Dear Minister Roxon

In response to your request to health funds to explain why our premiums keep going up, please find below for your consideration an explanation and some suggestions of how to address this important issue.

The main problem for private health funds is simply that people don’t really want our product. Despite your generous 30% subsidy (and the extra 1% tax on middle and high income earners who don’t sign up), less than half the population is on board.

Unfortunately for us, the people who join are often those more likely to need health care. We can’t refuse insurance to anyone who is sick or old. We can’t even charge high-risk people more — they pay the same premiums as everyone else, no matter what sort of havoc that creates for our balance sheets. Allowing us to refuse insurance to people who are likely to actually need health care would ensure our premiums remained significantly lower.

The attitude of the young and healthy is also a problem. They make the foolish assumption that just because they don’t get sick they don’t need health insurance, not realising that their role is not to use their insurance but just to pay their premiums and subsidise everyone else. It was hard enough to get them interested when we could offer them free CDs and gym shoes, it’s almost impossible now.

Another problem are fund members who feel that once they have paid their premiums for years they are entitled to get the maximum benefit from it when they get sick. They demand private rooms, their choice of doctor and the best quality hip replacements, rather than making do with a cheaper version. Although we make it as difficult as possible for consumers to work out exactly what their entitlements are, far too many of them manage to read the fine print closely enough to put a sizable dent in our profit margins.

And don’t get me started on health professionals. They continually put their fees up, well aware that their patients have health insurance and won’t have to pay the full cost of the increase. Optometrists suggest that their customers get a new pair of glasses each year, whether or not they need it, knowing that the government and the health fund will foot the bill. I hope you will act swiftly to put a stop to this blatant exploitation of tax payer funds. After all, don’t health providers realise that private health insurance is the only industry that is supposed to benefit from this government largesse?

Finally, there are the advertising costs. With close to 40 health funds competing for less than 50% of the population, we have to keep pumping money into promotions to keep up with the competition. And with a product that has as little to offer as ours, you will appreciate that we need to spend up big to persuade consumers that they should sign up.

In the light of the above issues, I hope you understand that your support for continued premium increases is essential to maintain the unique qualities of private health insurance. After all, if we were a low-cost, efficient, equitable and popular health insurance program we would be called Medicare, wouldn’t we?

yours sincerely,
A Health Fund Manager

Jennifer Doggett is a consultant who has worked in a number of different areas of the health system, including the federal health department and the community sector, and as a political advisor on health policy. She is the author of A New Approach to Primary Care for Australia.

Peter Fray

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