Post on 30-Oct-2021
transcript
Further Adventures in Health Riskan updated history of Australian Health Insurance
Andrew Gale
© Andrew P Gale
This presentation has been prepared for the Actuaries Institute 2017 Actuaries Summit.
The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the
Institute and the Council is not responsible for those opinions.
The adventure continues…
• Adventures in Health Risk (2007 Convention) – Gale & Watson
• Private Health Insurance Act 2007
• Risk Equalisation changes
10 years since:
20 years since:
• Industry Commission Report into Private Health Insurance
• Health Practice Committee PHI newsletter
• Industry Risk Equalisation quarterly survey
Adventure (n) an unusual and exciting or daring experience
Regulatory environment
• Private Health Insurance Prudential Supervision Act 2015
• Changes to Risk Equalisation arrangements
• Private Health Insurance Act 2007 and supporting rules
• Government Rebate & Medicare Levy Surcharge changes
• Transfer of regulatory supervision from PHIAC to APRA
Private Health Insurance Act
Generally separated and simplified previous arrangements
contained in National Health Act and regulations, with
some changes:
Discounts – move from provable expense savings for payment methods and commission (12% max) with annual reporting to Department of Health and strong regulatory intent
to12% maximum initial promotion plus 12% maximum ongoing discount, with commission excluded, no reporting or justification required and no linkage to substantially similar products
Discount changes created greater scope for aggregators
Private Health Insurance Act
Premium Approval
previous National Health Act: proposed premium change does not impose any unreasonable or inequitable condition on contributors or adversely affect the financial stability of the insurer
current Private Health Insurance Act:Proposed premium change is not contrary to the public interest. Minister for Health interprets this as the minimum necessary to:• ensure insurer solvency• support benefit outlays• meet prudential standards concerning capital adequacy• ensure affordability and value of PHI
Private Health Insurance Act
PHI coverage broadened to include hospital substitute/preventative care
Risk Equalisation 2007 changes
Age Previous Current
0–54 0.0% 0.0%
55–59 0.0% 15.0%
60–64 0.0% 42.5%
65–69 79.0% 60.0%
70–74 79.0% 70.0%
75–79 79.0% 76.0%
80–84 79.0% 78.0%
85–89 79.0% 82.0%
90–94 79.0% 82.0%
95+ 79.0% 82.0%
Proportion of benefits pooled tiered by age band:
Risk Equalisation 2007 changes
Intended to smooth retained costs across age bands
Government Rebate and Medicare Levy Surcharge
Medicare Levy Surcharge income threshold not indexed until 2008
Rebate income tested from 2012/13
Income thresholds frozen until 2020/21
Government Rebate
Since Apr 2014 Rebate
percentages progressively
reducing each year by the
difference between PHI
premium increase and CPI
Membership
After 10 years
of PHI
membership
growth above
population
growth, PHI
membership
growth has
now stalled
Membership
Highest growth amongst over 60 age group
Membership – impact of Veteran Gold Cards
Eligible war veterans (and dependants) have PHI equivalent cover,
which explains much of the recent growth in coverage for older persons
Membership – impact of Veteran Gold Cards
The impact of Veteran Gold Cards can be more starkly seen in the 80-89
and 90+ age groups. Come to my Insights session later this year for more
analysis of the impact of Veteran health care arrangements on PHI.
Financial performance
Financial performance has been relatively stable over the past 10 years
Premium increases and the CPI Index
CPI disaggregation
Sub-group Expenditure class
Items included CPI Index weighting
Medical, dental
and hospitalservices
Medical andhospital services
Consultations of physicians in general or
specialist practice and hospital charges,
medical insurance
3.42%
Group Expenditure class Year ended March 2017
%pa
10 years to March 2017
%pa
Weighting in total CPI
All groups
Health
Education
Alcohol & Tobacco
All
All
All
All
2.1%
3.8%
3.3%
6.1%
2.5%
4.6%
5.0%
5.5%
100.00%
5.29%
3.18%
7.06%
Health
Education
Alcohol & Tobacco
Housing
Household Equipment
Recreation & Culture
Medical & hospital services
Secondary education
Tobacco
Utilities (Electricity,Gas,Water)
Household appliances & tools
Audio,visual,computing equip
5.4%
4.1%
13.3%
4.3%
-2.3%
-7.2%
6.3%
5.9%
10.4%
7.4%
-0.6%
-12.2%
3.42%
1.26%
2.32%
3.61%
1.43%
1.56%
PHI premiums comprise 57.7% of the Medical & Hospital Services class
or 37% of the Health CPI or 1.98% of the overall CPI
Insurers
Insurers
New Entrants since 1989• Transition Benefits Health Fund: operated from 1996-2002 to manage
BHP’s employer funded health insurance
• National Health Benefits Australia: trading as onemedifund,
commenced in 2007, has less than 6,000 contributors
• health.com.au: commenced April 2012, purchased by GMHBA
in July 2015
• CBHS Corporate Health: registered 1 July 2016, focusing on PHI
through employers, part of CBHS Health group
• Emergency Services Health: registered 4 November 2016, focusing on emergency response and recovery sector, backed by Police Health
• Nurses and Midwives Health: registered 2 December 2016, focusing on nursing & midwifery union members, assoc with Teachers Health Fund
health.com.au
Health.com.au primarily sourced contributors through iSelect.Purchased by GMHBA for $46.2m in July 2015 as part of a recapitalization and repayment of $42.1m of loans from iSelect.
Financial
Year
Premiums
$m
Gross Margin
% of premium
Contributors
2011/12
2012/13
2013/14
2014/15
2015/16
0.7
25.3
59.4
108.7
117.3
-13.7%
14.7%
9.4%
7.4%
3.7%
3,456
15,863
31,656
39,489
40,350
Most significant new startup health insurer since Health Australia in more than 30 years
Status changes since 2012
Not For Profit to For Profit Restricted to Open Access
Doctors Health
Transport Health
CUA Health
Queensland Country Health
Health Care Insurance
Transport Health
Phoenix Health Fund
2 of the 4 For Profit conversions were associated with acquisitions
Restricted to Open access conversions are part of a long term trend
Mergers & Acquisitions
Year Target Acquirer Net Contributors Contribution Data
Assets
$m
000's Income
$m
per
Contributor
% of
Contributions
date
2016 Transport Health rt health 25.3 10.5 9.5 24.8 $1,562 60% Jun-16
2015 Health.com.au GMHBA 46.2 14.7 38.9 108.7 $808 29% Jun 15
2014 Medibank Private ASX listing 5,673.2 1 1,155.1 1,830.0 5,499.9 $2,469 82% Jun 14
2014 Transport Health Primary Health Care 18.0 10.3 4.6 15.6 $1,662 49% Jun 13
2012 Doctors Health Avant Mutual 30.0 19.9 7.5 25.0 $1,350 40% Jun 11
2009 AHM Medibank Private 367.0 215.0 155.4 377.1 $979 40% Jun 08
2008 Manchester Unity HCF 188.0 2 85.2 79.1 225.1 $1,299 46% Jun 08
2008 MBF BUPA 2,410.0 1,182.1 819.2 1,988.4 $1,499 62% Jun 08
2007 NIB ASX listing 611.1 3 336.3 328.8 666.0 $836 41% Jun 07
2004 IOOF NIB 15.0 6.4 10.6 17.2 $812 50% Jun 03
2003 NRMA Health MBF 100.0 46.3 95.7 170.6 $561 31% Jun 03
2002 AXA Health BUPA 595.0 117.6 453.4 821.0 $1,053 58% Jun 02
Purchase Goodwill Paid
Price
$m
Mergers & Acquisitions
Discussion areas
CPI – measurement of PHI premiums in Medical & Hosp Serv group
Premium Approval – clarity of public interest test
Discounting rules - consistent with community rating?
Membership Trends – impact of rebate means testing/reduction
Mergers & Acquisitions – around one per year – who is next?
New Entrants – pros/cons of a separate insurer
Restricted to Open Access – moving beyond the traditional base
Not For Profit to For Profit – realizing value outside of health fund
Ghosts of Private Health Insurers past
Melbourne
Sydney
Hawthorn