5AA Mornings interview with Dr Rachel David on hospital cover being classified into either Gold, Silver, Bronze or Basic tiers from 1 April 2019

Station: 5AA
Program: Mornings
Date: 1/4/2019
Time: 10:07 AM
Compere: Leon Byner
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


LEON BYNER: Today is also a day where your heath insurance, private health insurance is changing its characteristics because the industry sector is undergoing a very big overhaul – it’s probably the biggest in many years – and all hospital cover has got to be classified into either Gold, Silver, Bronze or Basic tiers. Now, there’s an anomaly here and when you hear about it you’re going to scratch your head and think – hang on, this doesn’t make any sense. So let’s say you’re a customer who wants the top cover but you don’t require insurance for costs like pregnancy and birth services, well the Government has mandated that all Gold policies include unrestricted cover for 38 clinical categories, such as pregnancy and birth, IVF, weight loss. Right? So, if you don’t want the pregnancy and other cover et cetera you will have to opt for a Silver or Silver Plus policy where you can exclude it. But you’re going to end up paying more than if you’d stayed on Gold.

Now, let’s talk to the CEO of Private Healthcare Australia, Dr Rachel David. Rachel, thanks for coming on today. So when people do this sum, they’re going to be left thinking well I want to exclude it but it costs me more to do it.

RACHEL DAVID: Well look, thanks for giving me the opportunity to explain Leon and I think that overall this system which has taken more than two years to design with a range of industry experts, including doctors, hospitals and consumers, I think overall it will make it easier for consumers to choose a product that’s right for them at their life stage. One of the challenges we have is that in Australia we have a community rating system which means that health funds are not [indistinct] to discriminate against people based on their risk or their health data. So you can’t give someone who’s already sick a higher premium under the insurance- under the private insurance rules. So that means that to spread the risk across the community you do need to actually bundle some conditions together. You can’t make products completely bespoke because that would actually turn the system into a risk rated system which would mean some people would have very high premiums and that would actually cause more people to drop out.

So what we’ve got is probably the best compromise that we could come up with that also simplified the system. So people will be able to choose between the four tiers. So Gold, as much as possible, mimics the top hospital cover that you have now, and Silver and Bronze will contain some exclusions. Now it should overall, the Silver category should be a cheaper option on average than Gold. There may be some individual people who will find that their products will change because of the nature of the changes and there’ll be a shift in prices. But for those people, there will be some options which are more affordable, which are like the increased excess so that you can choose a slightly higher excess and reduce your premium in that way.

LEON BYNER: So- and this analysis, you would’ve seen from iSelect, found that some Silver Plus policies might be cheaper but not always, it depends on a whole lot of stuff.
RACHEL DAVID: Well look, on average, the Silver category will be cheaper than Gold or top hospital cover because some of the exclusions will be for things that are very, very high cost like bariatric surgery, pregnancy and IVF. So that will be a reasonable option for someone who wants to- who’s getting to the age where they’re going to require some surgery for urgent things like heart- possibly for- say for example, heart condition, but they want a more affordable option.
LEON BYNER: Tell me, what’s the most asked question in the last week as people are transitioning to this new system as of today?
RACHEL DAVID: Well look, I think, interestingly the most asked question is about the changes to extras cover which is about the Government’s exclusion of some of the natural therapies that extra’s cover and that’s come up a lot because of those list of 16 natural therapies that health funds will no longer be able to cover were some things that were quite frequently used like yoga and Pilates. But what we’ve done to reassure people that there’s still a number of very beneficial things covered under extras cover. So it’s not just your basic dental, optical and physio, you can still get cover for remedial massage, acupuncture, chiropractic as well. But that change seems to have disappointed a lot of people.
LEON BYNER: Tell me, are your memberships going up or down?
RACHEL DAVID: Look, no one likes to see a price rise, although it’s been the lowest premium increase in almost a couple of decades, no one likes to see a price rise. And inevitably that makes people review their cover and possibly contemplate some changes. But as a result of these reforms, I would reinforce that there are a number of options that are going to be made available to help people with affordability as well as to ensure that people get the right level and cover.
LEON BYNER: What options are they?
RACHEL DAVID: So for a start – the excess that you can choose has actually increased a bit, which means that there’ll be some options for products with a slightly lower premium. For people aged under 30, there’ll be a discount of two per cent up to 10 per cent, increasing to 10 per cent every year to encourage people under 30 to join. And we’ll also be retaining the basic level of cover which is a good entry level option, particularly for younger people wanting to get a foot in the door in this market but have a lower likelihood of claiming.
LEON BYNER: Rachel David, thank you for joining us today. That’s the Chief of Private Healthcare Australia clarifying some of the issues. As I said, in dealing with all these things you’ve got to ask the right questions and when you get a clarification and something is in the contract, for example, whatever category you choose, always say – can you tell me where in my agreement with you that is stated? And if it’s not, it won’t be until they change it, if they will.
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