2GB Money News program interview with Dr Rachel David regarding premium increases

Station: 2GB
Program: Money News
Date: 26/02/2018
Time: 7:24 PM
Compere: Ross Greenwood
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


ROSS GREENWOOD: I want to take you back to last week, however, and remember that I told you that around Australia that the stated average increases in the health insurance premiums was going to be around, well, 3.95 per cent I think it was, 3.99 per cent I think was the average. Now, if you do bear in mind that that is quite clearly higher than the consumer price index. So what we did is that we went to the four largest private health insurers in the country and we asked them each six questions, some of which they didn’t answer. In fact I will say here that Medibank Private didn’t actually get back to us. They said they didn’t have the time – which we thought was unusual I’ve got to say is one of the biggest.

Anyway, we went to the all and we went to Bupa, we went to – say for example a range of others – and then they came back to us with some of the comments. So we went to Nib was another, and the question we asked them basically were; how is the premium rise calculated, that is yours, as much detail as possible please? Will every – in this case – Nib customer get the same increase? If not, why not? If not, how many customers will experience the increase, your average increase? How many will have greater increases? How many will have lower? Can you break down the price rises for your customers on different levels of benefits?

Now, it’s interesting because some came with more information or others came with less. HCF, Bupa, Nib came back to us, so that’s what we got. And as I say we got interesting commentary from each of them. So I’ll go through some of them.

Effectively- let’s go to Bupa. Now Bupa told us a premium increase is driven by two things. Their increase was 3.99 per cent. I should also make an observation to you here and that is I went out to Facebook and Twitter and had a range of people come back. So, a friend of mine, Cherry, came back and says ours went up by over 5 per cent. Another one, Neil, AHM, 5.1 per cent. Now if I go to AHM say for example, many of those which would have been the Medibank Private, Medibank Private is basically out there telling you right now that its average increase was 3.88 per cent, but Neil, his was up by 5.1. Peter, who’s with Medibank Private who said that their premiums were going up by on average 3.88 per cent, said his premium went up by 5.6 per cent. I notice that mine went up nearly 5 per cent. So you see what I’m saying? The average is going up by 3.88 per cent, in this case the reality is many people are getting increases many, many times more.

So they’re saying that this is partly about consumer price index but there’s a second thing. What they’re actually saying is because the Government has changed the rebate, the government rebate for private health insurance, that after 1 April this year they’ll have to take into account the lower government rebate which would contribute about 0.7 per cent of the premium increase. So in other words if you’re getting an above average increase that’s partly it. But what they’re saying is that there are increases to living ages, high quality of life, more operations, better medical devices and technology, all of this is driving the prices higher. Then we work out that increases relates to various products and policies we offer, work out the individual increases as well as an overall average submitted to the Health Minister.

Now that’s interesting because then HCF tells us that their number of 3.39 is an average across all our policies. We calculate the premium increase by looking at the contributions we received over the last 12 months and the claims we expect to pay in the coming year on the member’s particular level of cover in their state. As a result the final amount of a member’s premium increase may end up being lower or higher than HCF’s and the national average. So there’s an interesting thing. They also said how many will be lower. Nearly 60 per cent of HCF customers they say will have an increase of below 4 per cent, but they also say that around 740,000 or 49.4 per cent of their membership will get an increase below the average. But that would also imply to me that 50.6 per cent would have an increase above the average. See what I’m saying?

So I want to now go to the chief executive of private health insurance[sic] who is Dr Rachel David who is on the line right now. Rachel, many thanks for your time. Appreciate it very much.

RACHEL DAVID: G’day, Ross.
ROSS GREENWOOD: Private Healthcare Australia I should actually say. So, can I just ask, Rachel, in regards to what we’ve discovered from the private health insurance companies, individuals I believe are very seriously mislead by the information that the Health Minister and these private health companies put out on an annual basis because it doesn’t bear any relationship with what they’re paying.
RACHEL DAVID: Look, I think you’ve articulated the problem earlier, Ross, in that the number that’s announced by the Government is an average across all funds and all the policies that are in the market. So some people will pay a lot less and some people will unfortunately pay more. And of course no one likes to see cost go up, costs of any kind, and so this does come as a surprise to people given that it’s that headline number or the average that’s announced.
ROSS GREENWOOD: Okay, but surely, surely, surely, surely, it would be better off – and I noticed it in my statement, I’ve got to go online, go and have a look and it says look you’re paying this much per month now, you’re going to pay this much after 1 April this year. I had to do the calculation myself, it wasn’t like they spelt out that my increase was going to be 5 per cent. The only thing that’s really thrown out at people is that the average increase is pretty much the average across all of the premiums. This isn’t especially I would suggest particularly helpful for the consumer of private health insurance.
RACHEL DAVID: Look, I think that it’s that- you’re right, some people do get a shock when they realise that their increase is different from what the Minister announces. This is in effect of the way that health funds are regulated in that there is- that the government does enforce this announcement of the price rises on one day of the year and is such this way of explaining what the premium increase has evolved almost because of the political pressure about what that number is. So it’s quite artificial and people’s own- I mean we’ve got premium increases out there as low as two and some as high as eight in terms of the outliers, in terms of the percentage increase.

The other thing that people need to realise is that the government rebate for low and middle income earners has been frozen for budgetary reasons, so that means that what looks like a premium increase on their statement is actually a reduction in the government rebate that’s been announced, so that’s a further complexity that comes into play.

ROSS GREENWOOD: Because that rebate is wrapped up in the premium is what you’re saying?
RACHEL DAVID: That’s right, that’s right. So if people do get a number which is a shock to them there’s a site they can go to; privatehealth.gov.au which is completely independent. It’s run by the Government and the funds make a contribution to it which gives them the opportunity to compare different products and different funds and they can look for a product that has had a lower increase if it’s more affordable for them
ROSS GREENWOOD: Okay, so do you believe right now that the consumer is sufficiently articulate – I think is the right word? Because I tried to do this myself over the weekend, Rachel, it’s kind of hard to work out what you need and what you don’t need because you kind of try to make some anticipation of what you might require in the future. So let’s say for example you sit there and say I don’t need a prosthesis, right? You don’t kind of know in the future whether you’re not going to need a prosthesis or not, you just know you don’t need one now. This is what makes private health and trying to assess what you do or don’t need, what’s in or out, therefore what sort of price you pay or don’t pay, it makes it so difficult for an ordinary person to work out.
RACHEL DAVID: Look, this is right and it’s the decision that people need to make about all forms of insurance, really. It’s just that as to whether- if you’re looking at home insurance or travel insurance you’ve got to kind of sit down and say well, what are the things that could potentially happen. The trouble with health insurance and health care is that it’s the same process but a lot of us are not maybe as aware as we could be about health issues, the things that could happen to us and the things that could happen to people in our age group. So it’s important to maintain a degree of health literacy and financial literacy around these issues. They are complex but there is plenty of help available. There are a number of sites that can enable you to compare product. And if people are considering taking out health insurance and that the information, you know, and they’re not sure about their own health status, and what they might need to be covered for, not only do a lot of the health funds have that information on their website but you could also talk to your local doctor, your GP, who might be able to help with issues about family history and the likelihood that you might experience certain illnesses as you get older.
ROSS GREENWOOD: Gee, I’ll tell you what, it’s interesting to have you on the program because it is fraught. I think you understand this as well as I do, Rachel, and it’s just one of these points. But I would encourage people to go to that website that Rachel mentioned there and that is the website; privatehealth.gov.au. Effectively it’s trying to help you make consumer decisions but it is a government website so it gives all sorts of calculators there for you and gives your circumstances and allows you to compare policies. At least it gives you a bit more- I mean this is about information.

But then as I say even if you’re trying to think about something like your eye sight, eye check ups they’ll cover you for but then maybe if you’ve got some sort of major surgery they won’t cover you for other parts of it. I mean elective say for example, you want laser surgery, is it covered or not covered? It’s hard to work it out. So as I say you’ve just got to do your homework and remember also those gaps, those waiting periods that some times can affect you. But there’s no doubt in my mind picking the right cover can save you many hundreds, even potentially thousands of dollars each year, depending on your family circumstances. So this is absolutely worth trying to shop around and get the right policy, but it’s tough, it’s very very tough as we’ve discovered.

Dr Rachel David the chief executive of Private Healthcare Australia, I appreciate your time on the program this evening.

RACHEL DAVID: Thanks Ross.
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