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Health Fund Bupa Should Put Up Or Shut Up On Claims Comparators Costs Push Up Premiums
The industry body representing comparison services for private health insurance has called on the leading fund BUPA to provide hard evidence for its claims the cost of comparators increases premiums.
The fund has told Senate inquiry and the media that commissions paid to comparators for recruiting new members is pushing up the cost of policies for consumers.
But PHIIA, the Private Health Insurance Intermediaries Association, says the comparators are sales channels like any other and must remain competitive with the likes of Facebook, Google or funds marketing arms.
If Bupa or anyone else has evidence as opposed to conjecture for this suggestion let them please present it publically so we can comprehensively rebut it with the facts, says PHIIA CEO Christopher Zinn.
The marketing costs of the funds, such as using comparators, are included in their publically available management expenses are theres no sign of the kinds of increases Bupa seems to be referring to.
PHIIA members in fact contribute to competition by providing cost effective sales channels for smaller funds and new entrants and also help recruit many new and younger members.
Ironically calls by Bupa and the Senate inquiry for greater disclosure of commissions paid could backfire due to the existing PHIIA self-regulatory code of conduct designed to avoid such conflicts of interest.
Consultants are purposely unaware of commission rates so they and the intermediaries can not be accused of favouring one product or insurer over another, said Zinn.
PHIIA members, such as comparison services iSelect, Compare The Market and Choosewell, provide advice at no cost to the consumer via phone to help align their needs with better value products.
Members are bound by a code of conduct ensuring recommendations are in the consumers interests and not influenced by any incentives or arrangements with the funds.
Media inquiries PHIIA CEO Christopher Zinn 0425 296 442
PHIIA REJECTS SUBMISSIONS TO SENATE INQUIRY REPORT RELEASED TODAY
PHIIA (Private Health Insurance Intermediaries Association), the association of comparison services and agents in the sector, today rejected submissions made to the Senate Inquiry into private insurance, whose report was released today.
CEO of PHIIA, Christopher Zinn, said We strongly reject any suggestion that commissions have played any role in the staggering increases in health insurance premiums in recent years.
On the contrary, intermediaries have increased competition in the sector by delivering price competition and a strong service offering, he added.
Mr Zinn also rejected the submission that commissions be disclosed by intermediaries.
Consultants are purposely unaware of commission rates so they and the intermediaries cannot be accused of favouring one product or insurer over another.
Intermediaries understand that everyone’s insurance needs are different due to factors, such as age, income and general health, and can find the consumer more suitable policies and providers, he added.
PHIIA members, such as comparison services iSelect, Compare The Market and Choosewell, provide free advice via phone to help consumers align their needs with better value products.
They are bound by a code of conduct ensuring recommendations are in the consumers’ interests and not influenced by any incentives or arrangements with the funds.
Media inquiries PHIIA CEO Christopher Zinn 0425 296 442
The Senates community affairs references committee has held a public hearing to supplement their inquiry into the value and affordability of private health insurance and out-of-pocket medical costs.
Key issues mentioned throughout the Sydney hearing on Oct 31 revolved around:
The transparency of policies, pricing and executives salaries; so-called junk policies and their pros and cons and calls to make pregnancy and mental health services mandatory for all policies.
Health fund BUPA also claimed intermediaries added significantly to the systems costs.
Below are highlights in reported speech from some of the witnesses and senators.
Senator Sam Dastyari
The funds take in $22 billion in premiums, they pay out $19 billion. Where does the other $3 billion go?
PHI is the 17th largest item of Commonwealth spending.
Senator Richard di Natale
Asked a number of witnesses:
Has the PHI rebate which costs $6.4 billion worked in reducing waiting times in public hospitals? Many answered no.
Leanne Wells CEO
Consumers Health Forum of Australia
Fears the proposed discounts for those aged under 30 will undermine the principles around community rating
Dr Stephen Duckett, Grattan Institute
Calls the present public/private hospital system mixed and messy
The proposed PHI changes are essentially benign but not transformative and will only lead to a fractional increase in those insured esp the young.
Wants more transparency around hospital complication rates and all surgeries where there is a private contract with the consumers right to know trumping other concerns.
Agreed the $25 billion provided for the PHI rebate in forward estimates better spent directly in the public health system as a wiser investment of public money.
Advised his daughter now aged 22 not to take out PHI despite any discounts until aged 30.
People are not good judges of what might happen in the future. Its hard to know your likelihood for orthopaedic services.
Most never think theyll need help for a mental illness so leave it as an exclusion but yet we know mental illness can hit anyone at every age.
I have a junk policy as its free and Im subsidised. The cost of the policy is lower than the tax Id have to pay so I make a profit.
Its not rational health policy.
Dr Michael Gannon president AMA
Re Transparency, cover and junk policies: Wants to see an end to the tricks and the end to the horrible situation too many patients find themselves in when they are sick and only then discover they are not covered.
We believe policies in both the number (he put at more than 20,000) and details are deliberately confusing for consumers and they shouldn’t need to be a doctor or actuary to understand what they are paying for.
Out-of-pocket costs not the cause of discontent for consumers the problem is they believe they are covered but have bought a product which is useless.
Said the amount the funds pay for doctors expenses is about the same as it costs them to run their businessabout 10%
Says the shift to for-profit funds has driven much of the increase in premiums as shareholders to keep happy.
Wants all PHI policies to include maternity and psychological services.
Dr Rachel David CEO
Private Healthcare Australia
The PHA represents 20 funds which cover 96% of those with PHI. More than 13 million Australians some form of PHI and half of them with disposable incomes below $50k pa
Their surveys showed 84% of consumers on balance thought PHI represented value for money.
But top concerns 1 Affordability of the policies and 2 Affordability out-of-pocket expenses.
Says theres pent-up demand for those in their 20s for PHI and their entry into the system will keep premiums lower for everyone.
Younger people need cover for preventative dental work, sporting accidents and mental health.
On junk policies: Junk not a term we use no one has a consistent definition of it.
As long as theres been PHI theres been a basic table which covered public hospitals and only one or two additions.
It means more people contribute to the risk equalisation pool
Surveys show taking out a low-cost policy to avoid Medicare Levy Surcharge only the fourth most cited reason for having a policy.
Dr Dwayne Crombie
The cost of hip replacement and rehab between $30-$35,000 and not want to ration services.
Our own admin/operating costs 7.9% among the lowest and should be given our scale but we keep tightening our belt.
Comparators incur a significant cost on the system which he put at hundreds of millions of dollars.
Commissions can be 27% of the first year premium.
Its a failure of the system that its not obvious how much they charge in commissions or how much of the market they cover
PHI is a highly regulated area but things are not regulated here
(Writers note: The costs of intermediaries such as comparison sites are comparable, competitive and more cost-effective than other channels used by funds to recruit new members such as Google, Facebook, TV advertising, etc. They have to be as theres no obligation for funds to use the service. They chose to.
Compare The Market one of the larger comparators puts its first-year commission at 25%. For other members of PHIIA the figures vary and are often much lower. The PHIIA code of conduct insists the consumers best interest comes first and theres no conflict of interest in giving any advice around PHI.
As members of PHIIA they are required to be transparent and disclose both methods of payment and the coverage of the market.
Members are regulated by Australian Consumer Law and the ACCCs guide to comparator websites.)
Press Release: 13/10/2017
Health Insurance Reforms Should Prompt Consumers to Check Cover
The Federal Governments reforms to private health insurance may make comparisons simpler but many consumers will still need guidance to make better decisions about their cover.
The association representing private health comparison services and agents specialising in health insurance says the proposed reforms are a win for consumers as the changes will enable more confident decision making.
But Christopher Zinn, CEO of PHIIA (Private Health Insurance Intermediaries Association), says downward pressure in prices will be slow so consumers should act now.
He says The reforms will deliver many benefits to the 13.5million Australians with cover without reducing choice or increasing costs to any of them, but they will take time to implement.
The changes should nudge all consumers into reviewing their policy and provider to ensure they not only offer value but also cover the areas were they are likely to claim, adds Mr Zinn.
PHIIA welcomes moves to increase resources to the governments health insurance comparison site but argues up-to-date data on all policies should be more openly available to all.
In line with reforms around the world and the digital revolution policy data needs to be unlocked so existing comparison services and new entrants can help in the massive task of empowering the public to make better choices around private health insurance, says Mr Zinn.
The introduction of gold, silver and bronze categories will help although the detail has yet to be seen and the changes do not come into effect for 18 months.
The decision to maintain access to the lowest cost policies means entry-level cover remains available, especially to younger Australians, which enables them to better understand their insurance needs and when necessary alter their level of cover.
PHIIA recommends that consumers only use comparison services that are signatories to it the code www.phiia.com.au/resources/
For Further Information Call:
Chris Zinn Tim Allerton
PHIAA City PR
(0425) 296 442 (0412) 715 707.