ABC Radio Brisbane Focus program interview with Dr Rachel David regarding private health cover

Station: ABC Radio Brisbane
Program: Focus
Date: 20/02/2018
Time: 10:07 AM
Compere: Emma Griffiths
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia; Tom Godfrey, Spokesperson, CHOICE



EMMA GRIFFITHS: To the private health funds first, then. We have a panel of stakeholders around the nation ready to have a chat to you today. Private Healthcare Australia is the industry peak body, and Dr Rachel David is the CEO.

Rachel, hello.

EMMA GRIFFITHS: Now, 12,294 people decided that private health insurance was not worth it in the final months of last year. They dumped their private health cover. Are you worried that more people are going to make the same decision?
RACHEL DAVID: Yes, of course we’re concerned and we do hear that people – particularly as wages growth has been flat for so long – are concerned about rising premiums. The reason that premiums rise is clear: it’s because the health funds are paying for more healthcare, but we obviously need to do everything we can within our power to keep those rising costs down because, unlike the Medicare system, it’s a very direct signal to the consumer about rising health costs.
EMMA GRIFFITHS: Rachel, the private health industry made a net profit last year of 7.3 per cent. So how is a premium rise justified when you look at those sorts of profits?
RACHEL DAVID: If you look at what happens to people’s premiums when they pay into a health fund, for every $1 spent on premium income an average 86 cents gets paid back to the customer. Now, if you compare that to any other form of insurance – say for example, general insurance like home car contents – what you get back for every dollar is about 60 cents. So in fact, what people are getting back from their health insurance is much higher than any form of insurance.
EMMA GRIFFITHS: How are you making the profits, then?
RACHEL DAVID: The profits are made by running the business well. The money goes into managing the business; managing the risk; and often providing services, particularly on the not-for-profit side of the sector, where distributing income that’s raised unexpectedly can be difficult. A lot of that money goes into providing services to members.
EMMA GRIFFITHS: Dr Rachel David, you’ll be with us until 11 today. So, we’ll come back to you throughout the show. Expecting listener calls as well. 1300222612. Is private health insurance worth it for you? 1300222612 is the number. 0467922612 if you want to text. And if you’re at the point now where you’re looking at that 1 April premium price hike and thinking – is this really worth it? Should I be switching insurers? It can be really hard to compare the policies – how much they cost, what you get back – and it’s no surprise that it feels really difficult for you to do it because there are 20,000 different types of private health policies on offer. You’d need to set aside at least a whole day if you were going to do it.

Consumer group CHOICE has taken a few hard looks at private health cover. Spokesman is Tom Godfrey.

Tom, for many people, it’s not actually a choice, is it? Because they simply can’t afford to get private health insurance. That’s what you’ve found?

TOM GODFREY: Yeah, that’s right. I mean, they’re being priced out of the market, and you’ve said there that the staggering profit figures that private health insurers are making, it’s huge. But the reality for consumers across the country is that, over the past decade, private health insurance premiums are up 70 per cent on average, and they’re going up again on 1 April.
EMMA GRIFFITHS: [Interrupts] The industry says that they’re matched by the cost of health – the costs that they’re paying.
TOM GODFREY: That’s fine, but the issue is consumers just don’t have the ongoing capacity to keep paying more out of their family budget. These prices increases are ahead of inflation. Wages are flat. I’m not sure where the private health insurance industry thinks that consumers are going to get the money to keep paying, and the thing about that average figure, as staggering as the 70 per cent average figure sounds, your individual premiums could well have gone up far in excess of that. The fact is that people just don’t have the ongoing capacity to meet these regulated price increases every April. And the reason people are dropping out is because, yes, it’s expensive, but also they’re just not seeing value.
EMMA GRIFFITHS: And, Tom, when you look at the comparison sites that are on offer, which CHOICE is one, and you do pay a membership fee to be able to look at all of those comparisons on the site. It’s also big business, isn’t it? You’ve got iSelect, Choosi – have you also taken a look at the comparison sites?
TOM GODFREY: Yeah, we have, and there are many more out there. And those for-profit sites, assuming that you want to stay in the private health insurance system, they can help you navigate a complex market, but you do need to understand that they also have a vested interest in keeping you in private health insurance. One of things we did this year is update our site called because the answer might be that you don’t actually need it. And particularly if you’re under 31, earning less than $90,000 a year and you’re otherwise fit and well, then it might be in your best interests not to take out private cover. So, that site we set up to help people navigate often a very complex decision.

The other thing that we looked at was that private health insurers and the for-profit switching sites often create these very fear-laden marketing campaigns to kind of encourage you to stay in their and if you don’t stay in the private health insurance system, then these terrible things are going to happen to you. But the reality is that if you do get sick, if there is an emergency, you will end up in the public system anyway. So, this fear-laden [indistinct].

EMMA GRIFFITHS: What do you mean anyway?
TOM GODFREY: Well because if there’s an emergency, you’ll go to the emergency department and you’ll end up in the public system. So, the fear that these [indistinct].
EMMA GRIFFITHS: [Interrupts] Whether you have private health insurance or not?
TOM GODFREY: Yeah, that’s right. And so, the fact is that the fear that they create – oh, if something goes wrong, if you have an accident – you’ll be in the public system. The other challenging thing for consumers is that health insurance is very complicated, and what the insurers often do is sell you two things at the same time in a combined policy, when in actual fact, health insurance is two separate products. It’s hospital cover, which has the tax incentives; and it’s extras cover, which in reality, has no tax incentive and it’s just a form of forced savings.

It’s for those trips to the dentist, maybe it’s the physio. Now, you can drop your extras cover without a tax penalty, and for many of us, you’d probably be far better off just taking out a top-level hospital cover policy and increasing your excess to reduce your premiums.

EMMA GRIFFITHS: Tom Godfrey, when CHOICE made- a couple of weeks ago, I think it was, that you were putting out this message that, for many people, you just don’t need private health insurance – if you’re relatively young and relatively healthy. The Australian Medical Association criticised CHOICE as being irresponsible for doing that. What’s your reaction to that?
TOM GODFREY: Well, I think it’s always important that when you’re paying thousands of dollars for a commercial service every year that you question the value you’re getting, and that blindly paying private health insurance premiums every year and not understanding the value for money and what you’re actually getting, I don’t think is a good idea. And that’s why helps you navigate that process, because putting your family budget and your family finances under pressure to pay private insurers when a lot of us just can’t afford it doesn’t make much sense.

So start from that point of view: are you getting value for money? And what I’d encourage everyone to do is that if you have private health insurance, if you have an extras policy, get your insurer on the phone before 1 April and ask for an annual claims statement, because they’ll tell you how much you paid out in premiums versus what you’re getting back in benefits. And it’s a really simple equation. If you’re paying out more than you’re getting back, you should look at dropping it, setting aside some money in a savings account for that trip to the dentist, or maybe to go and see the physio. But don’t just assume that year on year; you’re going to get value out of your health insurance. You’re just not.

EMMA GRIFFITHS: Okay. Tom Godfrey, thanks very much.
TOM GODFREY: No problem.
EMMA GRIFFITHS: Tom’s with consumer group CHOICE. Going back to Dr Rachel David now, then, very briefly for a response on that. Rachel is the CEO of the private health insurers peak body.

What do you think about that idea then, Rachel, of just having a hospital cover, you can drop your extras?

RACHEL DAVID: Look, I guess that everybody- it is a good idea for people to review their health insurance, but there is one issue I’d like to come back to, and this is this issue of younger people being encouraged to consider that they don’t need health insurance. We’re seeing mental health claims in that age group grow by 9 per cent every year for people that have unexpectedly needed to be admitted to hospital to get a mental illness treated. Look, I was a doctor in the public hospital system and an administrator for some time, and it was heartbreaking because unless people were actually a danger to themselves or others, we couldn’t treat eating disorders, severe chronic depression and anxiety in the public hospital system, and I wonder how responsible it is to be suggesting to younger people that they’ve got little chance of developing these things, when actually the data shows exactly the opposite.
EMMA GRIFFITHS: But mental health cover is an extra, isn’t it? Like, that is …
RACHEL DAVID: [Interrupts] No, no. That is hospital cover. When it comes to extras, I’d also make the comment that we, from our own data in the health funds, we’ve seen that far from being encouraged to save extra money to look after their own dental health requirements and physiotherapy, it’s far too tempting for people just to spend the money on something else. We don’t have a strong culture of saving for healthcare in Australia, and so as a result, what we see is that people with extras cover and private health insurance have far better dental health in particular than in the general community, because it is …
EMMA GRIFFITHS: [Interrupts] Sorry, Rachel. When you said earlier that mental health is within hospitals cover, what do you mean by that? Because my understanding was that you paid extra to get coverage for mental health treatment.
RACHEL DAVID: Mental health treatment in a hospital is covered under the hospitals policy and it is covered in all policies, but in some policies there might be a co-payment attached if you’re admitted to hospital.
EMMA GRIFFITHS: Okay. Well, it’s good to get that clarification. We will come back to you.
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