The head of the Australian Medical Association (AMA) has said that "junk" health insurance policies are a problem for policyholders and dismissed as myths the idea that out-of-pocket medical costs are the cause of discontent among consumers with their health insurance and that medical expenses are the cause of increased premiums.
AMA President Dr Michael Gannon, speaking yesterday at the Senate Community Affairs Reference Committee Inquiry, said that the problem facing consumers is that they believe they are covered by health insurance, but have inadvertently purchased a product that is, unfortunately, useless. He asked: “If a policy does nothing more than avoid the tax penalty, how is it not a ‘junk policy’?”
He said that out-of-pocket costs are not growing. The proportion of health expenditure funded by individuals has remained relatively static at 17% over the decade to 2015-16. He also said that medical expenses are a small proportion of total benefit outlays for private health insurers. Medical expenses, as a proportion of benefits, have remained static at around 16% since 2007.
Questions about health insurers' admin expenses
Instead, Dr Gannon pointed out: “Administration expenditure by private health insurers is around 10%. So, it is costing insurers almost as much to run their business as it is to pay for the doctors who treat their customers. I would ask that this inquiry investigate the reasons why.”
He also questioned the role of the private health insurer. He said: “From our perspective, it is a payer for medical services.”
He noted that private health insurers are focused on minimising their expenditure, and said that they are creating barriers for patients accessing care.
The insurers are trying to convince the government that they can reduce health expenditure through controlling what services are provided or, as they would put it, reducing low value care.
“The AMA does not support low value care. However, we do not believe that the insurers should decide what procedures should be funded. Insurers should not decide what care is appropriate, or interfere with the relationship between the patient and the doctor,” asserted Dr Gannon.
He said that health insurers need to improve their offerings. Insurance products should be easy to understand, payments should be made on clinical need, and the ‘de facto’ risk rating system created through products with incomprehensible exclusions and ‘carve-outs’ needs to cease.