How will the Private Health Insurance changes affect you?

Ross Greenwood speaks to Medibank CEO Craig Drummond Private health insurance premiums have increased as part of a series of changes announced on April 1.

Interview with: Craig Drummond, CEO, Medibank

Ross Greenwood:  Welcome back to money news right around Australia. We want do a bit of maths for you right now. Since 2012 the average private health insurance premium in Australia has risen by 5.6%, 6.2%, 6.18%, 5.59%, 4.84%, 3.95% and in this year from today 3.25%. The premium rises are coming down, but they’re still well above inflation. It means if you’re a family with hospital and extras cover paying a little over 50 bucks a week back in 2012 2,750 was about the average the family’s pay then you today are paying just short of $3,900.

That extra works out to about $95 per month. It’s not just the premiums that are changing today, but also plenty of other things to try and take some of the pressure off those price increases. Say, for example, all private health insurers must now provide four tiers of cover. Gold, silver, bronze and basic it’s not the only things to try and take some of it out. For example, now you can have higher accesses the new accesses which were previously $500 for singles, $1,000 for families and now $750 for singles, $1,500 for families.

On top of this also that can reduce your premium discounts also for younger Australians are out there. There is some other natural therapies which may no longer be available on private health insurance. I thought we’d get in here the chief executive of Medibank, of course, one of our largest and historic private health insurers plus he’ll take your calls on 1-3-1-8-7-3. Craig Drummond is on the line right now. Many thanks for your time, Craig.

Interview with: Craig Drummond, CEO, Medibank

Craig Drummond: Pleasure Ross, nice to speak to you.

Ross Greenwood:  How well understood do you believe these changes to private health insurance that came in from today are in the community right now?

Craig Drummond:  Ross I think all the stakeholders in the health system and the private health system, including government and the private health insurers themselves continue to educate the public about these changes and we’ve- we and many of our peers and competitors have started a very significant communication process. Can I say that the changes and we are very supportive of the changes. The changes are aimed very much at improving affordability and transparency making the policies more comparable.

We have for the first time standardized clinical terms that are being used across all companies so that you can make a comparison more readily than you have been in the past. The government has also upgraded the quality of the website to make comparisons on the website. Additionally, Ross, there are many other options the increase in excess from $500 to $750 is not a requirement. It is an option that a customer– if a customer so chooses.

Certainly at Medibank the customer could choose to go from a zero excess to $250 a $500 up to $750 whatever they choose. We’re certainly not– that’s not a requirement for us to pass it on. It’s a choice for the consumer. As is indeed the youth discounts we have made the decision to pass on to all of our customers under the age of 30 a discount ranging from 2% to 10%. That will be enforced until the age of 41 and then gradually through to the age of 45 disappear when they become– those individuals will become heavier users of the health system.

Look, there are additional measures, one that we haven’t talked a lot about, but we’ve removed a change that government introduced a year or so ago. We’ve removed wait periods for individuals having an ability to upgrade their policy to cover a more comprehensive mental health policy from a basic mental health policy. Previously, there were wait times in place that if you wanted to upgrade your policy you’d have to wait a certain period. Those wait periods have now been removed. If someone is on a basic policy, they have basic mental health coverage, they’ve been diagnosed with a problem, they can go and upgrade their policy immediately no wait times and get the treatment they deserve.

Ross Greenwood:  I tell you what Craig we got lots of calls on the board on 1-3-1-8-7-3. I’ll get to them. Just one very basic question for you and I do ask all of our callers please keep it really short because we got so many– we have a limited amount of time. I’m the vast majority of people I’ve done absolutely nothing. What would happen to my policy which would be a pretty much maximum hospital and extras cover? What happens to me if I’ve done nothing? Where do we end up, gold, silver, bronze what do I do?

Craig Drummond:  Ross without knowing your specific details the things you do is– and people should not be concerned that if they haven’t had a call or a communication from their private health insurance company because the insurers have up until the 31st of March 2020 to convert their existing products through to compliant gold silver bronze and basic product. What I would suggest for anyone that is concerned or anyone that has not had a review of their cover in the last 12 to 24 months they should be calling their insurer and asking them how their policy will look under a gold silver bronze basic application.

Ross Greenwood:  That’ll be my call tomorrow. Craig, in that case, let’s get to our calls because we got a lot of them there. Let’s start up with Stephan who’s in Croydon. Stephan, keep it brief for me if that’s okay.

Stephan: That’s all right. Ross, thank you very much for taking my call. Back in 1987, there used to be a section in the Department of Health that was called Registered Organization. What we did we ordered it all the non-profit health funds back then. Due to effective lobbying by the health funds they brought in for profit health funds. At that time there were close to 20 health funds. The majors were the most expensive and the others weren’t. When they got rid of the section the health funds no longer were orders heard and kept to task and as such that’s where the premiums started rising. They all became profitable and started taking over all the small operators so to speak.

Ross Greenwood:  I’ll ask the question I want to put it straight back to Craig. Craig, one thing that the Labor Party has said is that they want to put a cap on premium increases because they’re right, they’re talking about the amount of money that the private health funds have taken out of the industry over the past few years. How do you respond to the Labor Party saying that?

Craig Drummond:  Well, the key point Ross, there is a couple of key points. Firstly, the private health insurance industry in the year to December 2018 had a 5.2% pre-tax margin. The first point I’d make is on any measure for an industry to have a 5% margin that’s not excessive, certainly from making a comparison with any other health care company in the country. The second point I’d say is health care costs in Australia in the last decade have been rising at about four and a half percent above inflation per annum.

One thing that’s not well understood Ross is that when we compare with inflation, inflation the CPI is a price index only. Premium increases that and what we absolutely are committed to trying to get these premium increases to be as low as possible. The last thing we want is our product to be less affordable. We understand —


Ross Greenwood:  If that happens, people drop out. If they drop out your business is less sound. I’ve going to keep moving. Let’s go to Jim, who’s in Clovelly now. Let’s get to Jim. What’s your question, Jim?

Jim: Ross. My premiums don’t come up until next August and I pay them a year in advance. Will the new laws or changes affect me now or will they affect me when I next renew my policy?

Ross Greenwood:  Craig Drummond boss of Medibank what’s the answer to that?

Craig Drummond:  The answer is your insurer has until the 31st of March next year to get in touch with you and make your policy compliant, what I would suggest to you is not, again not knowing your personal circumstances, I would put a call into your insurer and just for your own peace of mind ask them those questions. Also ask them what does your policy look like, your current policy that you understand, what does it look like under a gold silver bronze basic environment both price and benefits? There’s been a range of core changes and medical benefits schedule core changes. Some things have come out and many things have gone back in.

Ross Greenwood:  Craig I’ll leave it there and I’ll go to Sylvio very quickly who is in Mascot, good day Sylvio very quickly for me if that’s okay.

Sylvio: Yes. Okay. I had a pre-existing condition. I went to a specialist I’ve got a torn tendon in my shoulder now elective surgery. Is there still a gap that you have to pay with a specialist doctor or with under the new covers?

Ross Greenwood:  Very simply Craig Drummond?

Craig Drummond:  That is a question you need to ask your surgeon as to what are they going to charge for your procedure. You should talk to your insurer then about what you’re actually covered for. You should speak to your surgeon at the same time talking about do they participate in your insurer’s no-gap arrangement. Which can substantially limit and reduce the out-of-pocket expense if there is indeed going to be one.

Ross Greenwood:  There you go. Sylvio, that’s your answer in Mascot. Craig Drummond, who is the Chief Executive of Medibank we could have taken calls all evening Craig because we have so many of them on the board, but we are limited at the time. I appreciate your time this evening on the program.

Craig Drummond:  Thanks, Ross. Appreciate it. As always.

Image source: 2GB

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