Issues
2.1
The committee received evidence from submitters and witnesses who
expressed concerns about various aspects of the Private Health Insurance
Legislation Amendment Bill 2018 (Bill), the A New Tax System (Medicare Levy
Surcharge-Fringe Benefits) Amendment (Excess Levels for Private Health
Insurance Policies) Bill 2018 (A New Tax System Bill) and the Medicare Levy
Amendment (Excess Levels for Private Health Insurance Policies) Bill 2018
(Medicare Levy Amendment Bill).
2.2
However, even where concerns were raised, submitters broadly supported
the intent of the Bills.[1] The following chapter outlines the key provisions of the Bills and concerns
raised.
Schedule 1: Increasing maximum excess levels
2.3
Schedule 1 increases the maximum excess permitted in a complying private
health insurance policy that provides hospital cover, from $500 to $750 in any
12 month period for a policy that covers an individual and from $1000 to a
maximum excess of $1500 for any other policy.[2]
2.4
The Consumers Health Forum of Australia raised concerns that requiring
policy holders to pay a higher excess may make them more reluctant to use their
private health insurance and that these policy holders may instead elect to be
admitted to a public hospital as a public patient.[3]
2.5
Mr Shaun Gath, a former private health insurance industry regulator,
explained that there is a connection between a policy's excess and the amount
of the premium charged to the policy holder, because the insurer is required to
cover less risk:
...what you're doing by increasing the excess is removing risk,
because the insurer only has to recover a reduced amount of potential claim.
That therefore will sound in the cost of premiums. That's the way risk and
premiums are always linked together.[4]
2.6
Mr Michael Roff, Chief Executive Officer of the Australian Private
Hospitals Association, noted that the Private Health Insurance Ombudsman
previously provided advice to consumers that they should take out the highest
level of cover they could afford and then moderate the premium by taking out a
policy with a higher excess.[5]
2.7
Other witnesses, such as the Consumers Health Forum of Australia and the
Members Health Fund Alliance, noted that consumers generally understand what an
excess is because it is a feature that is common to other types of general
insurance.[6] These witnesses considered that the reforms would empower consumers to be able
to make an informed choice about whether they wished to take out a policy with
a higher excess to moderate their premium.[7]
2.8
Mr Matthew Koce, Chief Executive Officer of the Members Health Fund
Alliance, and the Department of Health noted that the current excess level had
not increased in 18 years, meaning that the higher excesses were simply
being adjusted to account for inflation.[8]
2.9
Private Healthcare Australia, which was involved in the Private Health
Ministerial Advisory Committee discussions, advised that the increased excess
levels proposed in the Bill were arrived at after careful consideration to
ensure that excesses would not result in adverse effects on private health
insurance premiums.[9]
2.10
The Department of Health confirmed that currently about 40 per cent of
policy holders elect for the maximum excess of $500 or $1000.[10] The Department of Health explained that another 40 per cent of policy holders
purchase a policy with some level of excess and it considers that this
indicates that 'consumers already make informed decisions based on their
personal circumstances and capacity to pay'.[11]
2.11
The Department of Health does not expect that there will be an increase
in the proportion of policy holders who elect for the highest excess because of
amendments made by the Bill.[12]
Schedule 2: Age-based discounts for hospital cover
2.12
Schedule 2 permits private health insurers to offer discounted premiums
to consumers aged 18–29.
2.13
Throughout the inquiry the committee received evidence from submitters,
such as Finder.com.au and Mr Russell Schneider AM, that the age-based
discounts may not achieve the intended policy outcome, but may instead have a
negligible or a deleterious effect on private health insurance affordability.[13]
2.14
These submitters were concerned that the discounts that the younger
cohort receive may not be sufficient to attract enough new healthy members to
moderate premiums.[14] Mr Schneider explained that the discounts would mean that less money would
flow to funds and the industry as a whole would need to attract potentially up
to 100 000 new members to ensure that premiums do not rise.[15]
2.15
Consumers Health Forum of Australia, the National Rural Health Alliance
and CHOICE expressed concerns about the effects the age-based discount policy
may have on community rating.[16]
2.16
Community rating is the principle that insurers cannot discriminate
between people on the basis of, among other things, their health status, age or
place of residence.[17]
2.17
Mr Schneider, former Chief Executive Officer of the Australian Health
Insurance Association, explained how community rating makes private health
insurance affordable for people who would otherwise be forced to rely on the
public system:
Premiums are set on the basis of a large pool of mixed risks.
As a result people who would be uninsurable (or have to pay a high price)
because of their health status are able to opt into the private health care
system reducing demand and costs for taxpayers and freeing up public bed spaces
for those who cannot afford or do not wish to take out private cover.[18]
2.18
The Australian Healthcare and Hospitals Association expressed concern
that the age-based premium discounts, and to a lesser extent the travel and
accommodation benefits, may erode or undermine the principle of community
rating by allowing insurers to consider age or place of residence in
determining the cost of, or entitlement to, particular benefits.[19]
2.19
For example, CHOICE noted that a factsheet on the Department of Health's
website suggests that the policy holder may need to continue to hold the same
policy to receive the age-based discount.[20]
2.20
Other submitters considered that the age-based discounts would bolster
community rating. Private Healthcare Australia submitted that increasing the
membership base of private health insurance would support the sustainability of
community rating:
Australia’s ageing population directly impacts the Australian
PHI industry as older age groups are more highly represented in PHI than
younger age groups and cost significantly more in healthcare than younger groups.
As noted in the Explanatory Memorandum to the Bill, the ongoing viability of
community rating requires the retention of a broad membership base. Without
this, premiums would need to increase to cover the cost of insuring higher risk
consumers who maintain their health insurance.[21]
2.21
The Australian Medical Association and the Australian Healthcare and
Hospitals Association both considered that while the Bill may have some effect
on community rating, they recognised that it was also important to try to make private
health insurance more affordable for younger Australians.[22] Because of the difficulty in balancing these competing objectives, both
organisations suggested that a review of the policy be conducted to examine how
the discounts are implemented.[23]
2.22
In addition, Private Healthcare Australia noted that the age-based
discounts are very similar to the existing Lifetime Health Cover loadings which
make policies more expensive if they take out a hospital policy for the first
time after the age of 30. Age-based discounts simply extend that principle:
[Lifetime Health Cover loading] has been a very effective
measure driving PHI participation by the over-30s. Age-based discounts
represent an extension of this principle by providing a ‘carrot’ incentive for
under-30s to take up PHI. PHA submits that this reform is necessary to help
rebalance the age profile of PHI consumers in Australia in line with
demographic and economic changes that have occurred over the last two decades.[24]
2.23
The Royal Australian and New Zealand College of Psychiatrists also
recognised that there was a need to recruit younger and healthier members (such
as those aged under 30) to help balance the risk pool and provide a broad base
to maintain downward pressure on premiums.[25]
2.24
Nib provided the committee with data that demonstrated that the rate at
which policy holders let their policies lapse is consistently higher for policy
holders aged under 30 than for those aged over 30 and that the key reason given
by the under 30 cohort for giving up their policies is affordability.[26] Nib considers that 'the ability to provide discounts based on age may help to
reverse falling participation'.[27]
Committee view
2.25
The committee acknowledges that some submitters and witnesses hold
concerns about the maximum excess increases and the age-based discounts. The
committee notes that some submitters are concerned that increasing the maximum
excess may discourage people from using their private health insurance. The
committee considers that allowing consumers to choose a policy with a higher
excess is an appropriate way to allow consumers to moderate their premiums. The
committee considers that consumers are familiar with excesses and that
consumers will continue to select policies that are suitable for their needs
and budget.
2.26
The committee notes that some submitters were concerned that age-based
discounts may undermine community rating. The committee understands these
concerns but recognises that the affordability of insurance premiums for all
Australians requires more young Australians to participate in private health
insurance. The committee considers that this incentive extends the principle of
the lifetime health cover loading that is already in place for people aged over
30 and that it is necessary to encourage younger Australians to participate in
private health insurance.
Schedule 3: Private Health Insurance Ombudsman's powers
2.27
The committee received a mixed response from submitters about the entry
and inspections powers proposed to be granted to the Private Health Insurance
Ombudsman by Schedule 3 of the Bill.
2.28
The Australian Society of Plastic Surgeons considered that the powers
granted to the Private Health Insurance Ombudsman should have gone further than
those proposed by the Bill.[28] The Australian Society of Plastic Surgeons expressed concerns that some
insurers reject insurance claims on the basis that the procedure does not have
an applicable Medicare item number and that even with the powers proposed by
the Bill, the Private Health Insurance Ombudsman is only able to make a
recommendation to the insurer.[29] The Australian Society of Plastic Surgeons considered that strengthening the Private
Health Insurance Ombudsman's power to make a direction would do more to
engender confidence in the role of the Private Health Insurance Ombudsman.[30]
2.29
Day Hospitals Australia noted that other areas of the health sector,
such as private and day hospitals, were already subject to inspection by
regulators and considered that permitting the Private Health Insurance
Ombudsman to enter premises and inspect documents would make insurers similarly
accountable.[31]
2.30
However, other submitters raised concerns that the powers being granted
to the Private Health Insurance Ombudsman were too expansive. Private
Healthcare Australia and the Members Health Fund Alliance expressed concern
that the Bill does not require the Private Health Insurance Ombudsman to obtain
a search warrant or provide the private health insurer or broker with notice.[32] Private Healthcare Australia claimed that, if passed, the Bill would provide wider
powers to the Private Health Insurance Ombudsman than is provided to regulatory
agencies:
...an unfettered ability to enter premises is unprecedented and
exceeds the inspection powers of other regulators such as the Australian
Competition and Consumer Commission, the Australian Securities and Investments
Commission and the Australian Communications and Media Authority. These
regulators require occupier consent or a warrant to enter premises, and notice
of the exercise of inspection powers to be given.[33]
2.31
The Members Health Fund Alliance submitted that the breadth of the
powers appeared to be excessive and inconsistent with the Guide to Framing
Commonwealth Offences, Infringement Notices and Enforcement Powers which, on
the advice of the Scrutiny of Bills committee, suggests that entry and seizure
powers without a warrant should only be authorised where there are 'exceptional
circumstances'.[34]
2.32
To remedy these concerns, Private Healthcare Australia recommended that
the Bill be amended to restrict the Private Health Insurance Ombudsman's powers
of entry.[35]
2.33
Medibank suggested that more extensive changes needed to be made to the
Bill. In addition to changes to procedural requirements to enter premises,
Medibank expressed concern about the ability to enter the premises of service
providers (proposed sections 20SA(a)(ii) and 20TA(a)(ii)), that there were no protections
for legal professional privilege or privacy, that the Ombudsman's powers could
be delegated very broadly and that there appeared to be no requirement for the
Ombudsman to report on the use of his powers under proposed section 20TA.[36]
2.34
Former Chief Executive Officer of the now defunct regulator the Private
Health Insurance Administration Council, Mr Shaun Gath, also noted that the
Bill did not provide clear rights of review to parties that may be affected by
the use of the new powers:
The circumstances in which such powers might be employed are
not clearly defined, nor are the rights to review of such powers by the parties
affected (primarily health insurers and brokers).[37]
2.35
The Explanatory Memorandum notes that it is not anticipated that the proposed
powers will be required because private health insurers and brokers have almost
always complied with requests from the Private Health Insurance Ombudsman.[38] The addendum to the Explanatory Memorandum (addendum) states that there have
been occasions when the Private Health Insurance Ombudsman has discovered, upon
further investigation, that letters, emails or phone calls relating to the
complaint have been overlooked by an insurer responding to a complaint.[39] The addendum notes that providing the Private Health Insurance Ombudsman with
entry and inspection powers provides investigating officers with ability to
independently verify the accuracy of the information that has been provided.[40]
2.36
The Commonwealth Ombudsman and Private Health Insurance Ombudsman,
Mr Michael Manthorpe, informed the committee that the new powers were
analogous to the entry and audit powers that the Commonwealth Ombudsman already
possessed elsewhere in his jurisdiction.[41]
2.37
The Private Health Insurance Ombudsman acknowledged that having the new
powers would be useful and that it may encourage private health insurers to be
more diligent in their cooperation with his office, but that the powers would
be exercised only where there was a real need to do so:
We don't see ourselves as a sort of heavy-handed entity. We
seek to work as collaboratively and as collegiately as we sensibly can while
maintaining an impartial and independent approach with the various entities
that we have oversight of—and the same applies to private health insurers. But,
from time to time, in various parts of our jurisdiction, we really do need to
go and have a look at documents, and it would be, from my point of view, useful
to have, if you will, a reserve power up our sleeve in this space.[42]
2.38
The Department of Health confirmed that the additional powers had been
provided to the Private Health Insurance Ombudsman to remedy concerns from
consumer groups that there appears to be a disproportionate power imbalance
between private health insurers and the Ombudsman who is attempting to resolve
complaints on behalf of consumers.[43]
2.39
Most submitters supported the stronger powers of the Private Health
Insurance Ombudsman as proposed by the Bill because they considered that it
would deliver better results for consumers.[44]
Committee view
2.40
The committee recognises that there are a range of viewpoints on the new
powers proposed to be granted to the Private Health Insurance Ombudsman. The
committee recognises the scrutiny concerns that have been raised by the
Scrutiny of Bills committee and by some members of the private health insurance
sector.
2.41
The committee has had the opportunity to examine the Commonwealth
Ombudsman and his staff about whether and how these new powers may be used. The
committee considers that, whilst the Commonwealth Ombudsman conducts himself
with professionalism, the committee considers that it would be beneficial for
some thought to be given to establishing a decision-making framework for the
appropriate delegation of such powers to properly trained and experienced
officers. The committee considers that the government should examine the
recommendations of the Scrutiny of Bills committee as to possible safeguards on
the Ombudsman's delegation of powers.
2.42
Overall, the committee considers that the new powers will make private
health insurers more diligent in resolving complaints and will provide the
Private Health Insurance Ombudsman with the ability to provide a better service
for consumers.
Schedule 4: Transitional provisions relating to the treatment of certain
health insurance policies
2.43
Schedule 4 removes benefit limitation periods in private health
insurance policies, including limitations on psychiatric treatment after 31
March 2018.
2.44
Submitters, including the Royal Australian and New Zealand College of
Psychiatrists, Consumers Health Forum of Australia and the Australian
Healthcare and Hospitals Association and Breast Cancer Network Australia
broadly supported the measure.[45]
Schedule 5 Part 1: Benefits for travel and accommodation
2.45
Schedule 5 Part 1 of the Bill provides insurers with the option of
including travel and accommodation benefits in hospital treatment cover
policies.
2.46
Some submitters expressed concern that insurers would be allowed to
determine to whom travel and accommodation benefits would be offered.
2.47
The National Rural Health Alliance told the committee it considered that
travel and accommodation benefits for country people should be a mandatory
feature of all private health insurance policies.[46]
2.48
The National Rural Health Alliance explained the importance of private
health insurance to country people:
[T]he transport and accommodation cost provision is very
important for country people. Service access is the biggest single issue, as
far as health care is concerned, that country people will tell you about.
That's what they're concerned about: access to health services. They're very
much aware that either they access the local public hospital or they have to
travel hundreds of kilometres by some means or other to access the next biggest
hospital services and, in a lot of cases, allied health and community based
services as well. The dislocation that occurs with families, removal from
communities, inpatient admissions in a remote location and the impact that has
on the family unit all need to be recognised as part of that transport and
accommodation provision, which we think should be mandatory as part of the
private health insurance policies.[47]
2.49
Private Healthcare Australia and Members Health Fund Alliance both noted
that providing private health insurers with flexibility would allow them the
ability to provide innovative and affordable products that better meet people's
needs.[48] For example, HCF advised the committee that it was intending to use its
discretion to also cover travel and accommodation benefits for carers as part
of the patients' hospital policy:
HCF also supports providing a benefit for a carer of a
patient (HCF member) being treated. Our approach will be that additional
benefits for the carer will be part of the patient's claim. As such, the claim
will be part of risk equalisation.[49]
2.50
Evidence to the inquiry demonstrates that insurers are likely to include
travel and accommodation in hospital treatment policies. Nib advised the
committee in its submission that the Bill would allow Nib to offer such benefits
to the 34 per cent of its members who live in a regional or rural area.[50]
2.51
Mr Russell Schneider noted that offering travel and accommodation
benefits may make private health insurance more attractive to people who live
in rural areas:
The certainty of being able to arrange treatment dates in a
private facility rather than risk being turned away from a public hospital
booking due to unexpected circumstances is a good reason for taking out PHI.
However the cost of travel can be a very significant factor in deciding whether
the cost of insurance plus travel may outweigh the benefit. Including the benefit
in risk equalisation is a positive step to ensure community rating applies
regardless of the insured person’s location.[51]
2.52
A survey conducted by the Haemophilia Foundation of Australia found that
50 per cent of respondents who lived in a rural or regional area thought
that including travel and accommodation benefits in hospital cover policies
would be beneficial, however some respondents were concerned about rising
premiums. The Haemophilia Foundation of Australia concluded that travel and
accommodation benefits needed to be offered in policies at a range of price
points so that people in regional and rural areas can choose their preferred
level of cover.[52]
2.53
The Australian Healthcare and Hospitals Association noted that the
travel and accommodation benefits could erode community rating because it could
allow private health insurers to make decisions about eligibility for benefits
based on a person's place of residence, depending on how insurers funded the
benefits.[53] The Australian Healthcare and Hospitals Association considered that travel and
accommodation benefits should be funded through risk equalisation rather than
using differentiated premiums based on the policy holder's place of residence.[54]
2.54
Most submitters strongly supported the travel and accommodation benefits
because it removes an access barrier for patients who live in regional, rural
and remote areas.[55]
Schedule 5 Part 2: Information requirements
2.55
Schedule 5 Part 2 substitutes the 'standard information statement' for
the 'private health information statement' in the Private Health Insurance
Act 2007. The requirements for the new 'private health information
statement' will be provided for in the Private Health Insurance (Complying
Product) Rules.[56]
2.56
CHOICE was concerned about the requirements for the new 'private health
information statement' as expressed in the exposure draft of the rules. In
particular, CHOICE noted that that the information statements may not be
standardised and that side by side comparison may only be available on request.[57]
2.57
Many submitters noted that there is currently a lot of confusion in the
private health insurance market about what people are covered for under a
private health insurance policy. To that extent, many submitters welcomed the
new 'private health information statement' because it will provide consumers
with certainty about their private health insurance product.[58]
Schedule 5 Part 3: Benefit requirements according to class of hospital
2.58
Schedule 5 Part 3 allows the Minister to make rules about whether
private hospitals are eligible for second-tier default benefits. Currently,
decisions about second-tier default benefits are made by the industry-led
Second Tier Advisory Committee.[59]
2.59
Day Hospitals Australia raised concerns that the exposure draft of the
rules did not differentiate between two different types of day
hospitals—six-hour facilities and 23-hour facilities—which have different
needs:
There are actually two types of day hospital. There's a day
hospital where the patient is just admitted for the day over a few hours—four
to six hours or more—but there's also a day hospital category where the patient
is admitted for up to 23 hours. At the moment, they are lumped into the same
group, which is inappropriate because obviously the cost for running a hospital
that has overnight beds for a 23-hour licensed facility is going to be very
different to the day hospital that just has the patients in for a few hours.[60]
2.60
The Department of Health explained that the task of classifying day
hospitals depended upon whether the hospitals should be classified based on the
number of beds or the patient's length of stay:
The issue is around, for the purpose of second-tier benefits,
grouping like hospitals. Benefits are calculated for groups of hospitals that
share similar attributes. There has been an ongoing discussion across the
sector about whether 23-hour hospitals are best grouped with day hospitals or
with hospitals that have the same number of beds as those hospitals. The
proposal that has gone out for consultation is to include those 23-hour
hospitals in the day hospital category, because they are licensed only to admit
patients for periods of less than 24 hours—so less than one day. It's a matter
of which category best captures the like attributes of those hospitals.[61]
2.61
The Department of Health advised the committee that it was currently
consulting on the exposure draft of the rules and that it would consider any
and all feedback it received in formulating the final rules.[62]
Schedule 5 Part 4: Closed and terminated products
2.62
Schedule 5 Part 4 explicitly allows private health insurers to close
private health insurance policies, including policies that consumers currently
hold.
2.63
The Australian Healthcare and Hospitals Association raised concerns that
the Bill may allow private health insurers to terminate a private health
insurance policy and transfer them to a different policy which may have
different cover, premiums or excess and that this may lead to poorer outcomes
for consumers.[63]
2.64
The Australian Healthcare and Hospitals Association noted that the
Explanatory Memorandum provided the example of a private health insurer that
may, for example, elect to close low or no excess policies.[64]
2.65
Other submitters considered that likelihood of insurers making
substantial changes to policies that people held was limited. Mr Shaun Gath, the
former private health insurance regulator, considered that this was a
'housekeeping' provision:
I don't think that's a major concern. Most of the policies
that are subject to the termination arrangements are small and obscure and
little used... There's going to have to be a proper oversight and fairness
issue addressed there. I don't believe it's going to be a major issue. Most of
the policies that the vast majority of Australians are in are going to remain
open. This is really a housekeeping and tidying up exercise.[65]
2.66
Mr Koce from the Members Health Fund Alliance considered that closing
products was so rare that he was unaware of policies being terminated or
cancelled:
As far as I'm aware, I don't think anyone has ever terminated
a policy. Some policies out there have very small numbers of consumers on them
because they're very, very old, and there are literally thousands of policies
out there. The industry hasn't previously gone to close policies, even though
they could. They've tended to leave people on them... Terminating policies has
never been an issue in the past, and I don't think it will be in the future.[66]
2.67
The Department of Health provided a visual representation of the number
of policies that currently have only a few members.[67] A copy of the graph is included below. The Department of Health further advises
that being able to move individuals from terminated products to current
products will assist in implementing the new product classifications.[68]
Figure 2.1: Number of products by
the range of people on each product
Source: Department of Health, Submission
4, p. 7 (based on 2018 premium round data).
2.68
In any event, members of the insurance industry advised the committee
that guidelines issued by the Australian Competition and Consumer Commission
and the Private Health Insurance Ombudsman already made it difficult to close
policies.[69]
2.69
The Department of Health told the committee that the amendments would
clarify what information consumers could expect to receive if a private health
insurer was to close an existing policy and transfer the policy holder to a new
policy:
It's also to be very clear about the consumer protections,
the information that we would expect insurers to provide to their customers if
a product is being terminated and people are being moved. There are some
important consumers protections in terms of clarifying the information that
will be available to consumers in these cases.[70]
Committee view
2.70
The committee understands that some submitters have concerns about
Schedules 4 and 5 of the Bill and the rules that will support those reforms.
The committee understands that the Department of Health is still consulting
with stakeholders about the draft rules. The committee thanks the Department of
Health for providing the committee with a copy of the exposure draft of the
rules to assist with its inquiry. The committee expects that the Department of
Health will consider the views of submitters in finalising the rules that will
be presented to Parliament.
2.71
The committee considers that, while some submitters had concerns about
whether the travel and accommodation benefits would be mandatory or could
potentially lead to a decline in the delivery of other patient travel services,
the committee considers that the new travel and accommodation benefits will be
beneficial to Australians living in regional and remote areas. The ability of
private health insurers to include travel and accommodation benefits in a
hospital policy means that the costs of providing those services can be shared
through the risk equalisation pool.
2.72
Submitters broadly supported the new private health information
statements. The committee considers that the new information statements will
make it easier for consumers to understand what procedures their private health
insurance covers them for.
2.73
The committee recognises that some submitters raised concerns about the
closure or termination of products. The committee understands that the purpose
of the provisions are to allow private health insurers to close policies that
have only limited membership and to assist in transitioning people to policies
under the new product categorisation system.
Product design reforms – Gold/Silver/Bronze/Basic
2.74
Throughout this inquiry, submitters have reminded the committee that
consumers find private health insurance to be a complex product that is
difficult to understand.[71]
2.75
In October last year, the Minister for Health, the Hon. Greg Hunt MP, on
the advice of the Private Health Ministerial Advisory Committee, announced that
from 1 April 2019 private health insurance policies will need to be
categorised into Gold, Silver, Bronze and Basic policies, where minimum
coverage requirements apply to each category.[72] The categorisation and the minimum inclusions for each policy are contained in
the exposure draft of the Private Health Insurance (Reform) Amendment Rules
2018 that is attached to the Department of Health's submission.[73]
2.76
Some submitters disagreed with the inclusion of a Basic policy. CHOICE,
the Australian Medical Association, the Australian Private Hospitals
Association and Day Hospitals Australia objected to the category on the basis
that these policies provide low value cover to consumers and exist to take
advantage of the financial incentives provided by government.[74]
2.77
While it may be the case that these policies provide low-cost and
low-value care, the Department of Health told the Community Affairs References
Committee last year that the Basic category was retained because the policies
make a contribution to the risk-equalisation pool, help to keep premiums
affordable and because some consumers see value in the products.[75]
2.78
Submitters also expressed concerns that, if the draft rules were
adopted, particular products or services may only be available in higher
product tiers. For example:
- Cochlear Limited and Neurosensory were concerned that hearing
services will only be available in a Silver policy[76]
- the Australian Medical Association considered that as 50 per cent
of pregnancies are unplanned, pregnancy should be covered in Bronze instead of
Gold[77]
-
the Australian and New Zealand Society of Vascular Surgery
questioned what will happen if vascular surgery (which is covered in Silver) is
required for an operations that would otherwise be covered in Bronze[78]
-
the Breast Cancer Network of Australia expressed concern about
whether breast reconstructive surgery and associated surgeries would be covered
in Bronze.[79]
2.79
While there may still be some debate about the rules, the committee
considers that the reforms will make it clearer to consumers what they are
covered for.
2.80
The Consumers Health Forum of Australia highlighted why the reforms were
necessary:
We also know, from our surveys, that people do not understand
private health insurance. They often don't know what they are covered for and
have no idea that they may have significant out-of-pocket costs. So we want the
reforms to address the complexity issue, to make it easier for people to shop
around for the best value and to understand exactly what they are and aren't
covered for. The product categorisation into basic, bronze, silver and gold,
flagged in the legislation and outlined in the rules, was designed to make it
simpler for people to see what they are covered for and to compare products.[80]
2.81
The Australian Medical Association pointed out that even doctors are
confused by the current array of choices and policies on offer and suggested
that a categorisation system would make it clearer for both doctors and consumers:
It is for that reason that we support the concept of
developing gold, silver and bronze insurance categories. Doctors are
intelligent people. But I can tell you that we are all bewildered by the many
different definitions, the carve-outs and exclusions from some 70,000 policy
variations—70,000, that's not my figure; it's the government's. It's
unbelievable. No wonder we're always being caught out.[81]
2.82
The Australian Private Hospitals Association noted that these reforms
will mark a considerable shift in the private health insurance landscape and
that it is important that all consumers under the changes to private health
insurance:
The only other point I wanted to make by way of introduction
is that these changes will necessarily lead to a degree of disruption with
health insurance products, and we think it's essential that the government
conduct a comprehensive consumer information campaign to ensure that all these
changes are well understood by those with private health insurance and those
who may be interested in taking it out.[82]
Committee view
2.83
The committee recognises that some submitters have some concerns with
the rules that will implement the product reforms. The committee understands
that the Department of Health is still working with stakeholders to finalise
the rules. The committee looks forward to seeing the final rules when they are
tabled in Parliament.
2.84
The committee understands that private health insurance can be a complex
product that is confusing to many people. The committee considers that
categorising products into Gold, Silver, Bronze and Basic will assist to help
consumers compare products and to help people understand what is covered in
each category by using clear, standard clinical definitions. The committee
considers that this will empower consumers to find a product that suits their
needs and their budget.
2.85
The committee considers that a public information campaign to help
consumers understand the product design reforms would allow more consumers to
be better informed about the product tiers and their inclusions in the lead up
to the commencement of the reforms.
2.86
Following the passage of the Bill, the committee believes the Government
should undertake an information campaign to inform consumers about the changes
to private health insurance.
Recommendation 1
2.87
The committee recommends that the Senate pass the Bills.
Senator Slade Brockman
Chair
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