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Health funds lay out pandemic blueprint amid declining membership

The private health insurance sector has vowed to return additional funds stemming from the cancellation of services, including for optical and ophthalmic care, as thousands of people dropped their cover as the COVID-19 crisis escalated during the March quarter.

The commitment features in a raft of measures from the sector – which also involves a six-month premium freeze and roll over of unused ‘extras’ to 2021 – after many health fund members were temporarily unable to access the services they were paying for.

It comes as the Australian Prudential Regulation Authority (APRA) released the March 2020 quarterly figures for private health insurance. It showed the number of insured people with hospital treatment cover, which includes cataracts and other eye procedures, decreased by 9,760 compared with the December quarter.

The largest decrease was 9,565 for people aged between 30 and 34, while the largest net decrease, taking into account movement between age groups, was for the 25 and 29 age group, with a drop of 11,176 people.

In terms of general treatment (ancillary) insurance, which includes optical, there was a decrease of 13,894 people with coverage in the same period. The largest net decrease, after accounting for movements across age groups, was 9,888 for people in the 25 to 29 age bracket.

Experts believe the impact of COVID-19 on the health insurance sector will be more evident this quarter.

Comparatively, last year’s March quarter saw an overall increase of 11,634 people covered.

Additionally, there was a 10.4% reduction in optical ‘episodes’ from December to March to 3.3 million, with $252 million in benefits paid. There were 82,920 ‘episodes’ for ophthalmic (prosthesis) services in this year’s March quarter, a reduction of 11.5% over three- month period.

According to consumer groups, people have been abandoning their private health insurance policies after the coronavirus pandemic left health funds charging people for services many could no longer use.

This was largely due to a month- long suspension on non-urgent elective surgery. Some routine services like eyecare were also cancelled or difficult to access, as practices prioritised urgent cases or shut down entirely.

Mr Dean Price, health campaigner at consumer group CHOICE, said the impact of COVID-19 on health insurance coverage would be seen more fully in the next quarter.

“Policies that were poor value before COVID-19 have only become worse value as the industry dithers on returning their unexpected windfalls back to their customers,” he said.

No windfall gains

Dr Rachel David, CEO of peak industry body Private Healthcare Australia (PHA), said savings from a reduction of services would look to be passed on to members, but this could take some time.

Rachel David.

“Health funds have given a commitment that any additional funds resulting from COVID-19 related restrictions causing cancellation of some elective surgery and some allied health services will be returned to members,” she said.

“This is a continuing process and health funds will be regularly reviewing their financial position in coming months to provide as much support as possible to members. Given the constantly changing circumstances resulting from the pandemic, it is not possible to calculate this amount in advance. It can only be done retrospectively, once claims data has been submitted to regulators.”

David added that “estimates of huge windfall gains by some so-called experts have proven to be excessive”.

This was due to the success of the Australian Government’s COVID-19 strategy, resulting in an earlier than expected recovery from a short period of service reduction. Elective surgery for most urgent and semi-urgent cases has resumed, and cancelled cases have been rebooked, she said.

To ease pressure on consumers in the short term, David said insurers had postponed the April 1 premium increase for six months and provided premium relief for thousands of Australians. They also secured regulatory approval to roll over unused ‘extras’ benefits, including optical, to 2021, which is now available to all health funds.

Overall, the private health insurance sector anticipated a decline in member claims due to COVID-19 restrictions.

“We expect APRA’s next quarterly report, reflecting data from April and May, to show some reduction in hospital claims, however with the lifting of the ban on elective surgery, this will be followed by a surge in claims in coming months,” David said.

“Members with private health insurance will have access to timely care in the private system. This compares to the public system where wait times are expected to exceed 1.5 years for common elective procedures. It has never been more important for people to hang on to their private health insurance.”

Economics of surgery coverage ‘marginal’ 

Australian Society of Ophthalmologists president Dr Peter Sumich, a cataract and refractive surgeon, said the economics of holding private insurance for ophthalmic surgery were marginal.

Peter Sumich.

Because eye surgery is a relatively commoditised service with high volumes and efficient services, he said the actual cost of an episode was not much more than an annual insurance premium.

“More patients are now paying directly for their surgery and saving on their health insurance by not paying for top cover. This is due to the failure of private insurers to keep up with medical inflation,” he said.

“In fact, the private rebate refunded to patients for cataract surgery in 2020 is approximately the same as in 2008. The new requirement for patients to buy Gold Cover to pay for cataract surgery means that many are happy to forgo Gold, settle for Silver and pay their own way.”

Specsavers director of communications Mr Charles Hornor said the overall figures demonstrated all sectors have been affected during COVID-19.

“All of optometry will no doubt welcome the rollover of unused extras cover into 2021 – not only will it maintain and highlight value for health fund members, but also it will come as a much needed boost to optometrists whose businesses have been so sorely impacted.”