The Australian Dental Association (ADA) has joined ranks with Choice, the National Rural Health Alliance and and other key groups in calling for a Productivity Commission inquiry into private health insurance.
The letter issued today to all members of parliament confirms that 70% of consumers believe that the policies they hold are poor value for money. This finding repeats concerns made on numerous occasions by the ADA that health insurance policies which provide extras cover are simply not delivering value for money for consumers, and in some cases, are disadvantaging many policyholders who want to see the practitioner of their choice.
Newly appointed ADA President, Dr Carmelo Bonanno, stated that insurers need to stop blaming health practitioners for the rising cost of policies and poor rebates.
“Our surveys show that the fees charged by dentists are not the problem. Health insurance premiums have increased at three times the rate of dental fees and nearly 2.5 times wage growth. Recent figures from the Australian Prudential Regulatory Authority’s Operations of Private Health Insurers Annual Report 2017-18 clearly demonstrate the profits that are being made by some health funds.”
The ADA’s analysis of the APRA report shows that returns for health insurers are high compared to most other companies. The industry-wide data indicates a return on equity (ROE) of 16.6% – higher than even the major banks who average around 12%.
“These returns are being driven by the big 3 ‘for-profit’ health funds with the APRA data showing returns of around 30% for Medibank Private and nib and over 60% for BUPA”, added Dr Bonanno.
Figure 1: Health fund ROE summary
Data Source: APRA Operations of Private Health Insurers Annual Report 2017-18′
The ADA is also calling on the federal government to prohibit differential rebates, a call echoed by the Senate Committee’s Inquiry into the value and affordability of private health insurance and recently by Senator Connie Bonaros in the SA Legislative Assembly. Dental rebates represent more than 50% of all rebates paid under extras policies, yet the ADA has not been invited to participate in any of the machinations around private health insurance reforms. It hopes that an independent inquiry may redress this gap.
“Private health insurance is sold as allowing consumers choice, but in reality, the current system offers differential rebates based on who provides that service, reducing choice by inserting a monetary incentive to attend a specific provider into a patient’s decision about their healthcare. If you hold an extras policy with a health fund, then you should get exactly the same rebate as anyone else who holds that policy regardless of where you live or which dentist provides the treatment.”
Dr Bonanno concluded by saying “health funds exist to do exactly what their name suggests – fund health. It’s time for them to focus on this instead of their profits.”