Optometry practices across the country are gearing up for a busy Christmas period, with pent up demand to make this period even busier than usual for some. Insight finds out how the sector is gearing up as patients race to use their health fund benefits.
After a challenging 2021 for many practice owners, the potential for optical retail to flourish towards the end of the year increases with Christmas, summer holidays – and the 31 December expiration date for many health funds entitlements.
The rush to claim health fund benefits before the end of the year – often known as ‘use it or lose it’ – presents an ideal opportunity for patients to purchase a spare pair of glasses, stock up on contact lenses before the holiday season or replace prescription sunglasses.
Typically, most health funds have a yearly or annual limit on claiming for optical or eyecare services, and within this, individual per person limits and, in some cases, membership limits also apply in addition to the individual per person limits.
A yearly or annual limit generally means that if a policyholder hasn’t claimed up to their yearly limit, it doesn’t ‘roll over’ to the next year – it resets on 1 January.
The annual limits on optical cover depend on each health fund’s policy, with most offering anywhere from $100 to $400 per person, per year. However, some providers also have a ‘rollover feature’ that lets the policyholder’s benefits accumulate from one calendar year to the next up to a maximum amount.
Whether patients spend-up in December, wait until January – or not at all – depends somewhat on location, and how that has been affected by COVID lockdowns and business restrictions this year.
Insight speaks with industry leaders, suppliers, and those at the coal face about what they’re expecting as the clock runs down on 2021.
Busier than before – but not necessarily
With more than 30 years management experience across a diverse range of industries – and the last 10 years at the helm of ProVision – CEO Steven Johnston is familiar with the seasonal ebb and flow of optical retail.
“I think the best way that our data illustrates the seasonal importance of November and December is when we index these months against the average and establish that they are typically 12% above an average month, whereas virtually every other month is usually within a few percentage points of that average,” he says.
When he spoke with Insight in October, Johnston says orders were starting to build in preparation for November and December.
“Most of our suppliers have indicated that they are in fairly good shape for stock, despite supply chain constraints – but ProVision practices don’t need to sit on any additional inventory if they
use ProSupply.”
Despite his confidence, Johnston says location will largely determine whether there is an end-of-year rush on optical retail and patient’s wanting to use benefits before they expire.
“It’s a tale of two different circumstances. In Queensland, which is not in lockdown, it’s almost business as usual. For practices in New South Wales and Victoria, depending on restrictions, they don’t need to beat the drum of ‘use it or lose it’ because they’ll have pent-up demand from weeks of limited operations,” he says.
Patients naturally want to get value out of their health fund entitlements and ProVision wants to help members prepare for that, he says. During his decade leading the organisation, communication with patients about maximising health fund benefits is also being actioned sooner rather than later.
“We have hundreds of different resources for members to send out accurate messages to patients with private health cover concerning their optical benefits. That’s already started for some practices; it started in September. Sending messages to patients in September helps even out the traffic flow for the proceeding months,” Johnston says.
“Giving patients a heads-up used to be done in November and December. Then it was extended to October, and now it’s happening in September, to make sure practices don’t get over-run with high demand. It’s tailored to these times, a clear message to patients that now is the time to start thinking about health fund benefits.
Over the years, Johnston says he’s also found patients fall into different rhythms.
“For some, as soon as 1 January rolls around, they want to get in and use their health fund entitlements at the beginning of the year. They may purchase specs before Christmas, and then come back in January for prescription sunglasses using their entitlements. This creates two bites of the cherry and spreads retail spending,” he says.
“Also, at this time of the year, lens labs offer promotions, especially for a second pair of lenses. Practitioners can leverage this to present patients with an opportunity to get a second pair of prescription specs or sunglasses.”
Specsavers director of professional communications across Australia and New Zealand Mr Charles Hornor echoes similar sentiments.
For optical retailers in Australia, he says November, December, and January will always be the busiest months of the year – and all the more so this year because of the enormous backlog of re-scheduled eye tests, not to mention those with private health insurance wanting to make use of their annual optical extras cover.
Hornor says this is also borne out in Medicare’s own data which shows a typical uplift of around 7% in November and December billings compared with other months of the year.
“Similarly, publicly available private health insurance data reinforces this point regarding optical extras spending, showing a 20-30% uplift in the months of November and December,” Hornor explains.
“This is well understood by the industry as a whole and makes perfect sense – for most health fund members, their cover and benefits renew at the end of the year. Therefore, across the industry you see an increase in people in November and December visiting optometrists to utilise their annual benefits that they haven’t yet used that year.”
Hornor also agrees there can be a retail buzz at the beginning of the year.
“In January, there is also a noticeable uplift in customers making appointments as their optical extras cover benefits reset, with those customers wishing to utilise these benefits as soon as they become available,” Hornor says.
“Specsavers spends a significant amount of time throughout the year preparing for this period to ensure product availability and a seamless customer experience across all of its stores. This year we believe it will be busier than ever before.”
Optical dispenser Mr Eddie Moore, who purchased Masons Eyecare in Kempsey, NSW, with optometrist Ben Bailey in 2006, says October is a reasonably busy month.
“We send out health fund letters mid-October and have done them this early for the past two years. It creates good early end-of-year sales for us. In November, we follow-up with an SMS to our health fund patients who are yet to utilise their fund, and this creates an even larger bounce in November,” Moore says.
“I suspect this quarter this year to be quieter than last year – which was particularly good – as there is less money being handed out by government in the form of JobKeeper.”
He says Masons Eyecare, which offers a two-year frame guarantee and an afterpay service, has reduced its stock levels.
“We get a lot of patients utilising their health funds and many will order two jobs; one for this year and the other to be supplied in January,” Moore says.
“We don’t typically stock up and in fact COVID has given us plenty of time to review our stock quantities and scale down our holding somewhat. We carry an extensive range of sunglasses, and this helps enormously for second pair sales.”
Optometrist Ms Nicole de la Perrelle owns Coral Sea Eyecare in Port Douglas. She says December is traditionally one of their quietest months as most people head back south for the summer.
“Typically, the practice sees a few last-minute health fund claims in the last week of December but nothing ground-breaking. Although we have not had any serious lockdown up here during the pandemic, most local businesses are finding it very difficult to stay afloat,” de la Perrelle says.
“As Port Douglas is a tourist town, there is little spare money for luxuries like health funds and new spectacles. Unless the Queensland border opens, things are looking very bleak for our little town.
“I suspect next year things will change as tourism returns, but probably not in time for this Christmas. Consequently, we will not be adding extra stock until we see a return of domestic and international flights to Far North Queensland.”
Taking stock
Ms Lisa Wymond, national brands manager and a director of Eyes Right Optical, Modstyle and Sunglass Collective, says the companies have spoken to many practices around Australia who are anticipating being extremely busy at the end of the year.
She says this is because of the usual end of year ‘use it or lose it’ health fund rush, and also COVID restrictions easing and states coming out of hard lockdowns.
“The patients that may have delayed their usual eye test for some months are now wanting to book in before the end of the year. Practices are gearing up for a very busy December and are making sure they are well stocked with the latest eyewear to delight their patients,” she says.
“Our three companies, Eyes Right Optical, Modstyle and Sunglass Collective are anticipating an increased demand on all product ranges, and we have invested heavily to make sure stock is available to meet demand.
“We have catered for this surge in demand by increasing our already large stock holding of all brands, including our luxury ranges, here at our state-of-the-art warehouse in Melbourne. This means we can fill our customers’ orders immediately and the practice receives their order within one to two days of placing it.
“Service reliability, support and strong supplier partnerships are crucial for a successful practice to provide beautiful, high quality eyewear and prompt patient delivery.”
While in October, Melbourne earned the unwanted world record for time spent in COVID-19 lockdown, unsurprisingly it is having an impact on consumer trends.
“Being in lockdown, we have seen more lifestyle factors influencing a shift in buying habits of eyewear. Examples of this are an increase in exercise, cycling, reading, hobbies, TV watching and being outdoors more,” Wymond says.
She says asking patients about their lifestyle can often lead to multiple pairs of eyewear prescribed to the same patient.
“We call it the patients’ ‘frame wardrobe’. You have different shoes for different outfits and activities, we treat eyewear in the same way. Having multiple pairs of eyewear is not only practical, it allows patients to express their individual personality and have the appropriate eyewear tailored for their lifestyle needs,” she says.
“Stock replenishment of best sellers is crucial for practices, particularly at this time of year. After the busy period it is an ideal time for practices to use their sales data to assess every brand and evaluate which brands are working for them.
“It would be worth expanding on these existing ranges that are doing very well. This will not only increase sales for the practice overall, it will also build a stronger relationship with the supplier.
“Every time you buy from a local Australian optical supplier, you are supporting the Australian optical industry and there is someone on the other end of that order who is extremely grateful for your support.”
Statistically speaking
In August, the Australian Prudential Regulation Authority (APRA) released its quarterly private health insurance (PHI) publications for the June 2021 quarter.
The publications provide industry aggregate summaries of key financial and membership statistics for the private health insurance industry.
In the year to 30 June 2021, industry profitability improved, driven by stronger insurance profits and investment income for the year.
APRA said the PHI industry’s commitment not to profit from COVID-19 has seen some PHIs announce their intention to return surplus funds to their policyholders while others are continuing to monitor experience and exploring options.
All private health funds provide benefits for optical or eyecare services. According to APRA data, optical is the second largest area of expenditure (behind dental) by private health insurers under general treatment (extras) cover. One in six (17%) of ancillary claims expenditure annually by private health insurers are for optical or eyecare.
Optical is also the second highest modality or allied health treatment service type that private health funds pay for, making up 13% of total allied health treatment services paid by private health funds on an annual basis.
APRA’s data shows health funds currently collectively pay over $966 million each year in member benefits for optical or eyecare services, covering over 12.7 million services annually. The average health fund benefit paid per optical service is currently around $76.
As at 30 June 2021, over 13.95 million Australians (54.3% of the Australian population) were covered by a general treatment policy with optical or eyecare coverage.
Dr Rachel David, CEO of peak industry body Private Healthcare Australia (PHA), says the latest APRA data shows in the 12 months to June 2021 growth in membership in both general treatment and hospital policies has stabilised, demonstrating that consumers recognise the value of private health insurance.
“Almost 14 million Australians choose to have PHI for the choice and peace of mind it provides. In the year to June 2021, there was an increase in general treatment coverage of 2.6% (up 352,000 to 13.95 million) and hospital cover increased by 2.2% (up 245,000 to 11.44 million),” David says.
The APRA data (June quarter) confirmed members were also using their PHI at pre-COVID-19 levels. Health funds paid $22 billion in benefits on behalf of their members in the year to June 2021.
“Under lockdown restrictions which came into effect in July 2021, all patients attending allied health appointments had to be classified as ‘urgent’ to receive face-to-face treatment,” David says.
“For the month of July 2021, optical treatments were at 76% as a result of COVID restrictions. As restrictions ease, health funds anticipate a rapid increase in the number of members seeking allied health treatments.”
She says health funds are committed to providing ongoing financial support for members and ensuring the affordability of PHI into the future.
Since March 2020 to the end of August 2021, there has been more than 172,000 financial hardship member applications approved by the private health insurance sector, with a cumulative estimated total value of over $172.5 million.
Last year, the industry returned more than $500 million to members through the pandemic crisis.
Whether or not this will be repeated this year remains to be seen.
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