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Profit driven health funds concern ASO president

13/12/2017By Matthew Woodley
The new president of the Australian Society of Ophthalmologists (ASO), Dr Peter Sumich, has criticised “profit driven” private health insurers, accusing them of putting shareholders ahead of patients.

Sumich, who said the ASO exists to protect – and when necessary, fight for – high quality, accessible ophthalmology services, also accused private health insurers of wanting to adopt a US-style healthcare model at the expense of Australian patients.

“At present we have private health funds that are more profitable than the banks and these same stock market listed entities are blaming everyone but themselves for rising annual premiums,” he said.


“Whilst they are bathing in rivers of gold it is their shareholders who are reaping the rewards that come from higher premiums and the government rebate that underwrites them.”
Peter Sumich, ASO president

“Whilst they are bathing in rivers of gold it is their shareholders who are reaping the rewards that come from higher premiums and the government rebate that underwrites them.

“The stated goal of private health insurers is to introduce US-style ‘managed’ or ‘Network Care’, or whatever other euphemism they will name it. This will deliver a restrictive product that limits patient choices – and choice, of course, is the very reason Australians take out private health cover in the first place,” Sumich explained.

However, the new CEO of peak advocacy body Private Healthcare Australia (PHA), Dr Rachel David, disagreed and pointed to data from the Australian Prudential Regulation Authority (APRA) to illustrate her point.

“Health fund profit margins have remained stable over the last decade running between 4.5–6%. This is a modest return when compared with other forms of insurance. It is also significantly below the returns made by procedural medical specialist practices,” she said.

“Management expense ratios have trended down consistently over the last 15 years, and have currently declined to 8.9% while the profit margin of funds, which is reported to our regulator APRA on a regular basis, is at 5.13%, and has remained stable over the last 10–15 years.”

David also described Sumich’s assertion that private health funds were looking to introduce US-style managed care as “fiction”, and cited data from the most recent Ipsos healthcare and insurance survey which indicated 84% of private policy holders felt they received value for money.

“Contrary to claims that some funds are restricting cover, health funds want their members to understand their policy and to have the appropriate cover for every stage of life. Health funds invested millions of dollars towards improving transparency during the PHI [private health insurance] reform process, to develop policies to simplify consumer choice and not add to complexity or upward pressure on premiums,” David said.

“Upward pressure on premiums is due to input costs, utilisation and health inflation, the key elements of which are hospital accommodation, specialist gap cover, allied health cover and medical devices.”

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Sumich said while he thought the recently announced private health insurance reforms made some progress, the issue of discrimination against patient choice remained unacceptable.


“Upward pressure on premiums is due to input costs, utilisation and health inflation, the key elements of which are hospital accommodation, specialist gap cover, allied health cover and medical devices.”
Rachel David, PHA CEO

“It is wrong that two patients with the exact same health insurance will receive a different private procedure rebate by a factor of up to three times, depending on which surgeon they choose – the contracted network doctor or the non-contracted free agent. The patient should not be penalised with a larger gap because they wanted their own surgeon,” he said.

“With respect to managed care, we see evidence that private health insurers are creating preferred provider networks with ‘carrot and stick’ arrangements for doctors and patients. Patients who do not use a gap cover provider are financially penalised, and are receiving differential benefits even if they have the same health care policies.”

According to the ASO president, patients are also receiving letters from insurers informing them that they local day surgery is not a ‘contracted hospital’, which ha said caused distress for both them and the day surgery owners.

“All taken together it may not be managed care by legislation, but it acts the same way in the marketplace,” Sumich added.

However, despite the criticism, David defended the practice and said the reason health funds contract with doctors is to give patients certainty about out-of-pocket expenses.

“Without a strong focus on affordability and value, consumer support of private health will decline to the point where everyone will lose out,” she said.

Currently, 13.5 million Australians are covered by private insurance, more than half of who have disposable annual incomes of less than $50,000.

Image courtesy: Flickr | Franchise Opportunities

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