Doctors and patients are expected to benefit from the government's plans.
As health insurance premiums continue to rise, the Australian government has announced a host of wide-ranging reforms aimed at making private health insurance (PHI) simpler and more affordable.
Many of these reforms, coming into effect throughout the year, intend to provide private hospitals with better support.
The government says these reforms will benefit consumers and private hospitals as well as reduce health insurance costs.
What's changing in private hospitals?
Australians rely on private health care, which is why we need private hospitals to run as efficiently and effectively as possible.
One of the reforms designed to do this is the second tier administrative reforms, which involve reducing the administrative burden associated with second tier arrangements. The changes are as follows:
- From 1 January 2019, private hospitals have been able to apply directly to the Department of Health for recognition that they are eligible for second-tier default benefits. This will replace the existing industry-based second tier advisory committee, cutting out a lot of time-consuming paperwork.
- The length of a private hospital's second tier eligibility approval will also be increased to align with the hospital's independent hospital accreditation cycle.
Other changes include:
- Customers will benefit from the Private Health Insurance Ombudsman's increased powers to investigate private health and private hospital contractual arrangements.
- Private hospitals will also have confidence that hospitals are grouped consistently for the purpose of calculating and paying second-tier benefits.
- Private health insurers will be required to use standard clinical categories across all of their documentation and across all platforms. These clinical categories were introduced from 1 April 2019 and insurers will have until April 2020 to use these categories in all of their policies.
How will the changes to private hospitals impact you?
Streamlining and extending a private hospital's second tier eligibility will benefit both medical professionals and patients. Not only will this cut out a large amount of administration costs for private hospitals and insurers, it will also help tackle PHI affordability.
Improving the quality of Australia's private hospitals will also help take the strain off public hospitals. Growth in the number of private patients using their insurance in public hospitals over the last five years has contributed about 0.5% a year to premium increases. Increasing the amount of people using private hospitals will help lower your premiums.
Similarly, getting rid of complicated medical jargon by introducing standard clinical categories and increasing the ombudsman's powers benefits the customer. Because let's face it, PHI can sometimes be pretty confusing and at times feel a little misleading. These reforms specifically target overly complex and unclear parts of PHI.
Will it impact your wallet?
There's no guarantee that the proposed changes will actually help you, as a consumer, to put more money in your wallet. Rather, they're a safety net for it; they'll help stop any unwanted or unexpected out-of-pocket expenses. That being said, second-tier reforms may contribute to lower premiums.
Why is it changing?
Nearly half of Australian hospitals are private, according to the most recent figures. The Australian Competition and Consumer Commission found Australians paid out $23.9 billion in premiums in the last financial year: $834m more than in 2016/17.
Yet, the number of people with hospital-only or combined health cover fell by nearly 1%, while extras-only cover went up. This suggests Australians are feeling the added pinch of increased premiums, so are downgrading their policies.
Coupled with the fact that more private patients are using public hospitals, these statistics don't bode well for private hospitals, which may be why the government is looking to improve them.
Another reason for the changes is a demand for simplification. Consumer testing has been done to ensure that the new standardised clinical categories are easy to understand, eliminating opportunities for you to misread or be misled by your policy coverage.
When will the changes to private hospitals happen?
Changes to second-tier eligibility came into effect on 1 January 2019, while changes to the ombudsman will be rolled out throughout 2019. The clinical categories will take some time to be fully implemented. Although they were introduced on 1 April 2019, insurers have an entire year to adopt the terms for all their products.
What else is changing with the health reforms?
There are several changes coming this year, including:
- A new simplified tiered health insurance system. All hospital policies will fall into one of four categories: Gold, Silver, Bronze or Basic. Extras policies will only have three tiers: Gold, Silver and Bronze.
- Discounts for 18- to 29-year-olds. Those under the age of 30 taking out PHI are now eligible for a discount of up to 10%.
- Better access to mental health services. Those in need of mental health services can now skip the waiting period if they need to upgrade their policy.
- Accommodation costs cover under general treatment. Insurers can now offer accommodation and transportation benefits in their hospital policies, which should help customers in rural and regional areas.