ACCC provides road map for private health insurance reforms

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The Department of Health would be wise to take the ACCC’s observations seriously during its review of Australia’s private health insurance system, writes APHA chief Michael Roff.

Last month, Federal Health Minister Sussan Ley launched the latest review into Australia’s health care system, this time private health insurance.

The Minister flagged the move, which follows six other health care reviews, during an address to the National Press Club in Canberra.

“I am about ensuring that Australians have access to information, choice and affordable health care,” Minister Ley said. “To truly achieve this,” she continued, “we must therefore recognise there is one other piece that is essential to completing the health puzzle – private health insurance.”

At a time when consumer concern about “value for money or lack thereof” in the system continues to increase, the announcement was timely and well received.

What we know about the review so far is that the Department of Health will conduct roundtable discussions on private health insurance with key industry and consumer representatives (mid-November), while consumer feedback will be sought online (mid-November to mid-December).

The Minister told the National Press Club that “everything is on the table” so that these discussions can properly explore:

• Opportunities to amend unnecessary and inefficient regulation which add costs for the consumer; and
• Identify reform options which would enhance the inherent value proposition of private health insurance to the consumer.

Minister Ley’s announcement followed the release of the Australian Competition and Consumer Commission’s (ACCC) report on competition and consumer issues in the private health industry for the period of 1 July 2013 to 30 June 2014.

The scathing report, delivered to the Senate on 20 October, detailed a review of the industry, with a particular focus on information provision, including the transparency, accuracy and consistency of information about policies and the impact this has on consumer behaviour.

The ACCC reported that the complexity of the private health insurance system, and its impact on consumers, was a frequent theme of the submissions it received from both consumers and industry bodies (including the Australian Private Hospitals Association).

A range of factors contribute to this complexity, including regulatory settings, the sheer number of policies available, the range of potential policy benefits and exclusions, preferred provider arrangements, policy variations and differing terminology between funds which makes comparison difficult.

The ACCC’s findings led to three primary observations:

• There are market failures in the private health insurance industry to asymmetric and imperfect information.
• The existing regulatory settings can change consumers’ incentives in purchasing private health insurance and drive insurers to offer products to primarily reduce consumers’ tax liabilities.
• The research has revealed examples where representations by insurers to consumers may be at risk of breaching consumer laws.

The ACCC’s observations further expose the flaws in a system that roughly half the Australian population rely on.

Most concerning is current regulation, which has led to an increase in out-of-pocket expenses for patients. As a result, complaints to regulatory and complaint bodies about the costs and “bill shock” are rising.

Minister Ley told the National Press Club that “Australia’s health system was built for the patient and it’s important they remain at the centre of everything”. The current state of the system suggests that may not be the case.

To rectify that, the Department of Health would be wise to take the ACCC’s observations seriously during its review of the private health insurance system.

Achieving meaningful long-term reform won’t come without its challenges, but APHA will be advocating to make private health insurance better value for Australians.

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