25 June 2018

Transparency in Health Insurance

The Australian Competition and Consumer Commission's latest report on competition and consumer issues in the private health insurance industry (covering 1 July 2016 to 30 June 2017) highlights the need to improve transparency in that sector.

The report was released amid controversy over HealthEngine's provision to law firms of referrals, ie alerting what one colleague dourly characterises as 'ambulance chasers' of potential litigation opportunities on the basis of patients seeking medical consultations, and controversy about the marketing practice of leading firms.

The ACCC states
This report analyses key competition and consumer developments and trends in the private health insurance industry during the reporting period that have affected consumers’ health cover and out-of-pocket expenses.
A major focus in recent reports has been on whether health insurers and other participants’ practices may be affecting the ability of consumers to make informed decisions when purchasing and comparing private health insurance, or accessing particular products or services under their existing policies.
Consumers remain concerned about the affordability of private health insurance
The affordability of private health insurance continues to be an area of significant consumer concern. A consumer survey conducted in 2016–17 found that the affordability of private health insurance is the second biggest cost of living concern for Australian households, after electricity prices.
Premium increases have been greater than inflation and wage growth in recent years. In response to higher prices, consumers are switching to more affordable policies with greater exclusions and restrictions. In response to higher prices, some consumers appear to be exiting the private health insurance market. There was a small reduction in the proportion of Australians holding private health insurance during 2016–17.
Consumer complaints continue to rise
In 2016–17, complaints about private health insurance to the Private Health Insurance Ombudsman (PHIO) increased by 30 per cent, continuing a trend of increasing complaints which have risen for the fourth consecutive year.
The PHIO reported that 88 per cent of complaints in 2016–17 were about health insurers. The benefits paid by insurers to consumers continued to receive the highest level of complaints— over 30 per cent of total complaints—the main issue of concern being hospital policies with unexpected exclusions and restrictions.
The ACCC continues to pursue enforcement activity in the health sector
Private health insurers and other health industry participants have been the subject of a number of recent ACCC enforcement matters. These include ACCC actions and investigations in relation to NIB, Australian Unity, and Ramsay Health Care Australia. The ACCC has also granted authorisation to health insurer HCF and participating dentists to agree on a maximum price for some dental services, and is awaiting the outcome of an appeal against Medibank. ...
The observations in this report are made in the context of ongoing government consideration of a series of reforms to the sector, with the aim of making private health insurance simpler and more affordable. Many of the consumer issues identified by the ACCC, including in previous private health insurance reports, are under active consideration. The ACCC welcomes the reforms announced by the Australian Government in October 2017 to the private health insurance industry and recommends that competition and consumer law principles be considered as part of the implementation of these reforms.
The ACCC has previously identified that there are continuing challenges in how information is provided to consumers of private health insurance. The ACCC has found that the existing standard information statement—a broad summary of key policy features all health insurers are required to provide to consumers—does not provide sufficient information for consumers to understand the key benefits and limitations of their policies.
The Australian Government has announced that the standard information statement will be replaced with a new minimum data set. The ACCC recognises this significant reform and considers it to be important that the new minimum data set is effective in informing consumers about their private health insurance policies and of changes to the benefits available under those policies. The ACCC considers that the new minimum data set should:
  • provide consumers with more reliable and transparent information in relation to the extent of each policy’s coverage 
  • provide consumers with sufficient information to make informed choices when comparing and selecting policies 
  • enable consumers to understand the extent of their financial exposure to additional health costs 
  • include clear and prominent disclosures with respect to applicable out-of-pocket costs in hospital for all items listed.
The ACCC also considers that private health insurers are capable of providing consumers with significantly more detail on their gap arrangements. The new minimum data set should include a clear description of the gap arrangements for each insurer. The proper disclosure of an insurer’s gap arrangements is fundamental to providing consumers with an informed choice when selecting a policy, as gap arrangements may be a key differentiating factor when comparing hospital insurance policies.
The ACCC will closely monitor developments relating to these and other policy processes and consider the competition and consumer aspects of any reforms.
One thought is that HealthEngine must improve the transparency of its information provision to ensure meaningful consent. Inadequate self-regulation justifies state intervention. Further, health practitioners should strongly dissociate themselves from inadequate disclosure of such sharing.