the last year; now that’s either true or it isn’t.
RACHEL DAVID: And we’ve seen an equivalent number take it up. So yes, there is some churn in the system, but overall the net effect is that slightly more people have some form of health insurance at the moment than they did a year ago.
JEFF HUTCHINSON: Okay. What do you make this morning of some of the remarks made by Dr Stephen Palmer, the Vice President of the Australian Medical Association saying that we’ve got evidence of groups like Medibank Private calling their members, encouraging them to downgrade their insurance cover, and making the observation that the AMA estimates that about 35 per cent of all private health policies now contain exclusions, compared to only ten per cent in 2009. Now on one reading of it, we can say hang on, does that mean I’m not getting what I thought I’m getting? What would be the reason for insurers having increased that amount of exclusion so much?
RACHEL DAVID: Look I think this is an attempt to keep costs down for the consumer to make sure they’re matched with a policy that’s right for them. For- and I exclusions are an important way of doing that. For example, there’s no reason why an older man should be paying for obstetric cover for himself, and it’s- so it is important to match the consumer with the right products for them, make sure they’re paying the right price. I think where we’ve fallen down as a system is that the information the consumer has had, in some cases has been confusing. So health funds are working with the Health Minister on a process to make health insurance easier to understand for consumers so they can make the right choice.We think that as a representative of the health funds, we think that work is incredibly important, and Health Minister Sussan Ley has taken some very important steps in that direction, and we’re working with her on a number of ways in which we can make the system easier for consumers to navigate.
JEFF HUTCHINSON: Okay, last question. When I heard this announcement yesterday, we then had our finance report, and I asked our fellow how’s the market today, and he said well the markets really like Sussan Ley’s announcement about the five to six per cent increase in premiums, and those insurers are doing very much better today. And immediately then I was thinking of their shareholders rather than that other stakeholder the customer, that is going to have to pay more and more. Is this going to continue to be a year on year thing, where the reality is if it’s 200 this year, it almost certainly will be 200 next year, and 200 beyond that?
 RACHEL DAVID: Health fund prices, or the premiums are related to health funds’ input costs. So the costs that I’ve mentioned previously – hospital bed days, the cost of medical specialists and the cost of medical devices. We’re working on a number of ways of keeping those costs down, including a plan with the Federal Government to better match the benefits we pay for medical devices to the actual prices in the market. And we intent to pass every dollar saved as part of that process back to consumers through a reduced premium.Now, what you mentioned about shareholders is interesting, because in fact a significant number of health funds are actually not-for-profits, including HBF in WA. And in addition to health insurance, as a result of their not-for-profit status, they provide an enormous number of low cost health services. So yes, if a fund’s doing well, shareholders will benefit, but don’t forget they’re Australian shareholders and – who do deserve to do well out of making a good investment. But for the most part it’s our members who benefit when we work together with other stakeholders to keep costs down.
JEFF HUTCHINSON: Okay. I think what our listeners will be thinking today is that … will you determinedly try and make this all less complex? Forty-eight thousand offers in the market when it comes to health insurance packages, people find difficulty moving from one to another, they find it hard to understand what a gap is and indeed what they think they’re covered for and what they’re not. I mean, with your help can we be more literate?
RACHEL DAVID: We are actively engaged in a discussion with them with a defined timetable with Health Minister Sussan Ley about addressing those very points – about making our system much more transparent and making health insurance easier for consumers to understand. So we are – we have put a number of initiatives on the table, as has the Health Minister, and I’m really looking forward to seeing what this process can deliver.
JEFF HUTCHINSON: Thank you for talking to us today.
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