Dr Rachel David spoke with ABC Adelaide about Gold/Silver/Bronze tiering

Station: ABC Radio Adelaide
Program: Afternoons
Date: 21/08/2023
Time: 1:11 PM
Compere: Sonya Feldhoff
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


SONYA FELDHOFF: Now, when it comes to private health insurance, for many of you, you may be considering it priced out of the market. Maybe you’ve already made that decision. The fact is, though, that with price rises coming up again for many of the health funds in September, you may well have started seeing the discussions over the weekend around what that means for private health insurance in the future. Now, watching very closely to all of this is Dr Rachel David. She is CEO of Private Healthcare Australia. Rachel, good afternoon to you.
SONYA FELDHOFF: For many of us, we don’t understand why top tier health cover is kind of getting more and more expensive. Can you explain the mechanisms that are driving those increases?
RACHEL DAVID: Sure. Well, the previous Federal Government introduced the tiers – Gold, Silver, Bronze and Basic – because they were advised that this would help make a complex system easier for people to understand, so they knew what they were getting. And yes, that’s actually true. We do know that it has made it easier for people. But the problem is that the tiering at the back end is very rigid. And it means that what’s happened is that at the top end, you’ve got a specific group of people who are either very sick or who know they’re going to claim, and so the risk in that top hospital cover is so bad or the risk of high costs is so bad, it means that the costs of the premiums for that group are actually much higher and escalating faster. And in fact, the problem is getting worse, because since the Gold, Silver, Bronze, Basic system was introduced, the number of people in that top hospital cover has been falling. So what you’ve got is a concentration of people who know they’re going to claim and who are very high risk, and so it is getting more expensive.
SONYA FELDHOFF: What’s the answer then? It was suggested that maybe we should be scrapping those tiers. Is that viable?
RACHEL DAVID: Well, look, it’ll be difficult at the moment, and we’re not really suggesting that we get rid of the tiers altogether, but we do need to have them. But we do think that it’s time for the Federal Government, along with some of the clinical and medical specialist groups involved, review the system, particularly the inflexibility of it, so that we can actually work out a way of spreading the risk a bit more evenly through the community that we serve. I mean, we have a record number of people participating in private health insurance at the moment. It’s close to 14.7 million people, which is well over half the population. These are people who need to access care faster than is currently available in the public sector, and we want to be able to meet their needs. So I think it is worth- it is certainly worth looking at that, to looking at ways that we can spread the risk a bit more broadly so that the sickest people aren’t disadvantaged.
SONYA FELDHOFF: Does that mean, though, that the lower tiers who are not accessing or having the risk that we’re talking about here that’s bumping up those prices, that they may be ultimately paying for that risk that others will benefit from?
RACHEL DAVID: Well, it’s something we certainly need to be careful of, particularly as younger people do need a kind of entry level product that enables them to get a foothold in the system so they’re not subject to lifetime premium loadings or- which can occur if you join for the first time when you’re older, or the fines that you need to pay if you’re on a high income and you don’t have private health insurance. So we do need to have some kind of entry level product in the system. But there are different ways we can look at that, because the Government also pays a rebate on premiums for lower income earners. Now that’s currently being reviewed by the Federal Government at the moment. So we think that as part of that, looking at the product tiering and whether it can be made more flexible while keeping in mind that affordability and cost of living is the biggest issue for our members, particularly younger ones, and that we need to look after people who are on lower incomes or who are younger.
SONYA FELDHOFF: If we don’t do anything, Rachel, is private health insurance sustainable in the way it’s structured at the moment, because more and more people are opting out, aren’t they?
RACHEL DAVID: Well, look, we’ve actually seen the opposite happen. So we’ve actually seen growth in the sector, which has been driven largely by the fact that the public system at the moment is struggling and it’s very difficult for people to access the- particularly certain types of surgery and mental healthcare in the public sector right now. So we’re actually seeing growth. We’re seeing we’re up to our fourth- our 12th quarter of growth, and as I mentioned previously, 14.7 million people in the system. So we’ve had a very large numbers of people join; 865,000 people joined since the beginning of the pandemic. But what we’re seeing is that at the top end people are dropping out of that top hospital cover and taking a lower cost product, which is completely rational. But the trouble is that the people that are left in that top tier are the high claimers, and that’s why the price is going up so much, and that’s why we need some more flexibility to be introduced into the system.
SONYA FELDHOFF: That’s Dr Rachel David, CEO of Private Healthcare Australia.
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