Life insurers should not dictate who receives mental health treatment

National law firm Slater and Gordon is warning Australia that allowing life insurers to fund mental health treatment is not a solution to the nation’s growing mental health crisis and many people would still be left without rehabilitation.

Slater and Gordon State Practice Group Leader Sarah Snowden said allowing life insurers to dictate and deliver treatments instead of paying disability income and lump sums would not prevent people falling through the cracks in the system, or help insurers better manage the increase in mental health TPD and income protection claims due to COVID-19.

“Insurers aim to maximise profits. If a person’s claim is only worth $1000 per month and the cost of treatment is comparable to the benefit being paid, it will not be profitable for insurers to rehabilitate the person. It is likely they would only agree to assisting people with treatment when it is financially beneficial for them to do so. This is an unresolvable conflict of interest for insurers to be making decisions about rehabilitation and treatment.

“There are still insurers that don’t comply with the FSC Life Insurance Code of Practice now. While there has been some improvement recently, there is still a long way to go to in terms of code compliance, especially around delays in making decisions to accept and pay claims. So, I have serious concerns about how this would be regulated.”

Ms Snowden said the life insurance industry was trying to re-invent what was proposed in 2018 before the Parliamentary Joint Committee on Corporations and Financial Services decided the proposal would have poor outcomes.

“This is not a new idea. The committee ultimately decided the proposal raised serious concerns that far outweighed any positives. The proposal was supposed to fill the gap in mental health services between Medicare and private health cover. There were some real concerns about how it would administered and how they would govern who would be treated and who would not receive treatment,” she said.

“The underlying concerns raised in 2018 have not changed and the industry is only reacting to the current COVID crisis. In reality, people would not be paid until they had received the treatment prescribed by the life insurer. There is a very good reason that the Health Insurance Act prohibits life insurers from dabbling in the provision of health services. It also raises serious questions around ethics and impartiality in circumstances where claims are rejected and disputed. It puts the claimant in a position of disproportionate disadvantage.

“These are often people who have been paying premiums for years and they are entitled to receive their benefits when they have a genuine claim that should be accepted. Having insurers funding treatment for mental health conditions would set a very dangerous precedent. It is a very slippery slope from there into prescribing appropriate treatment for claimants with other medical conditions where a ‘high’ portion of the claims are made.”

Ms Snowden said people were right to be sceptical about the industry saying it could not afford to accept increased TPD and income protection claims, and the proposal allowing people to be better supported.

“Insurers already make it as difficult as possible for people to have their claims accepted. The definitions are tough and the eligibility criteria in many policies already knock out a lot of workers if they are casual or in a hazardous occupation, often paying for a product they were never going to be eligible for,” she said.

“Then there are delay tactics in the hope that people will just give up or apply for Centrelink. This renewed push is a totally inappropriate interference with treating doctors in order to pressure workers back to work or to otherwise minimise costs.”

Ms Snowden said Superannuation, Financial Services and Financial Technology Assistant Minister Jane Hume’s comments that people with mental health issues could not be trusted with lump sum payments and would be tempted to gamble away the payment were “offensive and demoralising”.

“Many people who have developed a mental health condition and made a life insurance claim have families, mortgages and debt like anyone and should have the ability to choose where their benefit is spent,” she said.

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