ABC Radio Melbourne interview with Dr Rachel David regarding health fund premium applications for 2018

Station: ABC Radio Melbourne
Program: Mornings
Date: 9/11/2017
Time: 8:53 AM
Compere: Jon Faine
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


JON FAINE: Rachel David joins me. She’s from Private Healthcare Australia, the peak body for the health insurers in Australia.

Rachel, good morning to you.

RACHEL DAVID: Morning, Jon.
JON FAINE: You just heard the Health Minister then. I won’t ask you about same-sex marriage or dual citizenship, but in particular on increasing premiums. Why should premiums go up by as much as four per cent – which some of them are asking for – when the cost of living is a fraction of that?
RACHEL DAVID: Look, and I just should reiterate: we’re not sure how much premiums will go up yet. It is a competitive process, and health funds need to put in their submissions quite individually before they’re assessed by the regulators and the Minister, but realistically, I want to reinforce that health funds want to do everything possible to avoid a premium increase and to keep premiums low. We know …
JON FAINE: [Interrupts] Sure. You say that by way of trying to reassure us, but the reality is you also have members who are applying for as much as a four per cent increase.
RACHEL DAVID: That’s right, and what that reflects is the cost of the inputs that we need to pass on in the premium increase. Now, the cost of living …
JON FAINE: [Interrupts] No, it reflects your desire to maintain profits for your shareholders.
RACHEL DAVID: Well actually, health fund profits, or the net margin, has remained absolutely stable over the last 15 years, and that’s very clear from APRA data. What we’re seeing is a wide utilisation of the key health services that health funds pay for, and that’s medical devices used in elective or non-emergency surgery, the cost of gap cover for medical specialist services and allied health professionals, and the cost of hospital beds. All of those things have been going up at five to six per cent per year, and in fact, the premium increase that was applied last year of 4.8 per cent meant that some health funds were actually running the health insurance business at a loss to be able to maintain that level.

So it is a disaster for health funds when members leave, particularly when they leave after many years because they’ve been unable to afford the premium. We will do anything to avoid that outcome, but it’s very challenging with people ageing and using the health system more to bend that input cost curve when- and it requires a lot of detailed negotiation with the doctors and hospitals that are also part of Private Health to be able to do that.

JON FAINE: Well, let’s see what actually happens in the next day or two, but thank you for your explanations. Rachel David, from Private Healthcare Australia.
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