Outcome 9 - Private Health

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Improved choice in health services by supporting affordable quality private health care, including through private health insurance rebates and a regulatory framework

Major Achievements

• Implemented arrangements to support income-testing of the private health insurance rebates.
• Contributed to keeping the annual increases in private health insurance premiums to the lowest in four years.
• Improved patient access to prostheses which attract private health insurance benefits.
• Improved the quality of private health insurance Standard Information Statements to ensure that information about private health insurance products can be easily accessed and is comparable for the consumer.
• Implemented a new Overseas Students Health Cover Deed with insurers that sets outs arrangements for comprehensive, visa-length coverage for overseas students.

Challenges

• Ensuring adequate industry consultation and public communication about the income-testing arrangements for private health insurance rebates.
• Ensuring the level of information available to the private health insurance industry and to consumers is timely, concise yet comprehensive, to enable informed decision-making.
• Managing the private health insurance premium round process through ongoing consultation and liaison with industry stakeholders.

Outcome Strategy

Outcome 9 aims to promote the sustainability of private health insurance and support consumer choice in health care. The Department worked to achieve this Outcome by managing initiatives under the program outlined below.

Program 9.1: Private Health

Program 9.1 supports the sustainability of the private health insurance rebates by ensuring that Government payments are targeted at those people who need them most; promotes the affordability of private health insurance and the sustainability of the private health insurance sector; improves access to prostheses through a fair and equitable reimbursement framework; and improves the level of information available to consumers of private health services, enabling informed decision-making and encouraging a high quality private health industry.

Ensure the Sustainability of the Private Health Insurance Rebate

Private Health Insurance Rebate

In 2011-12, all privately insured Australians who were eligible for Medicare received a rebate of 30 per cent of the cost of their private health insurance premium (35 per cent for people 65 to 69 years of age and 40 per cent for people 70 years of age and over).

The Department continued to work with the Department of Human Services to ensure rebates were delivered in accordance with the Business Practice Agreement. All agreed performance standards were met in 2011-12.

Income Testing of the Rebate

In supporting the Australian Government’s commitment to strengthen the Australian health system and ensure that people are provided with the best possible health care, the Department worked with the Australian Taxation Office (ATO) and the Department of Human Services to successfully implement arrangements to support income-testing of the private health insurance rebates.

In March 2012, the Fairer Private Health Insurance Incentives Tiers Acts were passed by the Parliament. This legislation allows the application of an income-test to the private health insurance rebate, and the Medicare Levy Surcharge from 1 July 2012.

Using the most recent data available, the Australian Taxation Office sent letters to all taxpayers identified as those likely to be affected by changes to the private health insurance rebate. Additionally, 100% of insurers were advised of these changes.

Promote an Affordable and Sustainable Private Health Insurance Sector

Premium Approval Process

In 2011-12, the Department worked closely with the Private Health Insurance Administration Council to provide advice to the Minister for Health about premium increases requested by private health insurers. This advice supported the Minister in exercising her powers under section 66-10 of the Private Health Insurance Act 2007, and contributed to ensuring that premium increases were the minimum necessary to maintain the affordability and value of private health insurance as a product, whilst maintaining insurer solvency requirements, support benefit outlays and meet prudential standards.

On 28 February 2012, the Minister announced that private health insurers would increase premiums by an average of 5.06 per cent from 1 April 2012. This was the lowest overall increase in four years. The need for this premium increase was generally attributable to increasing insurance benefits paid to patients and rising health service costs. In 2011-12, the Department also improved the transparency of the premium approval process by providing consumers and insurers with a better understanding of the Government’s role in assessing and approving proposed premium increases.

At the time of announcing the 2012 approved premium increase, average premium increases for individual private health insurers and reasons for the increase at the industry level were published, along with a media release, on the Department’s website.

In 2011-12 the Minister for Health, the Department, the Private Health Insurance Administration Council, and the Australian Government Actuary (where relevant), assessed all applications for premium changes. In setting premium increases, the Minister considers whether the premium increases are the minimum necessary to maintain the affordability and value of private health insurance as a product whilst maintaining insurer solvency requirements, support benefit outlays and meet prudential standards.

Monitoring Participation

Private health insurance data is collected by the Private Health Insurance Administration Council¹¹⁵ and supplied to the Department quarterly. In 2011-12, the Department closely analysed this data to monitor participation trends and the effect of policy initiatives on private health insurance coverage. The Department also monitored and reported on risk equalisation and broader health cover initiatives, such as chronic disease management programs and hospital-substitute episodes. The data analysis underpinned modelling, policy development and compliance work undertaken by the Department. Figure 9.1 illustrates the number of people with private hospital cover in Australia from 1971 to 2012 and identifies key milestones in health insurance policy. In 2011-12, steady growth in the number of people with hospital cover continued, with coverage rising to the highest level since Medibank began on 1 July 1975.

Figure 9.1: Number of People with Private Hospital Cover, 1971-2012 ¹¹⁶

Text version of Figure 9.1

As at 30 June 2012, 10.6 million people had private health insurance hospital treatment cover compared with 10.3 million in June 2011. This is an increase of 332,152 people since June 2011. This indicator has been exceeded for each of the previous four years.

The Review of the impact of the new Medicare Levy Surcharge thresholds on public hospitals Year 2 Review Report 2011 was tabled in Parliament on 5 July 2011. The report is available on the Department’s website.

Improve Access to Prostheses through Private Health Insurance

The Australian Government aims to administer a fair and equitable prostheses reimbursement framework to ensure private health insurance expenditure is directed to clinically and cost-effective prostheses. During 2011-12, the Department worked with stakeholders to review and refine processes underpinning the Prostheses List arrangements. Other work included the introduction of administrative reform to improve integration, coordination and communication across Commonwealth Health Technology Assessment processes. The reforms will streamline prostheses listing processes for private health insurance benefits and provide for patient choice, whilst ensuring value for money and patient safety.

The Department will continue to administer cost recovery of the prostheses arrangements and will also administer cost recovery arrangements for the National Joint Replacement Registry.

The Department implemented regulatory amendments to private health insurance rules throughout 2011-12. These amendments concerned hospital benefit payments, the addition and removal of prostheses items and amendments to prostheses benefits, accreditation of health care providers, the delivery of health services, the collection of various private health insurance levies and the registration of a new private health insurer.

The Regulatory Framework

Private health insurance requires many regulatory amendments each year. Most of these are ongoing amendments, such as increasing the amount of benefits insurers pay for hospital accommodation in line with the CPI, or amending the list of prostheses items for which insurers must pay a benefit.

A range of ad hoc legislative amendments also occurred. These included amendments to the accreditation requirements that health practitioners must have, in order for an insurer to be allowed to pay a benefit for their services. Amendments were also made that allow insurers to conduct pilot projects to test new insurer products or consumer services.

A new private health insurer commenced operation in 2011-12. The Department worked in cooperation with the Private Health Insurance Administration Council to ensure the new insurer complied with all legislative and regulatory requirements, enabling it to commence operation.

The Department put into effect a new Overseas Student Health Cover deed of agreement with five private health insurers. The deed sets out the minimum health insurance cover requirements for student visa holders. The deed of agreement ensures that student visa holders have adequate health insurance cover while residing in Australia.

All regulatory changes were made within six months of receipt of advice from expert Committees.

Improve Information for Consumers

In 2011-12, the Department continued to collect information from private health insurers on average charges for the 21 most commonly used private dental services. The information was provided to the Private Health Insurance Ombudsman (PHIO) for publication on their consumer information website,¹¹⁷ to ensure that consumers are better informed when making decisions about whether and when to use their private health insurance, and to improve choice for consumers.

100% of private health insurers have provided partial or complete 2011-12 General Treatment Dental data.

The Government continued to improve the transparency of the premium approval process by providing consumers with a better understanding of the Government’s role in assessing and approving proposed premium increases. In 2011-12, the Department published information about the premium approval process and average premium increases for individual insurers on its website.

At the time of announcing the 2012 approved premium increase, the Department published average premium increases for individual private health insurers and reasons for the increase at the industry level, along with a media release on the Department’s website.

The Department, with assistance from the Department of Human Services, continued to administer the Lifetime Health Cover (LHC) mail-out. The mail-out provides information about LHC loadings¹¹⁸ on private health insurance premiums to people turning 31 years of age and new migrants, and aims to reduce the risk of people being disadvantaged through lack of awareness of the legislation governing LHC, as set out in the Private Health Insurance Act 2007. The costs of the mail-out are charged to individual insurers based on their membership market share.

The 2012 LHC mail-out was sent to target groups (i.e. 31 year old and new migrants) on 4 May 2012. The Department will continue to provide ongoing support for the mail-out through a dedicated telephone hot-line for answering consumer enquiries and responding to written enquiries received by letter and internet.

The annual LHC mail-out was delivered to 204,785 people approaching the 1 July deadline following their 31st birthday, and 78,061 migrants.

Private Health Insurance Standard Information Statements

The Private Health Insurance Standard Information Statements (SISs) were amended to improve their clarity, comprehensiveness, comparability and the ease with which consumers can use and understand the SISs. In close collaboration with the PHIO, and following extensive consultations with key private health insurance stakeholders, including insurers and consumers, the Department updated the SISs templates and their permitted content through amendments to subordinate legislation. Agreed by private health insurers, the revised SISs came into effect on 1 April 2012 and displayed the improved information on sub-limits and overall limits, benefits limitation periods, examples for exclusions and limited cover, and the extent of coverage for ambulance services.

Whole of Program Performance Information

The Department undertook policy research into a wide range of areas concerning the regulation of private health insurance, including premiums, discounts and promotions, lifetime health cover, the implementation of pilot projects, hospital benefits and health cover for overseas visitors and students.

The Department consulted widely with different stakeholders, using a variety of forums. The aim was to improve collaboration with the private health sector and evidence-based policy development. For example, the Department regularly met with private health insurers and representatives of peak insurer, hospital and consumer groups. The Department also consulted with tertiary education providers, Commonwealth, state and territory, and overseas government representatives with respect to overseas student health cover.

Stakeholders, including health consumers and service providers, the health insurance and health technology industries, and experts in current clinical practice, health policy and health economics, provided advice and feedback to the Department on a range of issues, including the implementation of the December 2009 Review of Health Technology Assessment in Australia recommendations, through a variety of fora including the Prostheses List Advisory Committee and its subcommittees, and the Health Technology Assessment Review Consultative Committee.

The Private Health Insurance Rebate is a demand driven program and is driven by the growth of coverage in Private Health Insurance, which in 2011-12 was higher than anticipated.

Outcome 9 – Financial Resources Summary

1. Departmental appropriation combines ‘Ordinary annual services (Appropriation Bill 1)’ and ‘Revenue from independent sources (s31)’.
2. ’Expenses not requiring appropriation in the current year’ is made up of depreciation expense, amortisation, make good expense and audit fees. This estimate also includes approved operating losses – please refer to the departmental financial statements for further information.
3. Payments under the Private Health Insurance Act 2007 Risk Equalisation Trust Fund and the Council Administration Levy have been disclosed in the 2011-12 Portfolio Budget Statements in Table 1.2.1 Department Resource Statement. This is consistent with the prior year.

115. Available at: www.phiac.gov.au
116. Source: Private Health Insurance Administration Council 2012.
117. Available at: www.privatehealth.gov.au
118. Under the Private Health Insurance Act 2007, anyone who purchases private health insurance hospital cover after their LHC base day (i.e. generally 1 July after their 31st birthday or, in the case of migrants, the anniversary of the day they are registered as eligible for Medicare benefits) pays an extra financial loading of 2% on top of their hospital cover premium for each year they are aged over 30 at the time they purchase their private health insurance hospital cover.

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