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How is Australia's private health insurance industry improving financial sustainability?

8 November 2016 - 9:30am

On October 19, the Federal Government released a statement about the incorrect pricing of medical devices to private Australian patients. This correction is being touted as a major step toward a sustainable private health insurance industry, according to an October 19 media release from Private Healthcare Australia (PHA).

While private healthcare premiums have been increasing, it's putting pressure on individuals and businesses trying to keep up with payments. As premiums increase, it's important to regularly compare health insurance - HICA is your one-stop shop for helping with that.

Aside from increasing premiums, however, what else is the government planning to change?

Have you been paying too much for medical devices?

The CEO of the PHA Dr Rachel David suggests that insurance premiums have been increasing at around 10 per cent per year, causing the issue of affordability in the market to come to the fore.

"Premium affordability is a major issue for health fund members."

"Consumer market research consistently shows that while more than 80 per cent of people are satisfied with their private health insurance and want to keep it, premium affordability is a major issue for health fund members," she said.

"Forcing health funds to pay a fixed, inflated benefit for medical devices causes upward pressure on premiums that has been compounding at 9 to 12 per cent per year. The Minister's decision to reduce benefits in line with actual market prices is an indication the government is committed to keeping private health affordable."

For consumers that are concerned with current affordability levels, a solution would be to consider the options in the health insurance landscape. The industry in Australia is worth $23 billion in annual revenue, according to IBISWorld. It has been increasing in overall market size by 6.5 per cent per year since 2011 as well, so it's clearly a burgeoning market. A mere 33 businesses make up the entire industry, employing over 12,000 people. There's a choice for your private health insurance that's better than your current plan out there - you just have to talk to the right insurance brokerage.

IBISWorld also reports that the insurance brokerage industry in Australia is worth $12 billion in annual revenue. If you believe your private health insurance plan is not up to standard, or is unaffordable, HICA is the place to go.

Who will benefit from these governmental changes?

According to Dr David, people with private health insurance are not necessarily in a stable financial position.

For help keeping your finances stable, talk to HICA about finding an affordable private health plan.For help keeping your finances stable, talk to HICA about finding an affordable private health plan.

"Consumers will be the big winners from this decision. Health funds have guaranteed every cent saved will be passed on to consumers in future premium rounds, significantly reducing the price people would otherwise have paid. Australians with PHI are far from wealthy, half of them have a disposable income of $50,000 per year or less."

With the price hikes in premiums in recent years, it's vital that policies are put in place that provide negative pressure on the consumers. This will help to encourage people to have a policy, and as affordability levels increase, it could become the norm to have private health insurance. That would boost the industry no end.

"The timing of the government's decision is crucial," said Dr David.

It could become the norm to have private health insurance.

"For the first time in 15 years, the number of Australians with private hospital cover has gone backwards, putting additional pressure on already-stressed public hospitals."

This would be detrimental to the wellbeing of the average Australian, so affordability must be made a priority - for the government and the consumer. This is the only way it can be sustainable in the long run.

"Keeping private health insurance sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system," concluded Dr David.

For help making the right choices with your private health insurance, and for the most affordable policies, get in touch with HICA today.