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Bupa policy updates to change eyecare delivery in Australia

05/07/2018
The Australian Society of Ophthalmologists (ASO) has urged Bupa policyholders to consider their private health insurance options, in the wake of a series of major policy change announcements that are set to restrict choice and expand exclusions.

The changes mean millions of policyholders at Australia’s largest insurer will have new restrictions placed on their choice of hospital or day surgery, and therefore doctor. Gap cover will be restricted only to procedures performed on patients within Bupa’s network of approved hospitals and medical centres, while more than 700,000 of its customers also stand to lose significant benefits, such as cataract surgery and hip replacement, after September 1.

The policy exclusions were meant to take place on July 1, but a Commonwealth Ombudsman’s investigation, ordered by Federal Health Minister Greg Hunt, rebuked Bupa for poorly communicating the changes to members by listing reductions as “improvements”, causing the insurer to delay their implementation.

As a result, ASO president Dr Peter Sumich has accused Bupa of playing ‘cat and mouse’ with health consumers and providers, and warned that in some instances the proposed changes threatened to tear at the fabric of private health insurance itself.


"What they’re doing really is putting a paywall around the network of doctors and hospitals and saying ‘this is our group’. I don’t think paywalls in medicine is the right thing to do.”
Peter Sumich, ASO

“I have been left confused by Bupa’s recent policy announcements and re-announcements. What hope does the average consumer have to figure this mess out? It breeds distrust and public anger with the private medical system,” Sumich said.

“The gap cover changes in particular will potentially have a huge impact on what private healthcare in Australia looks like in the future. If all the other funds decide to follow a similar strategy, customers will have to actually consider whether they join a health fund that is going to restrict who and where they go to for medical care.”

In a response to the Ombudsman’s report, Bupa CEO Mr Richard Bowden conceded the company could have communicated the changes more clearly, while he announced it had also shelved plans to drop gap cover for customers in public hospital emergency departments.

“While the communication aimed to be clear and transparent regarding the relevant detrimental changes to our customers’ policies, we now recognise that the communication was not as effective as it could have been,” he said.

“We remain committed to initiatives which help improve certainty and transparency for our customers, in particular reducing the risk of unexpected out-of-pocket costs. This was a key driver behind the changes to minimum benefits and the Medical Gap Scheme changes.”

Contracted hospitals

Despite medical groups such as the Australian Medical Association (AMA) welcoming aspects of Bupa’s response, concerns still linger over its stance on restricting policyholders to contracted hospitals.

“Insurance is overly complicated. Without clear and meaningful coverage levels, patients will continue to question their insurance. We remain critical that Bupa policy holders will not be able to use their ‘no gap’ or ‘known gap’ cover in non-contracted facilities,” AMA president Dr Tony Bartone said.

“This remains a major concern for the AMA as it means that patients will still be required to ascertain whether their surgeon and their hospital have a contract with Bupa. It’s something the AMA has spoken strongly against, and will continue to do so, as it potentially exposes patients to further gaps.”

Private Healthcare Australia (PHA) didn’t confirm whether it believed a patient’s right to choose their doctor or hospital was a fundamental aspect of private health insurance. Instead, its CEO Dr Rachel David told Insight choice was important, but that members needed to be aware that there could be differences in out-of-pocket costs regardless of their health fund membership.

“Out-of-pocket costs have become a major concern for health fund members. The AMA recently condemned medical specialists charging exorbitant out-of-pocket fees as well as the practices of booking fees and bill splitting as these do not reflect clinically relevant services,” David said.

“Health funds do not have the levers to stop this and therefore stakeholders need to work cooperatively to call for Federal Government intervention.”

Insight sought comment from Minister Hunt in relation to both the Ombudsman’s report that he commissioned, and healthcare legislation, but he had not responded at the time of publication.

According to Bupa, the main driver for its policy changes was the need to provide out-of-pocket certainty and reduce costs, in order to keep premium increases to a minimum.

However, given it is one of Australia’s largest private health insurance providers, with four million members and more than 25% of the market, some are worried the changes to its Medical Gap Scheme will be followed closely and potentially adopted by competitors.

“Bupa is being watched by the other funds as a test case. It’s the first time anyone’s tried to do this – where they’ve actually restricted your choice of doctor and surgeon – it’s never been done before, you’ve always had your free choice of surgeon and centre,” Sumich said.

“Unfortunately, there’s very poor literacy with regard to healthcare in Australia, but once you start to get networked care you’ve lost the freedom of moving around that private healthcare is supposed to give you – that’s one of the reasons why we take out private health insurance, we want choice.”

Bupa ANZ’s position of strength in the healthcare industry is difficult to understate. Aside from controlling 27% of the private health insurance market, it funds almost $6 billion in claims annually, and operates more than 230 dental clinics and 71 aged care homes. Its optometry practice network also continues to expand and now stands at 39 stores.

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Bupa ANZ does not publicly release its financial information, however, the annual reports of its UK-based parent the Bupa Group showed that it generated revenue of £4.926 billion (AU$8.78 b) in 2017, while raking in profits of £384.7 million (AU$685.91 m). Further analysis from 2011-2017 reveals that while the ANZ division was responsible for, on average, 40% of total revenues, that share generated a much larger proportion of the group’s total global profits – on average, 46.7%.

While Bupa ANZ is a for-profit private insurer, its marketing often highlights that its parent company is set up as a limited by guarantee company, which means it is required to “reinvest profits” into areas the company believes will benefit members.

A Bupa ANZ told Insight that despite the company generating billions of dollars in profits for its parent company, the group had still invested around $2.5 billion more into Australia than the less than $4 billion it had sent to the UK since 2002. However, at least two-thirds of that $6.5 billion investment comprises business acquisitions – such as the $2.4 billion deal to takeover MBF, or the $1.2 billion spent on 96 aged care homes in 2007.


“There is only one reason premiums increase and that is because health funds are paying for more healthcare.”
Rachel David, PHA

Moreover, the Bupa Group’s annual reports show that Bupa ANZ had generated £2.129 billion in profit between 2011–2017 alone, which using the average exchange rate for this period equates to AU$3.66 b. After seeking clarification, a spokesperson told Insight this apparent discrepancy was because Bupa ANZ didn’t pay dividends back to its parent company between 2003 and 2007, while a requirement to hold enough capital to sufficiently cover policyholder liabilities meant it couldn’t distribute all of its profits to the group.

Doctors blamed

Bupa ANZ also refuted a link between its profits, which have increased every year at an average of 9.83% at constant currency rates – including a 24% increase in 2014 – and its average premium increases of 5.54% annually. A company spokesperson stated that the two figures were unrelated and pointed to an Australian Prudential Regulation Association (APRA) quote, which stated the industry regulator did not consider profits to be the primary driver of rising premiums.

“As a health and care company providing more than just health insurance, profit is reinvested across all services and as such it is not accurate to look at health insurance in isolation. In saying that, health insurance premium increases are reflective of the broader increases of the cost of healthcare in Australia,” the spokesperson said.

Private Healthcare Australia also laid the blame for premium increases squarely on the medical sector.

“There is only one reason premiums increase and that is because health funds are paying for more healthcare. The only way to put downward pressure on premiums as utilisation goes up is to address wasteful input costs – fraud, over servicing, inflated prices for medical devices, low value care,” David said.

“The key driver of premium growth is increases in input costs such as the cost of medical devices, hospital accommodation, and provider fees charged by medical specialists and allied health providers, and health funds have limited control over these input costs.”

However, Sumich said the issue was more complicated than that, and stressed that while the insurers were lifting their premiums in response to medical inflation, they were not doing the same for their patients.

“Health insurers index their patient rebates at the equivalent of the Medicare index, which is about 2%. However, they know that medical inflation runs at about 5–9% and that’s the amount they increase their premiums by every year,” Sumich said.

“They [Bupa] know what the costs and inflation in the marketplace are and yet they’re paying patients a 2% per annum increase on rebates. That means the gaps get greater every year, which makes it difficult to swallow when they turn around and say to doctors – who are also exposed to costs – ‘we’re going to continue to index the patient rebate at 2%’, because our costs are going up by 5–9% too, the same as insurers. You can’t have it both ways.”

He also said it was difficult for doctors to reduce medical inflation, due to the wants and needs of their patients.

“When patients come to see you, they don’t say ‘can I have the second best operation or the operation from 2015?’ Most of them say I want the latest thing,” Sumich explained.

“The $6 billion private health insurance rebate should be redirected to alternate healthcare and not private insurers, because they’ve shown themselves quite capable of raking in big profits. I think it could be better used for waiting list reduction or primary care or something else.”

Regardless of potential legislative changes, Sumich is adamant that any further moves to restrict choice would have a negative effect across the system.

“If you take it further, what happens if eventually there’s a paywall around the top specialists? You’ve got to join the most expensive health fund to get access.” Sumich said.

“What they’re doing really is putting a paywall around the network of doctors and hospitals and saying ‘this is our group’. I don’t think paywalls in medicine is the right thing to do.”

Image courtesy: Pixabay | brenkee

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