Premium round reform needed to sustain private healthcare

The annual private health insurance premium round process must be significantly reformed to protect private healthcare access for patients as funding issues continue to threaten services.

In a submission to the federal government, Catholic Health Australia called for several reforms, including directly linking premium round increases with returns to patients and hospitals.

Funders with the lowest returns to patients and hospitals would only qualify for a limited increase in premiums while those with the highest returns would qualify for the maximum increase.

“In the past five years many insurers have been banking significant profits while returning less and less to patients and hospitals,” said Dr Katharine Bassett, CHA Director of Health Policy.

“This funding imbalance has contributed to the closure of 71 private hospital services across the sector in the past five years — and more will follow if we don’t pursue urgent reform.

“Linking premium increases with member benefits will ensure that highly profitable health funds have their members’ interests front and centre — and improve funding flows to patients and services.”

Last year insurers collectively returned just 83 per cent of premiums to members and some major funds returned less than 80 per cent, demonstrating the industry is failing to meet its own gold standard of returning 90 per cent of premiums to patients.

CHA is also calling for a formalised approach to incorporating hospital cost data into the premium round process, and for the process to be entrusted to an independent body such as the Independent Health and Aged Care Pricing Authority.

“An independent body would take into account the evidence and data across the sector to deliver better outcomes for patients, hospitals, and funders,” said Dr Bassett.

“While delivering a more robust premium round in the short-term, this would also lay the groundwork for a careful and considered longer-term move towards a National Efficient Private Price — an independently set, nationally consistent activity-based funding model for private hospitals.

“The private sector plays a crucial role in alleviating pressure on public hospitals. The government’s current financial health check is a critical first step to funding reform that will ensure access, value, and choice for patients while supporting the viability of private hospitals.

“CHA looks forward to working collaboratively with this sector on this important initiative.”