Private Health Insurance changes

The Private Health Insurance Legislation Amendment Bill 2018 (CTH) has been passed by the House of Representatives and is currently in the Senate.

The Senate Community Affairs Legislation Committee has recommended that the Bill be passed.

UPDATE: The Bill was passed by both Houses on 11 September 2018. Royal Assent was given on 21 September 2018.

The Bill is part of a larger package of changes to private health insurance options announced in 2017 and proposes to enable private health insurers to have more flexibility in offering hospital and treatment cover products including by using age-based discounts.

One of the key features of private health insurance in Australia is that, unlike other forms of insurance, it is not risk rated. Instead, it uses community rating, which requires that private health insurers offer policies in the same jurisdiction at the same price irrespective of an individual’s risk factors such as age, health status, previous claiming history or how frequently they need health care. Private health insurers participate in a risk equalisation scheme which partially compensates insurers with a riskier membership profile.

The Government blames the decline in membership on the increasing cost to consumers of taking out private health insurance and consumer confusion over product offerings.

There are concerns that unless this decline in membership is arrested it will have a negative impact on the viability of private health insurance (as fewer people are insured premiums will need to rise to cover the cost of those making claims; it is feared that higher premiums would drive further declines in membership), and on public hospital waiting times.

What the Bill covers

The Bill will:

  • increase the maximum voluntary excess permitted in a complying private health insurance policy that provides hospital cover, from $500 to $750 in any 12 month period for a policy that covers an individual and from $1000 to a maximum voluntary excess of $1500 for any other policy;
  • permit private health insurers to offer discounted premiums to consumers aged 18–29. It amends the Private Health Insurance Act 2007 and the Age Discrimination Act 2004 to allow age-based discounts for hospital cover from 1 April 2019. It will not be mandatory for insurers to offer discounted products;
  • remove benefit limitation periods in private health insurance policies, including limitations on psychiatric treatment after 31 March 2018;
  • provide that the principles and requirements of community rating do not prevent an insurer from assessing a person’s entitlement for travel or accommodation benefits based on the distance between the person’s place of residence and place of treatment. These amendments will allow insurers from 1 April 2019 to offer travel and accommodation benefits under hospital treatment cover. Currently, insurers can only offer travel and accommodation benefits under general treatment policies. It will not be mandatory for private health insurers to offer travel and accommodation benefits under either hospital or general treatment products;
  • allow private health insurers to close private health insurance policies, including policies that consumers currently hold;
  • remove the use of benefit limitation periods in private health insurance policies.

Other changes
Other proposed reforms, such as the creation of gold/silver/bronze/basic categories, removal of natural therapies and standard clinical definitions are yet to be finalised and are likely to be enacted through legislative instruments. Some reforms have already been enacted. The removal of the two month waiting period for mental health treatment has been enacted through a legislative instrument, while the cost of implanted medical devices (prostheses) has been lowered under an agreement with the medical devices industry.

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