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19 Apr 2016

The private health insurance industry is trying to stem an exodus of members by promising to pass on in full any savings from cheaper medical devices.

A survey commissioned by comparator website iSelect suggests more than 530,000 were preparing to ditch their health cover following an average 5.59 per cent jump in premiums at the start of the month, while almost half of policyholders planned to shop around and 7 per cent indicated they would switch providers.

The results are consistent with warnings of widespread consumer frustration over the cost of health insurance, and underline AMA concerns that many may be left inadequately insured if they downgrade their cover.

The Federal Government has initiated a series of reviews of the private health insurance system, and the AMA has highlighted disturbingly common incidents where patients have been booked in for a procedure only to discover at the last minute that they are not covered.

AMA President Professor Brian Owler said there was a profusion of policies with multiple exclusions that left policyholders uncertain about what they were covered for, while others were opting for public hospital-only policies that were essentially junk because they provided for no greater cover than was already provided through Medicare.

Last month the AMA released its inaugural Private Health Insurance Report Card, to give consumers a guide to the types of policies on offer, and the sort of benefits provided.

The Report Card identified large discrepancies between the health funds in the benefits they paid for common procedures such as hip replacement and cataract surgery.

But the industry has held out the prospect that premium increases could be held down next year because of reductions in the price health funds pay for medical devices.

Under current arrangements, funds are required to pay set prices for cardiac stents, artificial hips and knees and other prosthetics that are up to four times that paid by hospitals.

The Courier Mail has reported that a Government review headed by Professor Lloyd Sansom will recommend that medical device companies be required to disclose how much they charge hospitals, and is considering a one-off price cut for a selection of the most highly-overpriced prosthetics.

The peak health insurance industry body, Private Health Care Australia, said savings from the changes could slice $150 off premium increases next year.

Chief Executive Dr Rachel David told the Courier Mail said the process to realise savings could begin immediately, and guaranteed that “every dollar we save as a result of benefit reductions will be passed on to the consumers”.

Amid all the change, the nation’s largest health insurer, Medibank Private, has announced a change of leadership.

Former National Australia Bank executive Craig Drummond has been appointed to succeed long-standing Chief Executive George Savvides.

In an interview with The Australian, Mr Drummond – who is on a remuneration package worth up to $6 million a year – tried to deflect concerns about on rising premiums onto the broader health industry.

“The heart of the problem is the underlying cost structure in the industry,” he said. “This is an industry-based issue, where health care costs in general have been ruining at unsustainably high levels, not only in Australia but in other countries”.

Chair of the Medibank Board, Elizabeth Alexander said Mr Drummond had been hired for his strong commercial skills and his familiarity working in a regulated environment.

Adrian Rollins

Published: 19 Apr 2016