The ACCC just released their 21st report into the Private Health Insurance Sector, which analyses key competition and consumer developments and trends in the private health insurance industry to 30th June 2019 that may have affected consumers’ health cover and out-of-pocket expenses. This report also continues the ACCC’s focus on adequate private health insurer
communications to their consumers, including on detrimental policy changes, as well as potential emerging issues in the use of consumer data.
And in summary the system is unwell. Private health insurance premiums rise faster than income despite growing exclusions. For the first time, the majority of hospital treatment policies held by Australians now contain exclusions with more than 57 per cent of policies containing exclusions, up from about 44 per cent in the previous year. This chimes with our household surveys which shows more younger people are jettisoning their policies, or not signing up in the first place. This is a wicked problem, as more sick people as a total proportion are within the system, meaning that costs are becoming more concentrated.
Plus, the ACCC notes that consumer data collected by private health insurers and other businesses, for example through wellbeing apps and rewards schemes, can be used for a number of purposes such as targeted marketing, including from third parties.
Key industry data used and relied upon by the ACCC includes industry statistics and data collected by the Australian Prudential Regulation Authority (APRA) and private health insurance complaints data from the Private Health Insurance Ombudsman (PHIO).
As at 30 June 2019, 13.6 million Australians, or 53.6 per cent of the population, had some form of private health insurance. This represents a membership reduction of 0.6 per cent from June 2018 (54.2 per cent). The Australian population grew by 396 722, or almost 1.6 per cent, during this period. The decline is sharpest among younger age groups.
The five largest health insurers have a combined market share of almost 79.5 per cent and contributed to almost 77.5 per cent of total health fund benefits paid in 2018–1915, with Bupa and Medibank contributing 26.7 per cent and 25 per cent respectively.
The average premium increase of 4.8 per cent per year over this period has been higher than the average annual growth in the wage price index (2.1 per cent) and the consumer price index (1.6 per cent) over the same period. While the rate of the average yearly premium increases has been decreasing each year over the past five years, and was 3.25 per cent in 2018–19, the average industry premium change for 2020, to take effect on 1 April 2020, will be 2.92 per cent – still well above wages growth.
From June 2018 to June 2019, the proportion of hospital policies held with exclusions increased by almost 14 per cent. For the first time, the majority of policies held now have exclusions.
The number of exclusionary policies held increased by over 650 000 from June 2018 to September 2018, with an equivalent reduction in non-exclusionary policies during the same period. APRA’s statistics did not indicate the reasons for this rise in the number of exclusionary policies during the reporting period. However, analysis by Silvester and others has suggested that less expensive exclusionary policies may appeal both to existing policyholders whose policies have become unaffordable, as well as to young people buying health insurance to avoid LHC loading and the
Medicare levy surcharge.
While most in-hospital services are delivered with no gap payments required from patients, this rate has varied in recent years, from a low of less than 85 per cent of services not requiring a gap payment in September 2015, to almost 89 per cent in March 2018, before falling again to under 87 per cent in June 2019.
From June 2018 to June 2019, the average gap expense incurred by a consumer for hospital treatment was $314.51, an increase of 1.9 per cent from the previous year, as shown in table 8. Average gap payments for extras treatment increased by almost 4 per cent to $49.20 over the same period.
A YouGov survey from late 2019 found that, after the cost of premiums and a perceived lack of value for money, out-of-pocket costs were a leading reason given by respondents for no longer holding private health insurance.
Several health insurers offer rewards schemes for their members, some of which involve the use of fitness tracking apps and devices to record activities such as steps and sleep. Some of these apps operate in conjunction with companies other than health insurers. For example, the health insurers MO Health and GMHBA are both partnered with the life insurer AIA Australia Limited, and use the AIA Vitality program issued by AIA.
HCF has also entered into a partnership with Flybuys where new HCF members can collect Flybuys points based on their annual health cover
premiums. Qantas, which offers health insurance issued by NIB, also offers frequent flyer points for members who download the Qantas Wellbeing app and undertake certain activities. Its Qantas Wellbeing Program Terms and Conditions state that members must link a tracking device to record their physical activity, and that as members, they consent to Qantas: “collecting, using and disclosing any personal information including health and Wellbeing information submitted by the Member through joining or use of the Wellbeing Program or collected by Qantas through the Tracking Device or the Qantas Wellbeing App”.
Although Australians can receive benefits from rewards and discounts offered by health insurers and other organisations that collect consumer data, the ACCC is concerned that few consumers are fully informed of, fully understand, or can effectively control, the scope of data collected when they sign up for, or use, such services.
While the community rating system for private health insurance in Australia prohibits insurers from charging different private health insurance premiums to individual consumers based on health and other
factors, the ACCC notes that the consumer data collected by wellbeing apps and rewards schemes could be used for a number of other purposes, including for targeted marketing (including from third parties), and potentially to create insights that could be shared with or sold to third parties.
The system will continue to be under pressure – and we think the model is frankly broken.
I think the greed within the medical industry at corporate level has been out of control for many years add in profit driven directors and senior management with no interest in customer satisfaction and outcomes and here we are.
Let it die, like superannuation its a failed expensive experiment.