6PR Mornings interview with Dr Rachel David on private health reforms

Station: 6PR
Program: Mornings
Date: 11/09/2018
Time: 9:23 AM
Compere: Gareth Parker
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


GARETH PARKER: Now last night a key piece of legislation affecting your private health insurance past the Senate. So these are reforms that the Government have been working on for a while. They’re now through the Parliament. It will take a little bit of time before they become law. But I think it’s a good time to start talking about the way that the private health insurance industry and the policies that will be on offer are going to change. It’s usually about April each year that the private health insurers are allowed to tell the world how much their premiums are going to go up by. But this is about the whole structure of the industry. You might have heard about gold, silver, bronze and basic packages. They are soon to become a reality but there’s other aspects to this as well.

Dr Rachel David, she is the CEO of Private Healthcare Australia. That’s the peak body for the private insurers. Rachel, good morning.

RACHEL DAVID: Good morning Gareth.
GARETH PARKER: Appreciate your time today. So obviously this has been coming for a while but it’s through the parliamentary process. What’s it means for all of us?
RACHEL DAVID: Well look, we’ve been working through this with the government and going through health fund products one by one to ensure that consumers are better able, more easily able to choose and use their private health insurance to about mid next year. You’ve mentioned that pairing of products into gold, silver, bronze and basic, so consumers that have private health insurance will be advised what category their product is in. Then secondly they’ll be given a very clear indication on one or two pages of what treatment areas or what clinical conditions are covered by their policy and what clinical conditions are not covered and those definitions of what is in a particular clinical treatment area, say ear, nose and throat surgery, are being standardised between the funds so there’s no incentive to slice and dice into treatment areas and create confusion for consumers. And this will make it easier for folks to choose a product based on the particular circumstances and their life stage.
GARETH PARKER: Okay, does it mean that your existing policy is likely to change?
RACHEL DAVID: Well no, no one will be forced to change their existing policy except in some rare circumstances that the bill does give the funds the ability to discontinue some policies but that was in response to criticism that you may have heard that there were a huge number of products on the market. Some of those are no longer sold actively and only have one or two people on them. But those people if their products are to be discontinued will be given a lot of notice, more than three months’ notice, and will be given detailed information about alternatives available, not just in their existing fund but from other funds and we want to reassure people that no one will be forced to pay more or will be forced to opt for a product with reduced services as a result of this measure.
GARETH PARKER: Okay, so when my next renewal comes out, my next annual renewal, I’ll be told hey your existing policy is silver for argument sake. Will the same procedures be covered to the same extent?
RACHEL DAVID: Yes, although because we’re changing some of the clinical definitions it may mean that some products for some people will change, either they’ll have more things covered under that umbrella – say for example under orthopaedic surgery – or they may be advised that that’s no longer covered and that to have access to those services they will be given some additional options. Now we don’t think that will happen in the majority of cases. We think most people will realise when their category is given to them, gold, silver, bronze or basic that they have the type of cover that they thought they had. For people for whom that’s not the case they’ll be easily able to go to the privatehealth.gov.au website and access a much more comprehensive range of options for them to choose a more appropriate product.
GARETH PARKER: Right, so it sounds as though your mileage really may vary depending on your individual circumstances in terms of my initial question which is will your cover change? It sounds like it might change but it might not.
RACHEL DAVID: Well for the most part it won’t. This will reflect the range of products that’s on the market but for some people they may not have fully understood what was covered by the product they currently have. And so in those cases it will mean that they might need to look for some other options and it will make it easier for them to choose something more appropriate. For the small number of people for whom their product will no longer meet the required standards we’ll also be able to give those people some options as well and it will be much easier for people to figure that out if they go to the government’s website.
GARETH PARKER: So under the changes does it mean that each private health insurer will have just four levels of policies like- is that what it means?
RACHEL DAVID: Every health policy that is in the market at the moment will be in one of those classifications; gold, silver, bronze or basic. There may be a slightly different range of treatment areas covered because health- because what is set under this system is the minimum benefit. So some products, for example, might be called a silver plus because they’ve got something extra in them that other health funds don’t offer.
GARETH PARKER: So it may well be that, you know, health insurer x y z offer two gold products, four silver products, three bronze products, two basics, whatever, but…
RACHEL DAVID: That’s right and they’ll all be …
GARETH PARKER: …but a consumer can have confidence that those- once you’re in that category that there’s a base level of minimum cover that applies to that category?
RACHEL DAVID: Exactly exactly. And it’s pretty simple to understand. If you’ve got gold hospital cover the biggest range of treatment areas is covered under gold so that’s your full cover for everything, joint replacements, surgery, pregnancy, all of that will be covered in gold. If you have a basic level of cover that will cover you for a much more limited range of things but that might be appropriate for a younger person whose main concerns are, you know, am I going to have a sporting injury, an accident or possibly a mental health admission.
GARETH PARKER: Okay. Speaking of young people does this new system gives the insurers flexibility to try and encourage younger people to take out private health cover?
RACHEL DAVID: Yeah. One of the more exciting aspects of this deal which we worked on for a long time was that it gives health funds the option to give younger people with discounts on their premiums. So for every year that people join under the age of 30 they get a 2 per cent discount on their premiums up to 10 per cent. We know that a lot of people leaving home come off their parents cover in their early 20s and they’re facing a lot of costs. whether it’s cost of housing, repaying their education debt and really- they really need help to get a foot into the market at this time and given that younger people will face issues around mental health, sporting injuries and issues around pregnancy and having their first baby, you know, being able to get that hands up into private health system and have the range of choice that it provides we think is a pretty important measure.
GARETH PARKER: Okay. It’s still several months off these decisions being taken finally, but do you have a sense yet of what the industry-wide average increase in premium is going to be for next year? And is that setting going to be influenced in any way by this new system?
RACHEL DAVID: Look, the new system in itself will have a more or less a neutral impact on premium increases. What will happen, in fact, is the other important measure that the Government has brought in, which is a reduction in the sky-high medical device benefits that health funds have been forced to pay to medical implants like hips and knees. Australian private patients are paying the highest cost in the world for these devices and the Government have taken some steps to try and reduce that. We know that premiums increase for one reason and that’s because health funds are paying for more healthcare as the population ages. So we work with government and the providers, specialist doctors, and hospitals to do everything we can to remove waste in the system and to keep costs down in the provision of healthcare without reducing the quality of healthcare; and that is the only way we can keep premiums down. So we’re not expecting a stratospheric premium increase coming up this year because we’ve been able to keep those input costs down and medical device prices to a more reasonable level in this country, but we need to continue to do that work.
GARETH PARKER: All right. Of course, if Bill Shorten wins the election and he makes good on his promise, you’ll be capped to 2 per cent anyway so…
RACHEL DAVID: Well, let’s hope that that applies to the whole supply chain in private health, but everyone needs to work to discipline their prices.
GARETH PARKER: Okay. Thank you, Rachel. Appreciate the explanations.
RACHEL DAVID: Thank you, Gareth.
GARETH PARKER: Dr Rachel David, CEO of Private Healthcare Australia. That’s the industry group. Big changes are coming. I don’t think we will fully understand the implications of those changes until you start getting your renewal notices in the mail towards the middle of next year. So, we’ll keep on top of it. I’d like your help to do that. Let us know what’s happening as you start to get them. It’s probably one for the first half of next year to be perfectly honest, but we’ll wait and see what happens.
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