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For: Australia & New Zealand Study Tour
Canadian College of Health Leaders
Sydney, Australia
21 February 2012
By: Shaun Larkin
Managing Director
HCF
Private Health Insurance
in Australia
Not for publication or distribution 2
Outline
Definition
Health insurance sector:
- snapshot
- diagnosis
Future directions
Examples
What does it all mean ?
Not for publication or distribution 3
Industry Commission Report No. 57, Feb „97
“…..a voluntary facility for private funding of hospital care and ancillaries, sitting alongside a compulsory tax-financed public system (Medicare) that is available to all.”
but
“…..is constrained by regulation designed to pursue
similar non-discriminatory access objectives to those in the public sector.”
Definition
Not for publication or distribution 4
Why Industry Commission Report No. 57, Feb ’97 ?
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Health fund snapshot – then (1997)
40 „not for profit funds‟ and 4 „for profit‟ funds
Covers 2.8m memberships
Covers 5.8m lives
31% of the population is covered
Annual contribution income is $4.9b
87% of this was paid out in benefits
Management fees average 12%
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Post Industry Commission changes
30% Rebate (1999)
Lifetime Health Cover (2000)
Solvency and Capital Adequacy (2001)
Gap Cover (2000)
Second Tier Default Benefit (2001)
35% / 40% Rebate (2005)
Private Health Insurance Act (2007)
Means-testing of 30% Rebate (2012)
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Private Health Insurer snapshot – now
27 „not for profit funds‟ and 7 „for profit‟ funds
Covers 4.8m hospital memberships (2.8m)
Covers 11.9m lives (5.8m)
45% of the population is covered (31%)
Annual contribution income is $15.4b ($4.9b)
85% of this was paid out in benefits (87%)
Management fees average 9% (12%)
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Private Health Insurance snapshot - now
Major funds are:
BUPA 2,778k hospital „lives‟
Medibank 2,678k
HCF 1,249k
NIB 752k
HBF 671k
Rest 2,127k
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Health fund sector diagnosis
Industry Commission Report No. 57, Feb „97
“It is generally agreed by most participants in the
Industry Commission Inquiry that private health
insurance is beset by a plethora of problems”
“The most important cost drivers behind premium
increases are thus not under the direct control of the
funds. They reflect decisions by governments,
doctors, patients and hospitals about what treatment
occurs, where it takes place and at what price.”
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declining membership
>>> growing since December, 1998 driven by 30%
rebate and then in mid-2000 by Lifetime Health
Cover (LHC) but relatively flat since end of 2001
…..as a percentage of population
adverse selection is increasing:
- young and healthy are not entering; and
- high users, often the elderly, stay in
>>> LHC as of 1 July 2000
Health fund sector diagnosis: then >>> now
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Industry is highly regulated with controls on pricing, rating system,
product design, benefit design, prudential standards and
reinsurance
>>> ongoing incremental change occurring
(e.g. reinsurance to risk equalisation) with
industry consultation
moral hazard continues to be evident
>>> better understood and impact lessened by LHC
onerous billing and claiming systems for members
>>> - simplified billing systems in place
- e-commerce developments continuing
Health fund sector diagnosis: then >>> now
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unpredictable out of pocket for members
>>> “no gap” developments in hospital now
replicated in medical; dental; optical; and others
with some success (varying by State; modality;
geography) but market research says still a
significant issue for many consumers
traditional role is that of a passive buyer
>>> tendering emerging with difficulty; focus
still on buying, albeit smarter, i.e. not just price
Health fund sector diagnosis: then >>> now
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Then >>> now >>> future
“the right care
at the right time
at the right price” *
V = f (Q/C)
Q = “the right care” - variation in practice
Q = “the right time” - need for services
C = “the right price”
* Just like Ontario’s Action Plan for Health Care
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“the right care”
utilisation review
peer review
outlier review
not draconian
practice benchmarking and profiling
quality indicators
outcome studies
EBM, CPGs, clinical pathways
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continuity of care, i.e. “the right place”
member education
prevention
Primary
Secondary
My Health Guardian:
www.hcf.com.au/my_health_guardian.asp?member_id=Guest
focused disease/condition programs
“the right time”
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agreed payments (provider networks)
bundled services (per diem; per case)
benefit design
VBID (“aligning incentives to bridge the divide
between quality improvement and cost containment
- http://www.ajmc.com/VBID_Related )
waiting periods
limits
copayments and deductibles
exclusions
risk sharing
trade volume for discount rates
“the right price”
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Then >>> now >>> future
Away from :
individual;
reactive; and
sickness based approach
reliance on interventions that offer
the probability of treatment success
segmented and fragmented cost control
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Then >>> now >>> future
Towards :
population based, health risk management
approach using evidence based principles
reliance on interventions that offer evidence of
benefit
system and/or episode cost control
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Then >>> now >>> future
Through:
collaboration
clinician control of clinical matters
information to members and providers
incentives
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What does it all mean ?
Private health insurers have limited, but known,
options to contain costs and will always look to where
most expense is incurred
At HCF we will continue to actively seek stronger
alliances with our members and efficient, high quality
providers by:
finding ways to identify them
finding ways to reward them
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http://www.finity.com.au/publication/us-health-reform-whats-happened-and-does-it-matter-to-australian-health-insurers
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References Hospitals Contribution Fund of Australia (HCF)
www.hcf.com.au
[email protected] or http://www.linkedin.com/in/drshaunlarkin
Private Health Insurance Administration Council (PHIAC)
www.phiac.gov.au
Private Health Insurance Ombudsman (PHIO)
www.phio.org.au
“Private Health Insurance”
Industry Commission, Report No. 57; February, 1997
http://www.pc.gov.au/ic/inquiry/57privatehealth/inquiry_documents/57privatehealth
(+ http://www.pc.gov.au/projects/study/hospitals)
“Private Health Insurance in Australia: A Case Study”
(OECD Health Working Paper No.8; October, 2003)
www.oecd.org/document/25/0,3746,en_2649_37407_2380441_1_1_1_37407,00.html
European Observatory on Health Systems and Policies
The Health Systems in Transition (HiT) profiles are produced by country
http://www.euro.who.int/en/who-we-are/partners/observatory/publications/health-
system-reviews-hits
