ABC Radio Melbourne Mornings program interview with Dr Rachel David on premium reductions

Station: ABC Radio Melbourne
Program: Mornings
Date: 7/04/2020
Time: 9:51 AM
Compere: Ali Moore
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


ALI MOORE: Doctor Rachel David is Chief Executive of Private Healthcare Australia which is the peak body for private health funds. Rachel David, welcome to the program.
RACHEL DAVID: Morning, Ali.
ALI MOORE: So, will we be getting our money back?
RACHEL DAVID: Look, we are monitoring the situation very carefully because health funds do not want to make extraordinary profits out of the COVID-19 crisis. So, elective surgery will drop off by about half, we’re still going to be funding emergency procedures or procedures that need to take place within a four-week period – things like cancer and heart disease – and we’ll still be funding emergency dental and some Telehealth and mental health.

But there’s no doubt that we are going to be seeing a drop off in claims as a result of COVID, and so if we see abnormal profits accumulating we will rapidly work out a way to pay that back to members – whether that’s by a rebate or a premium reduction.

ALI MOORE: And what will be your benchmark for that? Because if you, I don’t- I mean, I’m picking numbers out of the air here, but let’s say that you got a profit of $500,000 but you’ve got 500,000 members, that’s a dollar a member – do you bother with that? Like how do you sort of measure this?
RACHEL DAVID: Well look, we do it by a thing called the claims ratio which is basically how much people get back as a result of the premiums that they pay and in the health insurance industry that’s traditionally been a lot higher than other forms of insurance.

So, for every dollar that’s spent on premium we pay back 86 cents which is about twice what other insurers pay. We want to keep that constant and, or as well as the net margins across the industry fairly constant which has been about 5 per cent over the last 10 years and stable. So if it is, it could be a small amount and that can go through as a premium reduction, and- but it is possible that if it does build up, with regulator approval, we could end up sending or actually be paying people cash back.

ALI MOORE: So, are you going to assess this on a sort of monthly basis? Or do you wait until we come out the other side?
RACHEL DAVID: No. Monthly is probably what we’ll end up doing, that’s what our regulators are looking at at the moment and, obviously, this will need regulator approval. But I think monthly given how rapidly the situation is evolving is reasonable, particularly if people with COVID who’re admitted to hospital end up electing to be private patients and have their own doctor will end up – we will pay those claims and we’re happy to pay those claims as well.
ALI MOORE: That’s actually an interesting point. Will people be able to do that, given that the private hospitals have now been nationalised, quote unquote, for the purposes of COVID treatment?
RACHEL DAVID: Yeah. People will still be able to elect to be private patients, there are a lot of people out there with serious chronic diseases who have had their own medical specialists in various areas for some time and for continuity of care it’s quite important that those people retain the ability to be private patients.

The other thing that’s important to realise is when this is over there’s going to be a very big backlog of non-emergency surgery that needs to take place and we need to be prepared for that and to be able to fund that when it happens.

ALI MOORE: Well, we shall wait, no doubt with bated breath, to see. It’s not often that our health premiums go backwards so to speak. Doctor Rachel David, thank you.
RACHEL DAVID: Thanks, Ali.
ALI MOORE: Doctor Rachel David is Chief Executive of the peak body for private health funds.
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