The Health Insurance Challenge in Australia

Read­ing time: 4 mins

Ignatius Li of Deloitte and the Institute’s Health Prac­tice Com­mit­tee looks at some key chal­lenges fac­ing the health sec­tor, includ­ing pri­vate health insur­ance reforms, ahead of the ‘Future of Health’ Sem­i­nar in Mel­bourne next month.

What does the Seminar theme Finding the Right Balance mean?

Find­ing the right bal­ance encap­su­lates the ongo­ing chal­lenge of how to build a sus­tain­able health sys­tem.

To be in bal­ance means for exam­ple find­ing the “right” mix of fund­ing between gov­ern­ments, indi­vid­u­als, pri­vate health insur­ance and oth­er insur­ance schemes; it means find­ing the “right” bal­ance between pub­lic and pri­vate health­care providers; empow­er­ing patients to get the “right” bal­ance in terms of how and where they should be treat­ed and the vol­ume of those treat­ments.  It means for exam­ple decid­ing on the “right” mix of care that is pre­ven­ta­tive in nature ver­sus reac­tive in nature. 

We can see that a health sys­tem is in fact the sum of these choic­es that are being made all the time, whether it be by our politi­cians set­ting health pol­i­cy, the own­er of a pri­vate hos­pi­tal decid­ing on how to invest their cap­i­tal, a GP advis­ing their patient, or a pri­vate health insur­er decid­ing what ben­e­fits should be cov­ered.  Their moti­va­tions may not always be aligned, ulti­mate­ly reflect­ing a bal­ance act between for exam­ple bet­ter clin­i­cal out­comes, keep­ing health spend­ing down or increas­ing prof­its. 

When we reflect on the cur­rent bal­ance of the health sys­tem in Aus­tralia, we must ask whether we have indeed found the “right’ bal­ance and whether that bal­ance is still “right” for the future. 

 

What do you see as the key challenges facing the health sector currently?

The health sys­tem has always been the focus of intense media and com­mu­ni­ty scruti­ny.  As a con­sumer good, health care is a very per­son­al one.  It is there­fore unsur­pris­ing that health pol­i­cy seems to get more atten­tion than many oth­er pol­i­cy areas.

In Aus­tralia, the media focus does tend to be on Medicare and the pub­lic hos­pi­tal sys­tem.  How­ev­er, pri­vate health insur­ance and in par­tic­u­lar the chal­lenges of afford­abil­i­ty, con­sumer under­stand­ing and hos­pi­tal con­tract­ing have become more and more promi­nent.

Each year, the pre­mi­um increas­es being approved by the Health Min­is­ter are inevitably high­er than wage and gen­er­al infla­tion, dri­ven by fac­tors such as age­ing and med­ical advance­ments.  It is a chal­lenge for health insur­ers to explain to their cus­tomers why this occurs.  This is not helped by a per­cep­tion that the val­ue of pri­vate health insur­ance is declin­ing, which is fur­ther exac­er­bat­ed by a mis­match between what pol­i­cy­hold­ers think they are cov­ered for ver­sus what they are actu­al­ly cov­ered for.  In addi­tion, health insur­ers’ attempts to dri­ve more of a val­ue based approach to their con­tract­ing with pri­vate hos­pi­tals have met with resis­tance from var­i­ous stake­hold­er groups.

These chal­lenges are ulti­mate­ly about how to achieve as much com­mon inter­est when bal­anc­ing between com­pet­ing stake­hold­er inter­ests.  It all makes for an excit­ing sec­tor for actu­ar­ies to work in.  These chal­lenges real­ly sharp­ens our minds on what is the “right” bal­ance for the health sec­tor.

How are consumers and government responding?

For years, pri­vate health insur­ance par­tic­i­pa­tion has been grow­ing.  How­ev­er, recent expe­ri­ence has not been as strong with con­sumers drop­ping cov­er or down­grad­ing, dri­ven in parts by afford­abil­i­ty pres­sures, a declin­ing val­ue per­cep­tion and con­fu­sion about prod­uct cov­er­age.  Respond­ing to these con­sumer con­cerns, the gov­ern­ment has been look­ing into a num­ber of poten­tial reforms that seek to address these issues.  Among oth­er things, they are seek­ing to stan­dard­ise indus­try ter­mi­nol­o­gy, improve con­sumer under­stand­ing of pri­vate health insur­ance and the effec­tive­ness of prod­uct cat­e­gori­sa­tion in assist­ing with that, and the types of ben­e­fits cov­ered.

The pri­vate health insur­ance indus­try is keen­ly await­ing for news on these reforms from gov­ern­ment.  In antic­i­pa­tion of these devel­op­ments, one of our ple­nary ses­sions is ded­i­cat­ed to dis­cussing the reforms.

How are actuarial skills assisting in this space?

In this cur­rent envi­ron­ment of uncer­tain­ty, our actu­ar­i­al skills are well equipped to help pri­vate health insur­ers con­sid­er their prod­uct offer­ings, pric­ing, cap­i­tal, the strate­gic impli­ca­tions for any leg­isla­tive changes, iden­ti­fy­ing oppor­tu­ni­ties in the mar­ket, to name a few.

There are lots of mov­ing parts in the health sys­tem, with com­pet­ing inter­ests by var­i­ous stake­hold­ers.  Actu­ar­ies bring a deep under­stand­ing of these dynam­ics and in par­tic­u­lar, how to quan­ti­fy and make sense of the whole sec­tor as well as the impact on pri­vate health insur­ance. 

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

With pri­vate health insur­ance reforms cur­rent­ly under con­sid­er­a­tion, the con­fer­ence is very time­ly.  There is a role for actu­ar­ies to demon­strate the skills and knowl­edge they bring, and to have our views heard.  The sem­i­nar will bring actu­ar­ies togeth­er with finance pro­fes­sion­als and oth­ers work­ing in pri­vate health insur­ance.  It will be a use­ful oppor­tu­ni­ty to get indus­try peo­ple togeth­er and to dis­cuss on the ways for­ward.

What unique insights will some of the Plenary speakers share?

The event has been expand­ed this year to run for a full day instead of the half day last year.  With four ple­nary ses­sions, I’m expect­ing to get unique insights through­out the day.  We will start off with an out­line on the cur­rent bal­ance in the sys­tem and where the chal­lenges lie. To chal­lenge our think­ing on this, we have promi­nent health indus­try peo­ple from acad­e­mia and gov­ern­ment back­grounds.

With the help of indus­try experts and prac­ti­tion­ers, we then dive into the chal­lenges of bal­anc­ing the sys­tem.  Specif­i­cal­ly, we will have a ded­i­cat­ed ple­nary each on cus­tomer cen­tred health care and health ana­lyt­ics.  Our speak­ers will include med­ical pro­fes­sion­als and data sci­en­tists respec­tive­ly. As the pay-off for these ini­tia­tives tend to be long term, it very much fits into the sem­i­nar theme of find­ing the right bal­ance.  I’m sure our speak­ers will bring their unique angle to the chal­lenges.  

And as men­tioned ear­li­er in this arti­cle, there will be a ple­nary on the pri­vate health insur­ance reforms.  We are for­tu­nate to have a num­ber of cor­po­rate lead­ers from indus­try shar­ing their thoughts on the strate­gic out­look.

The Future of Health Sem­i­nar will be held in Mel­bourne on 8 June 2017. View the Pro­gram Snap­shot and Reg­is­ter to attend today.

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About the author

Ignatius Li

Ignatius is a Director at Deloitte Actuaries and Consultants.

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