Private Health Insurance In Australia: Laws, Regulations, And Consumer Concerns

Issues Of Competition In Health Insurance

Overview of Private Health Insurance Laws and Regulations in Australia

Discuss about the Issues Of Competition In The Health Insurance.

Private Health Insurance Act of 2007 and Private Health Insurance Act of 2015 are the legislations which primarily govern the private health insurance. Health insurance of the private sector is administered by Department of Health with Australian Prudential Regulation Authority (APRA) overseeing the activities of the Health Department. When consumers complain, their complaints are usually handled by the Private Health Insurance Ombudsman. The ombudsman usually sits within the office of the Commonwealth which also funds the annual reports. Issues of competition in the health insurance are dealt with by the Australian Consumer and Competition Commission (ACCC) (White et.al, 2014, p. 68).

Australia has a mix of private and public health care. Public health care is financed broadly by the government such as pharmaceutical benefits scheme, public hospital, and Medicare. Some insurance covers are funded by individuals from their pockets, private health insurance. Private health insurance is not mandatory, and Australians have access to subsidized medical care and free treatment in public hospitals. Under Medicare, private insurance cover is not mandatory In Australia, two types of private health insurance policies exist, that is the private and ancillary. The private insurance covers a person who goes to the hospital for general treatment, while ancillary covers other ancillary treatment like dental, ambulance and physiotherapy. Private insurance can be dated back to the 19th century where friendly societies formed to contribute a fee and members got a range of medical services (Burling et.al, 2012 p. 445).

As a person’s health needs change as they become older, so does the health insurance cover. In Australia, over 30 insurances have over 3500 distinct policies, which depend on where a person lives and their circumstances as an individual. Every year, insurance covers tend to rise. In health insurance policies insurers include the terms and conditions stating that the prices may change at any time, although one will be notified when such changes take place. One has the right to switch policies when changes have a detrimental change to them. By law, one is allowed to switch insurers without any additional costs.

The private health insurance covers expensive treatment for patients in public hospitals. It also provides patients with more options that like choosing a surgeon or a specialist. The private insurance is also mostly bought because it has incentives from the government and responds to taxation policies.  Private health insurance is not compulsory. The choice no to purchase, however, will affect a person’s ability to access insurance of choice and the tax obligations. Medicare levy Surcharge is the tax imposed on high-income earners without a prescribed level of private insurance. This is distinguished from Medicare Levy. Many Australian consumers don’t incur the Medicare levy surcharge.

Features and Benefits of Private Health Insurance in Australia

11.4 million Australians had the private cover by March 2017, according to APRA statistics, with another 13.5 million having the ancillary cover. This represents 45.6% and 55.5% of the population respectively. Private medical care is becoming complex ad different; restrictions, exclusions, and co-payments are applicable. This has made consumers have a difficult time in choosing which cover suits them best. Products offered by insurance companies are many, and the number is not clear. The report by the ACCC  senate if 2014-2015 estimated 45,000 private insurance products to exist. The Ombudsman estimated the product to be 27, 281 in 2017. The government usually advises consumers to compare products and pick the one that is most suitable.

The government imposes penalties and incentives to consumers so that they are encouraged to take private insurance. In July 2001 the Lifetime Health cover was introduced for people who delay in taking private insurance. It has a 70% maximum loading with an increased 2% loading on the cost annually. The LHC ceases to apply after ten years coverage. Those were having LHC cover sometimes have permitted days without cover. The other cover is the Medicare levy surcharge which is imposed on earner with high income who fails to purchase private insurance. It is an additional levy on top of the 2% on the Medicare levy. Also, there is the Private Insurance Rebate, which was introduced in 1999. It is a test by the government on income on the cost of private insurance. Initially, it had a 35%offer on people under the age of 65 with high rebate. In the 2016-2017 budgets, the government froze this policy until 2021 when the legislation will be passed.

Private insurance in Australia has legislated features like, it is rated by the community and not by the risk like other products in insurance. The legislations on community ratings require that everyone is given the same insurance at the same price. The risk factors like previous claiming history, health status and frequency of using insurance policy, are not put into consideration when a policy is being given. Portability, on the other hand, allows for consumers to switch insurance policies without having to wait. The insurance they switch to offers the same benefits as the previous one. Sometimes certain restrictions and limits apply. A 12 month waiting period before one can claim insurance can be imposed by insurers when a person is new. Also if a person has a pre-existing condition, the 12-month waiting period can be imposed.

Incentives and Penalties for Private Health Insurance in Australia

The health ministerial authority advised the Minister of Health on health reforms, which includes developing categories of insurance which are simpler like Bronze, Gold, and Silver. The changes also include improving transparency, promoting consumer choice and ensuring that insurance policies are affordable. The recommendations come as a result of consumer concerns faced in the health insurance sector.

Recently many changes have taken place including mental healthcare patients having access to cheaper premiums and easy access to treatment. Since 2010, premiums have increased. The reduction of the premium rates is the major reform which has been seen in the last 15 years. The premium for young people was also reduced by 2% for every year they are on insurance fund until they reach the age of 30. The reforms also ban rebates for natural therapies which are not proven like yoga. The recent reforms also ensure that basic cover also covers mental illnesses, which was not covered before. Also, those with policies were able to upgrade their cover.  The number of sessions or times a patient can be treated will no longer be limited by insurers. Under the rural product, traveling and accommodation will be included in the cover. The reforms also advocate for a price reduction, after 5-6% increment in the past few years. Policies will also be clearer about what is being offered. This will be regulated by the government website, where people are asked what they are looking for and how much they earn so that a suitable policy is given. With this reforms taking place, Australians remain under the risk of being discriminated based on the genetic composition, and they cannot do much about it.

National Health insurance Act requires that private insurance does not discriminate based on sex, race and health status, and instead, health insurance should be community-based. In this insurance type, the risk is calculated across the pool and shared among consumers. The Insurance Contracts Act of 1984 requires that it is made in good faith and full disclosure is required from the consumers. This embodies the special category of insurance contracts as contracts of ‘utmost good faith’. The Insurance Contract Act under section 21 requires that the person being insured all information known to them or the information they ought to know. The Act under section 22 also requires that the insurer discloses in writing nature and duty of such disclosure. An applicant, however, is not supposed to disclose certain factors, such as those that diminish the risk. Non-disclosure can be used by an insurer as a defense when the applicant claims the insurance cover. By law, the insurer is also required to provide reasons when they refuse to enter into a contract with the insurer. Also, when the insurer refuses to renew a contract or cancels the contract of insurance (DeWalt et.al, 2004, p. 256).

Recent Reforms to Private Health Insurance in Australia

Insurers can refuse to give a cover based on information obtained from applicants; such information can be used to deny an applicant the insurance cover. This refusal does not cover life and disability insurance, but the legislation is relevant in their situation. Privacy Act of 1988 affects all the insurers, but it does not do much to protect applicants.  State legislation prohibits discrimination n basis of future or current disability, sometimes progressive disability. However, life insurers can be discriminated on medical conditions, this was held in Xiros v Fortis Life Insurance, after purchasing a mortgage, he linked it to the disability insurance. When he became HIV positive and ceased working, he claimed on the insurance and Fortis refused to pay as HIV positive applicants did not qualify for the cover. The applicant alleged discrimination under the DDA, but the court held that the exclusion had reasonable actuarial basis exempt under section 46 (Colombo & Tapei, 2009).

In Opinion re Elizabeth Kors and AMP Society the Queensland anti-discrimination, the tribunal was making a determination on section 228 of the Anti-discrimination Act of 1991, whether refusing insurance on the basis of a psychiatric condition was discriminatory. The court held that it was discriminatory because the insurance had the burden of proofing that relevant risks in the class were sourced from actuarial and statistical data. Failure for the insurance to proof, the court held as the evidence as insufficient to deny the applicant an insurance cover. Cases of genetic information are also likely to be judged based on a standard of medical conditions. Anti-discrimination legislation (Godwin et.al, 2011 p. 448)

Certain forms of medical exemptions should not be used, because social issues raise unique situations which require things to be addressed differently. Genetic factors of an individual reveal a lot about their family and most of the times are beyond an individual’s control. Discrimination based on the genetic makeup of an individual is unsound and is a blueprint for discrimination in future. Also, using genes is difficult because it calls for the definition of what is uncontrollable and what can be controlled. Australian insurers should be denied the right to set their conditions and terms. This will allow the economic-mutual benefit to everyone. There should be equal premium, and people should not be disadvantaged based on their genetic make (Beta, 2016, p.126).

Conclusion

With this in mind, exceptions based on genes are flawed and have no ethical justifications. There should not be any distinction between any medical risks which are uncontrollable and sensitive. Insurers should also use risk factors with relevance actuarial data which can be demonstrated. The policies should also focus on the general good for all as the egalitarians suggest. After all, it’s very ironic that many people cannot access insurance yet they are the ones that suffer the most. Therefore, reducing the premium is a social good which is desirable and essential.

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