The fast-growing health fund just paid out its biggest claim ever. A patient receiving end of life care in an intensive care unit just cost the fund $270,000 over a few months. “That was unique,” chief executive Philip Fraser told Fairfax Media. “But utilisation across the board is rising.”
In line with other insurers CUA Health, which has 50,000 members and premium revenue of about $118 million, is facing a rise in the cost it pays hospitals and healthcare providers of “about 6.5 to 7 per cent”, he said.
“Australians are living longer and they’re using their health funds more.”
The reason for the hefty rise, which is scheduled to come in on April 1, is because of rising use of health services, increasing care costs and more expensive medical technology, the executives said. This results in what the industry describes as high claims inflation.
The rise will come after an average boost to premiums of 6.2 per cent was approved by former Health Minister Peter Dutton in 2014, and rises of between 5.1 and 5.8 per cent in the four prior years were approved by Labor ministers.
Executives have mixed views on how the rising cost of cover will impact the $19 billion industry, with some, but not all, warning affordability is becoming an issue.
But they all agree that left alone claims inflation will continue to rise.
So what is the answer?
The chief executive of listed fund nib, Mark Fitzgibbon, proposed three solutions to ease the pain: encouraging greater take-up of insurance by young people; increasing collaboration between insurers and healthcare providers; and reconsidering risk equalisation – the policy that shares the costs of the industry’s most expensive customers among all funds.
Youth
Mr Fitzgibbon said because young policyholders do not require the same level or frequency of care, they can reduce costs on a per policy basis. “The younger the insured population the lower the rate of [claims] growth,” he said. “[Insurance] depends on having a lot of good risk to support the poorer risk.”
Healthcare collaboration
Health insurers want to play a greater role in determining where and how their members are treated, as well as in preventative care. Mr Fitzgibbon said greater collaboration between insurers and health professionals is needed to “avoid unnecessary hospitalisations”.
The holy grail for insurers – and a subject which they lobby heavily on – is to collaborate with general practitioners, but by law they are prohibited from playing a role in primary health care. Mr Dutton made comments about potentially reviewing these rules, but it is unclear what path Ms Ley will take.
Risk equalisation
This scheme partially compensates health funds for the hospital costs of high risk patients. It supports “community rating”, which means funds can’t price their policies based on risks such as age and pre-existing conditions. Equalisation shares a proportion of costs for members aged 55 years and older on a sliding scale with the industry. Funds pay a share based on the size of their membership.
However Mr Fitzgibbon argued it drives up prices, discourages young people from signing up and creates little incentive for funds with an older population to behave in a way that improves their members’ health and reduces the need for care.