Government to maintain community rating as keystone of strengthened private health insurance system

The Government will maintain community rating, speed up the introduction of coordinated single billing for private hospital treatment and will consider allowing health insurance funds to handle Medicare claims in reforms to private health insurance announced today.

Health and Family Services Minister, Dr Michael Wooldridge, said that the Government was committed to community rating, which ensures that the elderly and chronically ill are not charged more for health insurance than younger and healthier people, and had rejected a major review of community rating as recommended in a report from the Productivity Commission. The Government has also ruled out any wider inquiry into Australia's health system.

“The Government has supported the majority of the Productivity Commission's recommendations and for the first time in 13 years there is a Federal Government that understands that the long-term viability of Medicare depends on a stronger private health insurance industry and having more people covered for private hospital treatment,” Dr Wooldridge said.

“Together with the private health insurance incentives which are available from July 1, the reforms I have announced today will make health insurance fairer, more affordable, more customer-friendly and better value,” he said.

The Government has also supported moves to penalise people who delay taking out health cover until later in life, review the qualifying periods for conditions such as pre-existing ailments and obstetrics, and allow financially-troubled funds to be taken over by a rival health insurer in order to protect their customers, but wants more detailed study and consultation before making a final decision.

Dr Wooldridge was releasing the Government's formal response to the Report into Private Health Insurance, which was separately released in Canberra by the Productivy Commission.

He said the Commission found that the major cause for premium increases has been higher payouts to members, coupled with a significant increase in the average cost of claims per member due to the loss of younger, healthier people over the last decade.

“It has been evident for some years that the industry needs a circuit breaker to allow funds to stabilise their cost base, make it more affordable for members and develop better, cheaper and more innovative forms of health cover to attract younger, healthier people,” he said.

“We are helping people meet the costs of their health cover, and giving the funds the freedom they need to get their costs under control and get better products into the market.

“We have directly addressed two of the major complaints that people have about health insurance, namely the number of bills they receive after hospital treatment and the fact that they have to claim separately from Medicare and their private health fund.  I am confident that single billing and simplified payment processes can be introduced sooner rather than later,” Dr Wooldridge said.

Dr Wooldridge said allowing funds to charge a higher premium to people who delay taking out health insurance until later in life - known as 'unfunded lifetime community rating'  -  was very attractive to the Government as it would be fairer to existing members.

“The health funds have convinced the Commission and the Government that this would have a positive impact.  We need to have a detailed look now at how it would work in practice and how it would be implemented by the funds,” Dr Wooldridge said.

“If we proceed with this recommendation it will be based on firm evidence that existing health fund members, especially the elderly members, will not have to pay more as a result.

“It is not fair that people who leave it until later in life, when they are more likely to claim larger payments because they use hospital services more often, can join and pay the same price as someone the same age who has been a member for 30 years. It is also not fair that someone can join today, claim tens of thousands of dollars in a little over nine or 12 months, then drop out as soon as they get a clean bill of health.

“I am determined to make it harder for people to take the money and run,” he said.

Dr Wooldridge said a wider inquiry into Australia's health system was not needed and would postpone important reforms already under discussion with State and Territory governments  affecting financing, service development and quality of care, although there could be good reason to undertake a number of strategic studies of a more focused nature.

Other measures announced by Dr Wooldridge include new provisions for reserve management, an amendment to the National Health Act to make it easier for mutual funds to transfer to for-profit taxable entities, and the establishment of Medibank Private as a government-owned company consistent with competitive neutrality principles. The HIC will expand its focus to support improved health outcomes, develop new information and data systems, and continue to make payment processing services more accessible./p>

The Government also rejected changes to the private health insurance incentives and Medicare levy surcharge on the high-income non-insured, removing community rating of ancillary cover, immediate removal of the power to disallow an application for a premium change, and removal of the default benefit for private hospitals.

Media Contact:  Bill Royce, Dr Wooldridge's Office (02) 6277 7220

Copies of the Report are available from the Productivity Commission (02) 6240 3200