The Australian Medical Association Limited and state AMA entities comply with the Privacy Act 1988. Please refer to the AMA Privacy Policy to understand our commitment to you and information on how we store and protect your data.



10 Apr 2017


With the impending price rise of private health insurance (PHI) premiums and the bombarding commercials that saturate our TV screens at the present time, it is opportune to reflect on PHI and whether it is still serving us well. More importantly, is it providing us with value and does it support the public health system in its very important complementary role of ensuring universal access to affordable health care?

The private health sector currently accounts for just under half of all hospital separations. Over recent years, a gradual shift has been occurring - from funds previously acting as passive payers, to active funders. The balance of power within the market is slowly shifting in favour of the insurers moving from a system of patient control to one more like managed care.

The prevalence of contracts with no-pay clauses (and patients unaware of this), with exclusions that have many potential unintended consequences, is increasing substantially.

Also, publishing certain information on websites with the medical practitioner’s knowledge, including gap agreement usage, and average gap charges, allows for the establishment of closed shop referral databases (e.g. Bupa has a ‘Find a Healthcare Provider’ section of its website. Nib, Bupa and HBF are major shareholders of a system called Whitecoat, a database providing information on practitioner charging patterns.)

These types of websites have the potential for significant unintended consequences. The potential for reduced access to care is real, particularly for patients with chronic and complex health problems. They can also lead to the avoidance of high risk cases. Medibank’s provision of information to the referrals database Healthshare will allow general practitioners to identify specialists who charge gap fees – and more importantly, those who are not part of Medibank's 'no gap' or 'known gap”. This action could have a detrimental impact upon the referrals received by practitioners who are not part of Medibank's 'no gap' or 'known gap' schemes. It could influence the provision of services and determine who may provide services and set prices.

Vertical integration between insurers and providers is another case in point. Examples include: Medibank Private’s move into primary care; Bupa now has two GP clinics, 200 dental, 30 optical businesses, and a new model of integrated care with GPs employed as a part of their aged care home teams. They also have a pilot model of home-based palliative care. A strong separation should exist between insurers and providers of care. It is a sensible safeguard to minimise possible conflict of interests inherent in a vertically integrated organisation.

PHI used to be run mainly by not-for-profit funds. However, about 70 per cent of the insured population is now covered by ‘for-profit’ funds, creating a greater need to ensure there are sufficient profits and resulting in increased premiums to ensure sufficient returns for their shareholders.

There is a need to ensure that private health insurance remains viable and attractive to consumers. If consumers withdraw from the private sector, demand for these services will move to the public sector, already overburdened and under-resourced.

Private health insurers should not determine who provides services in Australia and patients should not have the facilities available to them curtailed.

The current regulatory environment and the moves towards managed care mean that insurance offerings serve the needs of the PHI industry and not the needs of health consumers. PHI should provide choice for the patient. Without that choice, its value is diminished.

The AMA has consistently called for greater clarity.  Last year the AMA released its first report card into PHI. The Government in part responded by establishing the Private Health Ministerial Advisory Committee. PHMAC was tasked with simplifying private health insurance. The variety of objectives included developing easy to understand categories for consumers, simplifying insurance policies into gold, silver and bronze, and addressing regulatory issues and increasing the cost of premiums.

The future of PHIis at a crossroads.With household income growth almost stagnant and healthcare costs growing around five to six per cent per annum - plus the enormous number of “junk” policies in the market - it is inevitable that PHI members are downgrading their coverage.  Reforms are essential to lower costs. Of course the effects of the ongoing Medicare MBS freeze and its concomitant effects on PHI rebates only further compounds this situation.  The complexity of the various policies, with more than 40,000 insurance variations available, is fertile ground for further disappointment. Action and planning are required to stem this exodus and reinstall value into PHI, and thereby support the universal access that underpins our public health system.   

Published: 10 Apr 2017