Brent Walker, a retired health actuary with over 40 years’ experience, outlines how his recent personal experiences with the health insurance systems in Australia demonstrate a significant lack of transparency. With membership of most private health insurers declining, the system must address these transparency issues if it is to survive and prosper.
Private Health Insurance (PHI) Membership
Private health insurance (PHI) membership growth has two components. The first is getting new members in the door. Most insurers have active programs to do this even if their orientation is to get members of other insurers to transfer to them. The second, often neglected component, is to stop existing members from leaving or going to another insurer.
Overall PHI industry membership has been falling.
My recent personal experiences revealed an overall lack of transparency in the health and health insurance systems, not only for health insurers members and prospective members, but also for patients generally. This lack of transparency may be the cause of declining membership growth in private health insurance funds.
Hospitalisation – advice on benefits paid
Advice on benefits paid for each hospitalisation episode acts as a reminder to members just how valuable their health fund membership has just been. It also enables them to audit what has occurred.
One large health fund automatically advises its members of the benefits they paid for every hospitalisation. Its membership is still growing (as at December 2018).
Another insurer advises members only if the total fund benefits are more than $10,000 for the episode of hospitalisation. Its membership is also growing, but to a lesser extent.
My current health insurer is one of the majority of insurers that don’t automatically advise members of the benefits that they paid for their recent hospitalisation. It does, however, give you this information upon request.
Informed Financial Consent
I recently had cataract surgery for both eyes as a day patient. On admission for the first operation, I was presented with a large form with a cross next to where I had to sign. Understandably, I was nervous, and even wearing glasses I found it difficult to read the form because of my cataracts. After the operation, I was unable to remember how much the operation cost. Anyone who has had an operation under a general anaesthetic will know that invariably you don’t remember anything much that occurred at that time.
On the second occasion, three weeks later, I made a conscious effort to absorb the financial information yet, even though I designed our current hospital benefit structures when working as a health actuary, I did not understand the items that I was to be charged for. On this occasion, I had to put on some temporary reading glasses to read the form with my one good eye plus, the receptionist was impatient for me to sign the form, so she could then attend to the next person in the queue. Copies of the ‘informed’ financial consent forms were not provided to me.
The Ophthalmologist’s staff verbally advised me of the medical gap I had to pay but not the amount charged and payable by Medicare and my health insurer. By failing to pass this information on, the opportunity to remind me of the value and benefits of my health insurance policy was missed.
Further research on Healthshare.com.au indicated that on 99% of occasions the Ophthalmologist did not charge a gap. This was because the gap was charged on a separate bill, of which the insurer was unaware.
My Anesthetist for a recent heart operation did the same thing. His staff advised me before my operation that I would be charged an extra $100 per hour and I duly received a separate bill. This is not how informed financial consent is supposed to work.
Separate billing is contrary to the insurer-provider agreements and these extra charges don’t get included in the Medicare Safety Net arrangement, which is specifically designed to financially assist patients with multiple pathologies and chronic illnesses.
The advice provided before my cataract operations was relatively straightforward compared to when I have often been requested to sign a form authorising a public hospital to charge my health insurer for a cardioversion procedure provided by them. On one recent occasion the doctor administered Ketamine, an anaesthetic that can act as an associative hallucinogen. I had a bad psychedelic trip coming out of it and after the symptoms subsided, I was taken to a recovery ward where, immediately, a nurse asked me to sign paperwork to bill the health fund. I found it extremely difficult to even sit up let alone hold a pen and write my name!
Never once when signing a form in the recovery ward of a public hospital have I been given my glasses so that I could read the form that I was to sign. There has never been financial information on the form and once when I did ask the nurse what was going to be billed, she said she had no idea. This type of ‘informed’ financial consent is not acceptable.
Billing More to Insured Patients
An uninsured friend who had the same cataract procedures by the same Ophthalmologist just one day after I was charged less than 80% of what I was charged. Doctors may charge whatever they like to individual patients but when they increase their charge by 25% if you are insured – effectively devaluing your insurance policy by 20% – I wonder how many comprehend that over time the practice of surcharging privately insured patients will decrease the pool of privately insured patients from which they draw most of their income?
One therapy provider that I also attended recently proudly advised on its formal list of services and charges that there was a $10 surcharge to members of insurers who paid for their service via HICAPS. When I asked if I could pay the substantial balance not met by the health insurer through HICAPS in cash, I was told “no, if you are claiming the fund benefit through HICAPS then you must pay the remainder of the bill by credit card including the $10 surcharge.” This effectively reduced the fund benefit by 30%. Of course, I could still pay cash and get the reduced charge, then claim the full benefit from the fund. If every provider adopted this form of discriminatory billing and every member then lodged individual claims for benefit, then there would be no need for HICAPS and insurer expense rates would climb rapidly.
Preferred Provider Agreements
Health insurers are contracting with many ancillary providers and provider groups on a preferred provider basis. These are called a variety of names such as ‘choice networks’, ‘members first networks’, ‘members plus providers’ and so on. It seems that these contracts (particularly in the case of dentistry) may fully cover a small range of services available and partially cover other services. The practice then bills excessive amounts for other services so that the overall income of the practice is not compromised.
For example, while the health fund benefits may fully cover dental preventive treatment the dental practice can make up the income lost by charging much higher fees for restoration work and root canal therapy than other comparable practices. Do these practices charge the same amount to all patients receiving the same service? Almost certainly not because various preferred provider agreements with various insurers will have different benefits and therefore may force the provider to have a range of charges for each service. As a result providers would think that it is reasonable to bill according to what the patient can pay for partially covered services.
It is illegal for insurers to reduce benefits without advising affected members in advance. But when there is a preferred provider agreement the provider can still increase its charges for non-fully covered services without advising anyone. This has the same net effect on members as a reduction in health fund benefits. This is a loophole that should be closed.
Time for action
To make informed financial consent appropriately transparent it should always be given in writing, to be signed by the patient. A copy of the signed advice should then be given to the patient. The practice of separate billing should also cease.
Proper informed financial consent should include full financial information and should be practiced by the both the public and private sectors. It should be mandatory that patients are given a copy of everything that they have signed.
To put a stop to the practice of billing more to insured patients, preferred provider agreements should have a clause inserted that requires both parties to respect each other’s businesses. Preferred provider agreements should also have full transparency requirements for all affected parties including patients.
Greater transparency of benefits paid, and accountable provision of informed financial consent, will remind members of the value of their PHI membership and prevent membership decline. Frequent and clear communication to members will enable them to audit what has occurred and keep the benefit of their PHI membership front of mind. For hospitalisations, all insurers should automatically provide advice on benefits paid. As technology and data analytics progress, so too should the level of personalisation in this communicated information. The more personalised the advice, the more members believe their insurer cares. Widely publishing example costs and benefits to all members also helps to keep the long-term value of their cover front of mind.
These actions are necessary now to ensure fairness and sustainability in Australia’s PHI system.
 Bleeding Hearts, Profiteers, or Both: Specialist Physician Fees in an Unregulated Market, Meliyanni Johar, Chunzhou Mu, Kees Van Gool, Chun Yee Wong. https://onlinelibrary.wiley.com/doi/pdf/10.1002/hec.3317
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