Submission to the Senate Community Affairs References Committee Inquiry into the Value and Affordability of Private Health Insurance and Out-of-Pocket Costs

COTA Australia appreciates the opportunity to provide brief comments to the Senate Community Affairs Reference Committee Inquiry into the Value and Affordability of Private Health Insurance and Out-of-Pocket Costs.

This Inquiry is significant for older Australians, who remain strong subscribers of PHI (with 52.6% of people over the age of 65 retaining coverage) despite generally much lower incomes and greater difficulty meeting premium payments after retirement. However, it is also important to note that nearly as many older Australians do not have PHI as do, and there are strong variations in coverage amongst older people depending on factors such as marital status, cultural and linguistic background, incomes and where a person lives.

One example of the diversity in PHI take-up amongst older people can be seen in the 2014 figures in the Household, Income and Labour Dynamics in Australia (HILDA) Survey. It showed that 71.4% of ‘elderly couple’ households (both partners over the age of 60) had some form of PHI compared with 50.8% of single ‘elderly person’ households (over the age of 60). The same source found that ‘elderly couple’ households were the second strongest growing group with PHI coverage between 2005 and 2014, outstripped only by ‘lone person’ households.

Also important to COTA, at a broader policy level many of the current debates around PHI and the continuation of a mixed public/private healthcare model are conducted within the frame of a negative and alarmist concern about an ageing society placing heavier demands on the public health system. While it is true that the incidence of use of the health system does overall increase with age there are many ways in which the configuration of our health services system could be improved to deal with older people in more restorative, rehabilitative and enabling ways that would both increase health outcomes and decrease costs.

In December 2016 through our national magazine ONECOTA, we asked our members’ views on the value of Private Health Insurance (PHI) and what they considered to be the main problems needing attention in the system. Most of those who responded had some level of PHI coverage.

Many questioned the value of PHI given the high cost of premiums compared to the benefits received in return. Out-of-pocket expenses were a great concern. Reinforcing these messages, a number of members reported having had very good recent experiences using the public hospital system, leading them to further skepticism about the value of PHI.

Despite this, most said they maintained their PHI coverage to avoid lengthy waiting lists in the public health system and to have the doctor of their choice. Extras cover was valued by some as it allowed them to maintain optimal health by providing access to a range of allied health services, particularly optical and dental care. Others felt that Extras cover was of little value.

The cost of PHI and the rate of premium increases were the most commonly expressed concerns, particularly for those who are fully reliant on the Age Pension for income. Many members were concerned they may not be able to afford PHI in the future given the premium increases, especially if there is a reduction in the PHI Rebate. Some members noted that while using PHI “Preferred Providers” increased the benefits paid, the Preferred Provider was not necessarily the provider of the member’s choice or preference.

The challenge of shopping around for PHI was also highlighted, as it is increasingly complex and difficult to compare the benefits of products offered. One member highlighted the importance of considering subtle differences in benefits, for example coverage for ‘ambulance in emergencies only’ does not include a range of situations where an ambulance may absolutely be required but which are not considered an emergency.

These responses late last year reflected the key concerns we have heard in feedback from our members and the older general public over a period of time. They are also consistent with earlier research findings by National Seniors Australia that identified the main reasons for purchase of PHI by people over 60 were: security or protection or peace of mind; shorter wait for treatment or concerned over public hospital waiting lists; choice of doctor; and allows treatment as a private patient in hospital.

We will confine our brief contribution in this submission to a limited number of the Inquiry’s Terms of Reference below. However, a key issue for COTA underlying our comments throughout is the need for a much more consumer-friendly PHI system, based on the fundamental principles of transparency, simplicity and comparability. PHI consumers require the right kind of information at the right time in order to reduce the risk of purchasing or maintaining the wrong product for their needs. Older consumers also tend to have specific requirements regarding the means of delivery of information. We view the industry as having a long way to go to improve on communicating fairly and effectively with policy holders and those wishing to purchase new (or review existing) PHI policies.