EMPLOYER ACTION CODE: ACT
The Australian government has enacted a series of compulsory and non-compulsory private health insurance reforms designed to simplify the system and make it more affordable for consumers. Extensive consultations preceded the reform package (consisting of three bills), which was passed by the Senate in September 2018. Some changes are now in effect, while others will be implemented in April 2019.
Private health insurance is a fundamental part of the health care system. According to the most recent statistics from the Prudential Regulation Authority, as of September 2017, 54.8% of the population had private insurance to cover medical benefits not covered by Medicare (the national health care plan). The vast majority of policies are individual or family policies due to a combination of a fringe benefit tax on companies offering the benefit and a tax levied on consumers who don’t carry private health insurance for hospitalization. Consequently, in Australia policies are usually purchased by employees rather than by companies.
One change that took effect in early 2018 includes reductions in minimum benefits payable for prosthetics (which are not covered by Medicare) resulting in lower premium increases than in previous years. Another provides a one-time option for consumers to upgrade policies for full cover for mental health treatment without a waiting period. Most reforms will take effect on April 1, 2019, and are outlined below.
All private health funds must implement the following:
- Simplification of policies will be based on a four-tiered health insurance system (gold, silver, bronze and basic) designed to make it easier for consumers to compare insurance policies and features.
- Standardized clinical definitions will have to be used when listing what is covered within hospital policies (e.g., dental surgery will be the only acceptable term to describe services that may otherwise be listed as “wisdom teeth” or “surgical removal of wisdom teeth”).
- For those with ancillary benefits coverage (“extras cover”), certain natural therapies (including Alexander Technique, homeopathy, aromatherapy, iridology, Bowen Therapy, kinesiology, buteyko, naturopathy, Feldenkrais Method, pilates, western herbalism, reflexology, rolfing, tai chi, shiatsu and yoga) will be removed from all private health insurance products.
- From July 1, 2019, first-aid courses will no longer be claimable under a health management benefit (where provided).
Private health funds can choose to implement the following:
- The introduction of voluntary age-based insurance premium discounts for people age 18 to 29 to widen the insurance pool: Individuals taking hospital cover before age 30 will be eligible for a cumulative discount of 2% for each year the policy is in effect prior to age 30, up to a maximum of 10%. The discount will remain in effect, provided coverage is maintained, until the policyholder reaches age 40. Insurers will not be required to offer such discounts, but if they do, they must be offered on the same basis to new and existing policyholders.
- An increase in the maximum annual excess levels (from 500 to 750 Australian dollars for single coverage and from 1,000 to 1,500 Australian dollars for family coverage) for policies that exempt individuals from the Medicare Levy Surcharge: This surcharge is a tax of up to 1.5% levied on higher income households without private health insurance for hospitalization.
- An introduction of travel and accommodation benefits to encourage greater uptake of health insurance for people living in rural and regional areas who don’t have a local private hospital: These benefits can be provided as part of hospital cover for members who need to travel to certain types of hospitals for treatment.
Among Australian companies surveyed by Willis Towers Watson in 2018, only 29% of employers indicated they provide some form of supplemental health care benefits to their employees, most commonly in the form of a premium discount through a preferred provider. The compulsory reforms are likely to have little impact on health policies’ claims performance but may result in slight premium increases at renewal. However, the adoption of non-compulsory reforms could lead to premium decreases, especially for younger participants entitled to the age-based insurance premium discounts. As a result, employers providing health care benefits through a premium discount program could potentially see their costs either increase or decrease.