private health insurance
DESCRIPTION
Private Health Insurance. University of New South Wales 13 October 2003. PHIAC Role. Established in 1989 by National Health Act Statutory Authority Reports to Minister for Health Minister can direct but direction must be tabled in Parliament. PHIAC Role. Four main purposes - PowerPoint PPT PresentationTRANSCRIPT
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Private Health Insurance
University of New South Wales
13 October 2003
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PHIAC Role
Established in 1989 by National Health Act
Statutory Authority
Reports to Minister for Health
Minister can direct but direction must be
tabled in Parliament
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PHIAC Role
Four main purposes
Efficient and effective industry
Protect consumers
Minimise premiums
Ensure prudential safety of funds
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PHIAC Powers and Functions
Monitor financial performance of funds
Administer reinsurance
Produce statistics
Establish uniform reporting standards
Impose levies for PHIAC and fund failureRegister funds and simplified billing agents
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Health Insurance Industry
43 Registered Organisations38 “not for profit”5 “for profit”
There are restrictions on what funds can do with their reserves. Difference between “for profits” and “not for profits”
- “for profits” are allowed to pay a dividend
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Health Insurance Industry
Top ten funds cover more than 95% of the
market
Remaining 34 funds tend to focus on niche
markets such as regions or are restricted
membership organisations
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Characteristics of Private Health Insurance
Heavily regulatedPHIAC Financial RegulatorPrivate Health Insurance Ombudsman-
consumer complaintsDepartment of Health & Aged Care -
Policy, products and pricing regulationAustralian Competition & Consumer
Commission - Trade Practices ASIC - Corporate Reporting
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Characteristics of Private Health Insurance (cont.)
Community RatingCan’t discriminate on basis of gender, age or health
statusNo risk rating?
Reinsurance Cost sharing arrangement NOT “Real” Reinsurance
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Characteristics of Private Health Insurance (cont.)
Heavy product regulationNeed approval from DHACMust be community ratedCannot be discountedMust cover psychiatric, rehabilitation and
palliative care
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Characteristics of Private Health Insurance (cont.)
Lifetime Health CoverForm of risk rating based on age of joiningJoin at or below 30 - basic premium paidJoin over 30 - 2% increase per yearCapped at age 65 - maximum rate 170% of
basic premium
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Characteristics of Private Health Insurance (cont.)
30% Rebate Government pays 30% of the costCost $2.1 billion in 2001-02
Higher Medicare Levy - Extra 1% - for persons without private health insurance Single persons with income > $50,000 paFamilies with income > $100,000 pa
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Characteristics of Private Health Insurance (cont.)
Pricing - Premiums increases can be disallowed if:Breach of the NHAUnfair condition on contributorsAdversely effect the fund financiallyNot in the public interest
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Characteristics of Private Health Insurance (cont.)
• Under considerable cost pressure e.g.– Ageing population– Increased patient expectations– Increased technology costs– Pharmaceuticals and prosthetics– Staffing- health professionals in short supply– Doctors Indemnity
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PHIAC Regulatory Processes
Managing Intervention - guidelinesBoards of funds are accountableFunds must meet regulatory requirements“No surprises” approach to regulationPHIAC will intervene to protect members in an
efficient and timely mannerAppointed Actuary
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PHIAC Regulatory Processes (cont.)
Powers of supervisionSet conditions of registrationExamine books and recordsAppoint an inspectorAppoint an administrator Apply to wind up a fund
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PHIAC Regulatory Processes (cont.)
Indicative Factors which make PHIAC nervousExternal events - takeover, insolvency of a parentFailure to meet prudential requirementsFailure to meet reporting requirementsFailure to pay reinsurance paymentsBreach of registration conditionsDrop in O/S claims while benefits are increasing
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Reinsurance
NOT Real Reinsurance Equalisation scheme to share costs of high
cost members Persons over 65Members with more than 35 days
hospitalisation in a year 79% of benefits in reinsurance categories
counted towards the pool
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Reinsurance
HBRTF - It is a Trust Fund
Reinsurance is a zero sum pool
PHIAC collects data from all funds on a State
basis
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Prudential Standards - PHIAC’s Objectives
PHIAC wanted standards that:Were responsive to risk profiles of individual
fundsEncouraged risk management Encouraged cost effective supervisionDid not impose undue compliance costs
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Requirement of Fund Boards
Board and Management need to focus on risks to the fund by either:Mitigating the risks, orReserving against the risks
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Standards are intended to:
Reduce probability, to a defined & acceptable level, that a health fund will not be able to meet its claims.
Provide a financially & legally certain trigger point for regulatory intervention that recognises time delays in the provision & analysis of fund data.
Promote public confidence in the financial stability of the private health insurance industry
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Appointed Actuary
• PHIAC is requiring all health funds to have an appointed actuary for the year commencing 1 July 2004.
• AA will be involved with :– Pricing– Product design– FCR– Prudential Reporting
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Appointed Actuary
• reasons for decision to establish the AA– Two significant fund failures where the fund
could not recognise what was happening– Pricing failures– Increased complexity of industry – Government protecting its investment
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Appointed Actuary
• Advertisement– There aren’t enough actuaries in private health
insurance • Good quality, insufficient quantity
• Health Practice Committee of Institute of Actuaries provides good professional support
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PHIAC Information
Membership and Coverage Gap Statistics PHIAC A Quarterly Report PHIAC B Quarterly Report - Funds Only Time Series Benefits Statistics Annual Report Insure? Not Sure?
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Summary
• Industry is highly regulated
• Unlikely to change in short term
• Costs will increase
• Appointed Actuary from 2004 -05 FY– Increased involvement of actuaries
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PHIAC Contact Details
http://www.phiac.gov.auTelephone: 02 6215 7900Facsimile: 02 6215 7977Email: [email protected]