Private health insurance industry in a ‘death spiral’

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At the same time as the head of one of Australia’s biggest health insurers has called on the Government to abolish Medicare and make private health insurance compulsory, a Grattan Institute report claims the private health insurance industry is in a death spiral.

Mark Fitzgibbon, managing director of NIB, says that forcing people to take out private health cover would solve an impending funding crisis in the public and private sectors.

Under his proposal, the Government would cover costs for those unable to afford private cover, thus continuing Australia’s universal healthcare, but funds would get an influx of healthy members to effectively balance the books.

“We love this word Medicare, it’s like Bambi,” Mr Fitzgibbon told Fairfax Media. “I don’t want to be seen as the one who wants to shoot Bambi, but I think there’s a better way of delivering universal healthcare which is more efficient and fairer.”

He argues that by effectively privatising Medicare and adding competition, the system would be more efficient. He said several European countries had similar systems and envisaged that private insurance would become mandatory within 20 years.

However, Stephen Duckett, health program director at think tank the Grattan Institute, believes privatisation is on the nose with the general public in the wake of similar moves in the gas and electricity sectors.

“It’s inevitable that government will have to make tough decisions about whether more subsidies are the answer to the impending crisis,” he said.

“Governments have failed to clearly define the role of private health insurance since Medicare was introduced in the 1980s. The upshot is we have a muddled healthcare system that is riddled with inconsistencies and perverse incentives.”

Premiums are rising faster than wages or inflation and the young and healthy are dropping their cover. As a result, those who are left are more likely to require medical services and are driving insurance costs up further.

Meanwhile, taxpayers subside the industry to the tune of about $9 billion every year – $6 billion for the private health insurance rebate, and $3 billion on private medical services for inpatients, Mr Duckett said.

Goldman Sachs analyst Ashley Dalziell says in a research note that revenue trends for health insurers would “remain tough”.

He reports that member numbers fell 0.5 per cent in the year to March and the proportion of the population with private health cover slid 10 basis points to 44.5 per cent. That was driven in particular by people in their 20s, who now have the lowest insurance participation rate since 2005.

“We expect that on stable levels of claims inflation, it will be very hard for the health insurers to maintain their gross margins off the 2019 rate increase,” he said.

“Recent reform measures are having little positive impact, policyholder/mix pressures remain unchanged, and we expect the near term rate increases will be kept [below] three per cent.”

YourLifeChoices members told us in our most recent completed Retirement Matters survey that 69 per cent of the almost 5000 respondents had private health cover and 81.5 per cent hoped to maintain their cover for life. Of those without cover, 73.3 per cent said they were once insured.

Do the struggles in the healthcare sector concern you? Are you confident you will be able to hang on to your cover?

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Written by Janelle Ward

138 Comments

Total Comments: 138
  1. 0
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    Profits, Profits is All This Mob are concern with/ I Don’t Care instead of Medicare.
    To sadly Quote Shame, Shame.
    {-(0)

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      Of course Chris. That’s what business wants. The real concern is that we have a business owned and directed government which is conflicted. We saw the other day that it refused to investigate a story of significant corruption between government ministers and Crown Casino.
      The big worry with the current government is that the call to force people with even two razoos to rub together to take out health insurance is all about money for rich health insurers. Its the next shot over the bow to kill of Medicare and turn Australia into a system similar to America.
      We have a universal health system. The crooks want us to not only pay (high) taxes but then savage us in all areas of life. All well and good for multi millionaires but a further attack on many others. And you thought Labor’s franking credits changes were life shattering!

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      Whoa back there MICK, telling half the story to suit your ideology is akin to lying. Yes, the government refused to investigate an accusation of significant corruption and it is also true that the opposition crossed the floor to vote with the government. The only ones who voted for the inquiry were the cross benches, five in all.

      The government hasn’t called for forcing people to take out health insurance as your post intimates. It’s the brother of Labor frontbencher Joel Fitzgibbon who is calling for the death of Medicare and government to pay for those who can’t afford it.

    • 0
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      Always plugging for your side OM.
      The government left the chamber so it did not have to vote against the bill. Labor did the same. It is what it is! Both sides sold us out for electoral funding.
      Labor would NEVER, I repeat never, call for Medicare to only be accessible to pensioners. That would see it cease to exist as a party.
      NIB CEO Fitzgibbon’s salary increases depend on Australians staying in private health care. His interest is his bank account. The government’s interest is the systematic plundering of working Australians. That should be obvious to all but rusted ons and trolls as the track record and intent never changes……’We can’t afford Newstart increases’ but we can afford $189 billion in tax cuts for the already rich???? Don’t get me started mate.

    • 0
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      Mick
      Franking Credits were another issue.
      Like I said, One Only Has To Rearrange There Financial Affairs.
      I no longer Have To Worry About Franking Credits Any more.
      I don’t Trust either Government, Opposition or Cross Bench.
      I haven’t Had Private Insurance For Over 40 years.
      The longest that I had to wait for Operations/Surgery is a month.
      I’ve waited longer to have a consultation.
      Medicare as is Has Severed Me Well.
      Just the Hospitals/Staff other than orderlies has Been An Issue.Glad to get out alive without any Extra Problems.”LUCKY”
      The Public and Private Hospitals Have Major Problems, Best To Stay Away If At All Possible.
      I’ve Been in 2 Different States with 3 different Cancers, once Private and Twice Public.
      Slightly Better Than Nursing Homes in my observation.

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      I can’t fault you on that Chris. Pretty well agree on most things.
      We’ve been very lucky to mostly avoid the hospital system but are getting to the stage where something is bound to go wrong despite a healthy lifestyle.
      So who you going to vote for? Greens? I have to admit that despite the contempt I’ve had for the Greens De Natalie has pretty well hit the nail on the head for the past 12 months. Called government AND Labor out earlier in the week with Crown Casino. Called politics in Canberra CORRUPT. As much as I hate the thought of voting for the Hanson Young nightmare perhaps its time to go down this road to shake out the bastards who never do the right thing and sell us all out all of the time. The latest ‘leak’ about forcing some of us into private health insurance has pretty well done it for me….but I did warn readers about voting LNP. Sadly many on this site went for their franking credits and now have to pay the piper. They’ll wish they hadn’t in a few years. We live in interesting times.

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      got sad news for your mick we conservatives are strong and united and are on track to ensure another ScoMo government – granted a long tie to next election but things are looking promising. We the conservatives (coalition) have won 8 of the 9 elections since 1993 and I include the 2010 as a win as won more seats and votes but only lost out to Windsor and Oakshotte who were unceremoniously thrown 3 years later- good riddance. The fact is that generally there are more conservative voters than labor or progressive ( for me read regressive) voters. Long may it remain so.

  2. 0
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    Of course he does. He’s in the insurance business . Insurance salesmen always want a crisis to frighten people into giving them money.

    Far better to admit the Private Health Insurance Industry has failed and just put an end to it altogether.

    Put the money wasted on privatised health into public health, increase the medicare levy by 2%, end all private insurance rebates and if rich people want to pay for private health they can. the rest can use a more efficient and cheaper public system.

    • 0
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      I like this idea Rae

    • 0
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      I too would prefer to pay more tax or more medicare levy and do away with the private health system. The present system is inequitable and even if you do pay health insurance you need additional savings in order to be able to cover the gap. The british fund a proper health system available to all regardless of income so why cant we?

    • 0
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      Seconded. Pay more into the Medicare contribution and get rid of the expensive corporate private insurance.

    • 0
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      Good on you Rae. Was just about to say the same thing.
      Let the private funds collapse then we will be all on the same level.
      May have to pay a bit more tax to support Medicare but no where near as much as the private premiums.
      Best outcome for all. Why should the government- that is we – pay for the excessive salaries and profits of the private funds?

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      Totally agree with Rae and the others. Increase the Medicare Levy and scrap private health insurance. For me personally I pay half the Medicare levy of 1% of taxable income (I have a DVA Gold Card so am exempt but have to pay half levy for my wife) and then 3.5% of total income for private health insurance (single rate for my wife only). If the Medicare levy went up to around 5% I would be better off overall, and have no ‘out of pocket’ expenses if my wife did have to go to hospital, touch wood.

    • 0
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      Also it would be interesting to know what percentage of the insurance and medical fees and gaps we pay go to the shareholders of the private hospital.

    • 0
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      Agree with all of you.

    • 0
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      Lets not blame the insurance industry for the all woes, my wife had to have a bowel cancer treatment/operation in a private Cairns hospital, for 3 days a notice above her bed read “no food, no liquids ice blocks only”, on being discharged we noticed the daily charges were identical except for the consumables, bandages, safety pins plaster etc, when we queried the daily rate as 4 out of the 9 days she was not fed we were told we always charge the same daily bed rate no matter the treatment or after care, which included a daily bottle of wine!, the shared room rate was more expensive a room at the local Hilton hotel, I do not begrudge the surgical staff the high fees but I think the hospital is onto a good thing,being able charge for some thing they they do not provide or if not a wine lover the patient wants, as we were working overseas and were on holiday in Cairns when she fell ill we paid for the procedures and hospital fees. but a look at the hospital charges is the main reason for the health fund crisis.

    • 0
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      I agree, Rae. These CEOs just want more money. They do not care about other people at all.

    • 0
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      ‘put an end to it altogether and then ‘if the rich want it they get it’… if it doesn’t exist, how do they get it, and why would they want to?

    • 0
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      People have the right to choose for a start. Getting rid of private health funds would not solve this. The money would not be put into the hospitals it would be railroaded like every other thing the government is supposed to cover. Some funds are better than others as well, so choose wisely. By pulling out of those funds makes it harder for those that stay in who include many poorer people on pensions and low incomes. Also, wealthy people using the public hospitals gum up the waiting lists. If you are able to contribute to the public system you should do so. Means test the public system and average people pay something and the super wealthy pay the total cost. It is actually cheaper for one of our sons to have private cover than pay the levy so should be one or the other except for people with no means of support or very low or homeless, etc. If pensioners can pay for private cover then others need to contribute.

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    I also can’t see myself continuing to pay health insurance if the premium rises outstrip the CPI year after year. I’ve paid in for decades without using the services and it’s becoming unaffordable quite quickly. Better perhaps to save and deal with the doctors or use the public system in an emergency.

    Paying for excessive doctor profits as well as insurance company profits is fast making the system unaffordable for all but working high income earners.

  4. 0
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    Even increases of 3% are not sustainable in a less than 1% inflation world. Increases have been as high as 8% a year. It’s no wander people are cancelling insurances. It’s just not affordable anymore.
    I expect Health Funds will start failing and going into receivership leaving members in the lurch. That consequence is easily seen coming.

    • 0
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      nobody is asking the question as to what price would younger age groups choose to opt-in? Lowering the premiums might entice enough new members to ensure continuing viability rather than resorting to increased premiums for fewer members.

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      Why you’d want to waste money on insurance executives and shareholders when the finds could be directed to health care never made any sense to me.

      An insurance company is not going to fix any health issue ever.

    • 0
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      You’ve got that right, Rae.

  5. 0
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    And this man is the brother of Joel fitzgibbon, ALP shadow minister. I wonder where he stands on this issue

    • 0
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      Wherever the money tree casts its shade for him ….

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      Brothers must be working on the same side…..i.e. to help Private Companies increase profits at the expense of customers, increase bonuses for the CEOs, and ensure new employment for these politicians when they retire to add on to their politician perks. Why would anyone think Labor (without “u” / you in it) be any different? After all, Labor was the party (think Keating) who destroyed local industries, and Americanised the Australian business environment.

    • 0
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      George is right, “Brothers must be working on the same side” … just ask Peter and Tim Costello

  6. 0
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    Well, case in point, a woman finding herself with hyperthyroidism when never being sick and now facing removal of her thyroid, with no private cover. She contacts the surgeon who also goes to public hospitals and the response from the receptionist is we will contact you if he has an appointment for you. I recall that same response a few years back and never heard back. So, lesson, keep your private cover, economise elsewhere first!

    • 0
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      On the other hand, a friend with breast cancer had a mastectomy just after diagnosis the best treatment including chemo and radiotherapy all free in the Public System. Great for life threatening emergencies, so people shouldn’t panic in that regard. I had hyperthyroidism 12 years ago, was told it would need removal, but it righted itself. Glad I took time to reflect. Good ever since. We have private cover but I’m still in two minds. The premiums are one thing, it it’s the gap fees which are a major concern

    • 0
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      Sundays – agree. the Gap fees are what is killing the Private Health Insurance. And that is down to greedy doctors and surgeons.
      I reluctantly have Private Health Insurance. Only on a pension, have cut down cover, increased excess, changed funds. But eventually will come crunch time and I will have to leave due to increasing cost, and decreasing cover.

    • 0
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      That is just greed and blackmail. If there was no private insurance system and the surgeon was employed by the State it would be entirely different. You’d just join the queue and we’d have a lot more surgeons and a far less expensive operation.

      Keeping the cover while you can is sensible but what happens when the Fund collapses as mote and more people simply can’t afford to economise anywhere else.

      How much is too much?

    • 0
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      Sundays, you were lucky. She is not responding to treatment and hers is a bad case.
      Her symptoms are extreme. She has a nodule that is lit up.
      We only have dental extras at the moment so we need to save for glasses down the track.
      Saying people can save up though assumes they can afford to do so. Many are living fortnight to fortnight. The payment for private cover is automatic so saves worry mainly and you go with coffees out and restaurants etc. however, some are doing that already anyway and still are poor.
      My sister had free treatment for a stroke but still did not drop her private cover. It is about peace of mind I guess. You have to choose a good one and choose your doctors and hospitals as well.
      We would probably drop a meal a day rather than drop our cover and many others agree including my sister as we know too many without any cover and the consequences.

    • 0
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      Correction: go without having coffees out and restaurant eating etc.

    • 0
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      Case in point?? A few years back I was diagnosed with a kidney problem. GP sent me for a scan in the morning, called me back later in the day when he got the results. While I was in his consulting room he rang a Urologist and explained the situation. The Urologist said he was ringing the public hospital straight away and for me to attend there ASAP. I went home packed a bag and presented at the hospital. After the usual admission procedure I was admitted and the Urologist operated later that evening to to insert a stent. Two weeks later I had the kidney removed. Having been forced to take retirement I couldn’t afford private health cover. The proof is there, if you have a serious health issue, hospital treatment is still provided regardless of the fact you don’t have private health insurance PLUS it doesn’t cost you for all the extras like anaesthetists.

    • 0
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      Thank you, Paddington, for your reminder that the medical ‘profession’ in many instances need to be controlled more and brought under proper scrutiny for their selfish practices. Just screaming out for regulation with that kind of abuse of sick people.

      Nationalise the lot – they can always go on strike and see how long they last without the income.

    • 0
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      Bloody doctor’s union – standover Union thugs at work…

    • 0
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      I would not be without my health cover. Have had several operations. Only concern has been the gap which I save for I prefer to see the same specialists due to a variety of different health concerns. Going through the public hospital does not guarantee that you will see the one you have to treat you. In Sa there is a long waiting lists for people who need hip operations.Private health cover is good for elective surgery. People need to be reminded that if you have a heart attack or stroke you will be treated accordingly at a public hospital that has the facilities to treat you. They government must make health insurance affordable.

    • 0
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      I would not be without my health cover. Have had several operations. Only concern has been the gap which I save for I prefer to see the same specialists due to a variety of different health concerns. Going through the public hospital does not guarantee that you will see the one you have to treat you. In Sa there is a long waiting lists for people who need hip operations.Private health cover is good for elective surgery. People need to be reminded that if you have a heart attack or stroke you will be treated accordingly at a public hospital that has the facilities to treat you. They government must make health insurance affordable.

    • 0
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      That is a good point TREBOR the AMA is a union and the same rules should apply. If they refuse to treat public patients is that a strike?

    • 0
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      I’m fuming because a lady I know was just last minute told her brain tumour op was postponed to suit the quack and his bank balance, costing her travel and accommodation costs for nothing done.

      Nationalise the bloody lot of them and put them on salary.

      I notice on another forum not much of the boot going in over the current hospitals ancillary staff strike in NSW over safety concerns…. nurses, ambos, cops, and firies are all saints in the public eye – yet each such group is highly Unionised, and never criticised for strike action.

      Bizarre lack of reasoning by the herd out there at times… it seems that you can only be a Union ‘thug’ if you are a blue collar worker, so those big hairy beasts are so frightening for poor little managers who hold all the whips to deal with… **rolls eyes** while the saints are never to be criticised.

    • 0
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      The difference between a Union thug and a heroic Unionist is a class issue… in this allegedly class-less egalitarian society…

      You can take the peasant out of the prejudice field, but you can never take the prejudice field out of the peasant…

    • 0
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      Gra – note you say ‘a few years ago’. How long ago is ‘a few years’?

      Believe me, things are VERY different now. Might have had quick surgery then, but now – depending on which state – wait time is normal.

  7. 0
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    The most obvious way of preventing the ever increasing cost of private health insurance is to put an end to the ridiculous charges the medical profession hit us with.
    They have got away with murder for years because no one has the guts to take them on.

  8. 0
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    At the of 54 I decided to join the Private Health Ins. As I had been on and off the Ins. They had come up with an absence of around 1000 or so days. So I had to pay an extra 42% due to the absent days or days without cover. I did this for Seven years and because my circumstances changed I could not afford to continue at the time, so two years ago I opted out, anyway after two years I have become able to join again and you would not believe it, I thought that I could do the other three years which would amounted to the penance of 10 years, but because of the absence, they said that I would have start again and do another 10 years at an extra 48% loading, but that is something that is so wrong, they blamed the Govt. for that so who is to blame. There is no way I can pay that much extra, I was willing to join back up, no wonder people are dropping it.

    • 0
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      Good choices – you can thank John Howard for that debacle. It just shows you which world he lives in. The land of the rich. I was in a similar situation and had to pay a lot extra because I couldn’t afford to be insured when it first came in but got worried as I got older that I might need something expensive and timely due to hereditary factors. As regards this article there probably is a better model but we are always the ones who suffer and have to end up paying more when the political parties chop and change all the time and destroy what the previous party introduced. The LNP are into supporting big business hence we have a multitude of private health insurers.

  9. 0
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    We dropped Extras a couple of years ago as it wasn’t cost effective. Have saved the premium in a seperate account just in case we get sick and there is a gap to pay. I regularly question why we pay for private hospital cover just in case when despite the highest cover (and premiums) you’re not fully covered anyway. I’d drop out too if I was in my twenties.

    • 0
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      I wish I’d started an account when I joined in my 20s. I’ve rarely used the insurance as I’ve been lucky and would have a lot of money sitting there to negotiate with doctors for elective surgery and essential is covered by Medicare anyway.

    • 0
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      You know something Rae, once you are collecting the aged pension you don’t even have the choice any more of saving up yourself and paying the doctor directly. Just imagine if we had a separate account for health cover and the money added up over the years and was substantial in order to cover any health event we may have. Centrelink would say we had too much and would cut off our pension.

  10. 0
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    We dropped Extras a couple of years ago as it wasn’t cost effective. Have saved the premium in a seperate account just in case we get sick and there is a gap to pay. I regularly question why we pay for private hospital cover just in case when despite the highest cover (and premiums) you’re not fully covered anyway. I’d drop out too if I was in my twenties.

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