Health Insurance in Australia: A Sustainable Future?

Health Actuary Ignatius Li discusses risks to the sustainability of Australia’s private health care system, ahead of the Institute’s inaugural Future of Health Seminar.

What trends are impacting your work as an actuary in the health sector?

Health actuaries interface with different parts of the health sector every day, seeing trends through the lens of various stakeholders and problems. They work in a variety of capacities, from “traditional” actuarial work to “greener” fields such as designing population health strategies. The following list is certainly not exhaustive but describes some of the trends I am currently observing:

  • Increasing health data – the increasing proliferation of wearables opens up the options for how health providers interact with patients, how individual’s health is monitored and how health payers can incentivise healthy behaviour.
  • Rise of consumer driven health care – individuals will increasingly demand and get tailored personalised medicine, aided by better capture of their individual data.  How should this best be funded and delivered?
  • Dealing with chronic disease – as medical advances keep us alive for longer, we are also witnessing increasing prevalence of chronic conditions.  How can chronic disease management programs be made more effective and targeted?  How do you reconcile and recognise the long term benefits against the short term costs and what is the best method of delivery?

What risks are there to the sustainability of our Private Healthcare system?

The issue of sustainability is ultimately about keeping health costs down while simultaneously delivering more and or better quality health services to patients. As health actuaries are all too aware, there is a major public conversation taking place around the value proposition of health insurance. All too often, the public perception is shaped by a focus on the rise of insurance premiums, without much discussion (if any) around the underlying drivers of premium increases.

Therefore, there are a number of risks to the sustainability of the system. Some risks go to the fundamental issues around provider costs that drive medical bills higher each year. Some go to the public perception of health insurance, and may ultimately be about how to better align the product offering with expectations, and in my opinion, making the transition from being purely a health payer to being a partner in their member’s health. 

What challenges are facing consumers?

Affordability is a major challenge. As premiums have recently increased at a faster rate than wages and general inflation, consumers are responding by downgrading or dropping private health cover altogether.

Another challenge is product complexity. The product design can be quite detailed, and exclusions and restrictions are applied on treatments that not all members fully understand. The definition of restrictions differs from insurer to insurer and is not easily understood.

I believe there are 60,000 products on offer across Australia so comparing and analysing different products is not easy and understandably stressful.

What challenges are facing government?

The government faces challenges on multiple fronts in the private health sector. Ultimately the challenge is around how to allocate the limited public purse in an efficient manner and how can government policy create the “ideal” conditions for the mix of public and private providers to meet consumers’ health needs.

By definition, some of these challenges are structural and will require a long term solution.  Others are more immediate and fall into the basket of potential “quick wins” although they also have implications for the long term policy direction.

At the Future of Health Seminar (FOHS), I expect that we will hear opinions from our speakers on how the government can help steer the sector, either through policy changes and or through their approach to funding.  Some of the specific challenges for government that I think will be relevant for the conference include:

  • enabling greater innovation to help health insurers transition from being just health payers to partners in health;
  • helping address the public perception and consumer frustration with private health insurance;
  • enabling the data revolution, whether that is greater take up of electronic health records, through to better data being made available to encourage greater competition and transparency by health providers; and
  • enabling creative solutions that address the impact of an ageing population

How are actuarial skills assisting in this space?

Actuaries bring a long term perspective to problem solving. In addition, we are skilled in forming solutions from a principles based approach while still grasping the commercial and practical challenges that are attendant. 

These skills are supported by our collective understanding of the health system and its interactions, which we reflect in our approach to modelling and thinking through the risks.

Ultimately, we always aim to bring a view that is informed and arrived at from analysis and reasoning. We can enrich the public discussion by providing an objective voice.

Why is the Future of Health Seminar an important conference at the present time?

Just prior to going into caretaker government mode, there were no less than six government inquiries into the health sector. Health actuaries are all actively focussed on the issues touched by these inquiries.

The health system is complex. As health actuaries, first and foremost we are drawn to work in this sector because we are interested and care deeply about the way health care is financed. It is therefore important that we contribute to the public discussion about the future of the health system. 

This conference is a great opportunity for actuaries to share their differing perspectives and unique experiences and to take learnings from outside our profession

What unique insights will some of the Plenary speakers share?

We are very fortunate to have such a fantastic line up of speakers! The organising committee has worked hard to develop a great programme. Each speaker will bring unique insights based on their research, and direct industry experience. Here is a sample of their experience:

  • leading a variety of government enquiries including into health insurance;
  • developing health care programs;
  • researching chronic disease management;
  • contracting and relations between health funds and private hospitals;
  • health system modelling for government;
  • appointed Actuary of a major health insurer; and
  • design and execution of health fund strategy

Find out more about the conference and register here.

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