Is this what the doctor ordered? Interested parties diagnose the ills of private health insurance & offer their cures.

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

Bupa Australia



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.)