What the health insurance reforms mean for you

What's happening with health insurance in Australia and how will it affect you?

On 13 October 2017, the Australian government announced a raft of changes to the private health insurance (PHI) industry in Australia, planned to take place between October 2017 and February 2020. With so much information available in the 22 pages of facts sheets, we thought we'd break down the what, the when and the why of these reforms.

Simplified product categories

• What? A new simplified tiered health insurance system will come into effect in 2019 and all hospital policies will have to fall into one of four categories: Gold, Silver, Bronze and Basic. Extras policies will only have three tiers: Gold, Silver and Bronze. Combined hospital and extras policies will offer separate ratings for each component.
• When? How these tiers will be defined will be discussed in 2017-18, with the product categorisations being rolled out from 1 April 2019.
• Why? These changes should make it easier for everyday Australians to compare health insurance products, as it will be easier to identify like-for-like policies.

Discounts for 18 to 29 year olds

• What? Those under the age of 30 will get a 2% discount on their hospital insurance premiums (capped at 10%) for every year that they hold a valid hospital policy. This discount will remain in effect until they turn 40. The discount will be voluntary for insurers, but if a fund does choose to discount a product they will have to offer the discount to new and existing customers.
• When? Discounted premiums will come into effect in April 2019.
• Why? The discounts are designed to encourage young people to take out cover and to broaden the membership base.

Improved access to mental health services

• What? Beginning next year, those with limited access to mental health cover on lower cover tiers will have the ability to waive the normal hospital waiting period and upgrade their policy so that they have immediate access to in-hospital mental health services when they need it most. The two month waiting period exemption can only be used once.
• When? This reform will come into effect from 1 April 2018.
• Why? Those at risk of mental illness stand to benefit from immediate access to care when they need it and will no longer be at risk of being stung by substantial out-of-pocket costs.

Removal of coverage for some natural therapies

• What? Cover for the following natural therapies will be scrapped from all private health insurance policies: Alexander Technique, aromatherapy, Bowen therapy, Buteyko, Feldenkrais, herbalism, homeopathy, iridology, kinesiology, naturopathy, Pilates, reflexology, Rolfing, Shiatsu, tai chi and yoga.
• When? Changes to take effect from 1 April 2019.
• Why? According to the former Commonwealth Chief Medical Officer, these items lacked supporting evidence as to their therapeutic efficacy. Cutting these treatments should also help to stem rising insurance costs.

Increase in maximum excess levels

• What? For the first time since 2000, the maximum excess will be increased from $500 to $750 (for singles) and from $1,000 to $1,500 (for couples/families).
• When? Higher excesses will be available from 1 April 2019.
• Why? Higher excesses provide more of a choice for consumers and will contribute to slowing premium increases.

Private in public

• What? The government is seeking to find a sustainable solution to private patients in public hospitals.
• When? No date stated.
• Why? There has been an increase in private patients using the public system. Reducing the number of private patients in public hospitals could reduce the cost of private health insurance.

Prostheses List benefit reductions

• What? There will be a reduction of the minimum benefit payable for the majority of items listed on the Prostheses List.
• When? The first change will happen on 1 February 2018, with subsequent reductions being made on 1 February in both 2019 and 2020.
• Why? It is hoped that by saving the health insurance industry more than $1 billion between 2018 and 2020, private health insurance premium increases will be curbed.

Greater transparency for out-of-pocket costs

• What? The government will set up a committee of consumers, insurers and medical professionals to create a framework in order to make out-of-pocket medical costs more transparent and easier to understand for consumers.
• When? The committee will receive funding from 2017-18 to 2019-20.
• Why? Roughly 14% of services have an out-of-pocket cost and one in seven patients will have an out-of-pocket expense. These changes will mean that patients are aware of these costs from the outset.

Improved care for those in regional and rural areas

• What? Travel and accommodation benefits are going to be offered via hospital policies rather than through extras cover, though it will not be mandatory for funds to offer these benefits.
• When? The travel and accommodation reform will come into effect on 1 April 2019.
• Why? Improved transport and accommodation benefits is great news and should provide those living in rural and regional Australia with better value for money from their private health cover.

Committee on low-value care

• What? In an effort to remove inefficient or low-value care options, the government will set up an advisory committee made up of consumers, clinical experts and stakeholders from the healthcare and insurance industry.
• When? The committee will be established sometime between November and December 2017.
• Why? The aim of this committee is to provide higher standards of care for patients by doing away with ineffective care options. The flow-on effect of this will hopefully be lower premiums.

Increased oversight for Private Health Insurance Ombudsman (PHIO)

• What? The PHIO is going to get increased powers to conduct inspections and audits on health funds and to investigate consumer complaints against insurers and aligned service providers.
• When? Legislation regarding the increase to the PHIO's powers will be introduced in March 2018. Legislation for the Increased Complaints Levy funding, which is needed to boost the PHIO workforce, is to be passed in June 2018.
• Why? Consumers will benefit from this change due to increased protection from the PHIO.

Upgrades to the Private Health website

• What? The website is being redesigned so that consumers can better understand what a particular policy covers. The data will now be sourced from information collected by the PHIO from insurers rather than from Standard Information Statements provided by health funds.
• When? The upgraded website will be launched in April 2019.
• Why? The change should provide consumers with clearer information.

Standard clinical definitions

• What? One of the major roadblocks that consumers have to face with private health insurance is the use of non-consumer-friendly jargon, which is why the government has asked for standard clinical definitions to be used by health insurers.
• When? This measure will be tested throughout 2017 and 2018, with an aim to roll out the new definitions on 1 April 2019.
• Why? The required use of standardised definitions should make it easier for you to understand what is and isn't covered by your policy, as there won't be any confusing terms jammed into the lists of inclusions and exclusions.

Medical Technology Association of Australia agreement

• What? The government will work with the Medical Technology Association of Australia to improve the time to market for items to be added to the Prostheses List. The government will also continue reforms and look to expand the Prostheses List to include non-implantable devices. It will also establish a $30 million med-tech and biotech grants program.
• When? No dates available as yet.
• Why? The changes are designed to make health cover more affordable.

Administrative improvements to second tier default benefit arrangements

• What? Improvements to the efficiency of administration for second tier arrangements.
• When? From 1 January 2019.
• Why? These changes will reduce the administrative burden on health insurers and private hospitals.

Support for private hospitals

• What? These reforms relate to administrative improvements to the second tier, resolving disputes between prosthesis providers and hospitals and solving the problem of private patients in public hospitals.
• When? No specific date.
• Why? This will provide support for private hospitals as they address the affordability of health cover.

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