Motions

Private Health Insurance

The Hon. C. BONAROS (16:49): I move:

That this council—

1. Notes that private health insurance is increasingly unaffordable for consumers;

2. Further notes that preferred provider schemes are not in the best interests of patients or providers receiving a lower rebate for the same treatment under the same policies;

3. Welcomes the recent decision of HBF to dismantle its longstanding preferred provider scheme;

4. Acknowledges recommendation 12 of the Senate inquiry into the 'Value and affordability of private health insurance and out-of-pocket medical expenses', which recommends legislation to prohibit the practice of differential rebates for the same treatments; and

5. Calls on the federal government to amend relevant legislation to prohibit the current practice of differential rebates for same treatment under the same product in the same jurisdiction.

I am pleased to be speaking today on the issue of differential rates for same treatment under the same products in the same jurisdiction. At the outset, I would like to begin by acknowledging all of the work and tireless efforts of Dr Anthony Smerdon, President of the Australian Dental Association South Australia, and Dr Samantha Mead, CEO of ADASA, who have taken time out of their busy schedules to be here today. I would also like to acknowledge the work of Damian Mitsch, national CEO of ADA; Eithne Irving, deputy CEO and general manager of ADA; and Dr Paul Toumazos and Dr Phil Toumazos.

They have all committed a tremendous amount of effort to this matter and continue to advocate fiercely on behalf of their association's members and the broader dental industry. Importantly, they continue to work with the providers of other services similarly impacted by differential rebates. Australia operates a mixed public and private healthcare system where Australians have the freedom to choose whether they wish to have the universal health care provided by Medicare or whether they want to be treated privately. For many Australians, private health care is too expensive and out of reach or increasingly becoming out of reach for many families.

Private health insurance premiums have become less affordable. At the same time, exclusions and co-payments have increased. This year, federal health minister, Greg Hunt, approved the lifting of health insurance premiums for private health insurance by an average of 3.95 per cent from 1 April. Last year's premium increase was 4.84 per cent. It is no surprise that consumers are experiencing difficulty to pay private health insurance premiums and/or out-of-pocket expenses since the almost 4 per cent hike is twice as much as the average worker's pay rise and other increases in the cost of living. By contrast, last year's wage growth and inflation rose by around 2 per cent.

In 2015-16, Australians paid $11.4 billion for private hospital policies and $4.5 billion for general treatment policies. Australians also paid $483 million in excesses and co-payments for hospital services, and $706 million in out-of-pocket medical expenses. For general treatment, Australians paid $4.7 billion out of pocket. These figures are truly staggering and, to paraphrase the jingle for Medibank Private, 'Does it make you feel better now?' because it makes me sick with worry for our private health system and consequent impacts on our public health system.

The private health insurers are doing very well. The quarterly private health insurance statistics for June 2018 released by APRA show that the industry held assets of $14.4 billion, which increased by a whopping $633 million in the past 12 months. Total net assets increased from $7.8 billion in June 2017 to $8.3 billion in June 2018. The health benefits fund profit after tax breakdown for 12 months to June 2018 was $1.37 billion.

I turn then to the Senate Community Affairs References Committee which looked at the value and affordability of private health insurance and out-of-pocket medical expenses, with the consequent report published in December last year. On that, I acknowledge particularly the efforts of Senator Griff, who not only pushed for that inquiry but was also a member of that inquiry. The report made a series of sensible recommendations. The federal government is yet to respond to those recommendations, and I urge it to do so as a matter of urgency. I want to focus on recommendation 12 of that Senate report, which states that:

5.47 The committee recommends that the Commonwealth Government amend relevant legislation to prohibit the current practice of differential rebates for the same treatments provided under the same product in the same jurisdiction.

There we have it: the Senate recommendation has actually recommended that we do precisely what this motion is calling on the federal government to do. The issue of differential rebates has been acutely felt not only in the dental industry in Australia but also in other health industries, which are no longer immune. Here is how it works.

The differential rebate is employed by many health insurance funds to push their members to seek treatment with dentists or other providers who have preferred provider arrangements with their particular fund. The arrangement is that the fees which the dentist can charge are set and controlled by the health fund and not by the dentists themselves. By agreeing to charge lower fixed prices, the dentist benefits by the influx of patients who are directed to them by the health fund. In order to receive the maximum rebate, the patient must see a preferred provider practice rather than an independent provider.

The business model used with dentists is being rolled out across the health services industry, with health insurers setting up in other fields, including optometry, physiotherapy and podiatry, as well as a number of other fields. Members of those fields have raised the exact same concerns and were also involved in that Senate inquiry. They provided submissions in relation to the same issues as dentists.

Just two players in the market, Medibank Private and Bupa, account for a staggering 60 per cent of all health insurance policies in Australia, and their market dominance is starting to bite. It has become the Coles and Woolworths of private health insurance. In fact, in South Australia the majority of dentists have now signed contracts with health insurers in the hope that their patients will get better rebates. Bupa has more than half of that market. That stranglehold is destroying independent clinics.

Given that, apart from hospital cover, insurers pay out the most for dental claims, differential rebates have caused a distortion in the market that is short-changing consumers. This is because it forces them to make a decision about their dental care that is cost driven and cost driven alone, not patient care driven, because of the differential rebates model. Using this model, health insurers are manipulating patient behaviour using financial incentives. They reward patients who attend preferred providers and deprive those who seek treatment elsewhere. They remove choice for consumers.

Who can blame patients for opting to use a preferred provider when savings from those providers can be as high as 80 per cent compared to a private provider who is not a preferred provider? I certainly do not know many households who would not be tempted by that sort of saving. I suppose that is really what this motion comes down to: above everything else, it is about protecting consumers. That does not mean we should underestimate the impact it is having on private providers, because it is having a devastating impact.

There is absolutely no point in putting this issue off until independent providers have been squeezed out of the marketplace. We need to do it now, not regret that we did not do it while we had the opportunity. It is entirely inappropriate that the health insurance funds should be allowed to exercise the level of power that they do exercise over a patient's care.

Bupa is now in the business of opening its own dental super clinics to try to gain more of the dental market share and as a means of bypassing its preferred providers altogether. The ADA maintains that health insurance call centre staff are pushing patients to use their own contracted dentists and increasingly to visit so-called super clinics run by the insurers themselves.

It is absolutely disingenuous when the private health industry argues that its preferred provider contract arrangements provide patients with choice and could save them money and that dentists did not have to sign up. Private Healthcare Australia's chief executive, Rachel David, has said:

There is nothing compelling a dentist to enter into a contract with a health fund, and there is nothing compelling a health care fund to use a particular dentist…

Last year, the ABC reported that in 2016 Bupa sent the following demand to the clinics it endorses:

All recognised general dental practitioners within your practice must apply to be part of the Members First dental network…

If we do not receive a completed agreement prior to June 1, 2016, your current agreement will end with us from June 1, 2016.

At the time of the ABC report, the ADA's Hugo Sachs said Bupa's letter was evidence of coercion, was an anticompetitive act and was potentially in breach of consumer law. He went on to say, 'If that's not evidence of third-line forcing, I don't know what is.'

The HICAPS machines at dental clinics register every claim that is made and feeds that information back to health insurers, so they can find out what dental clinics are charging and how much money they are making. Given the move by Bupa as a health insurer moving into the business of owning clinics as well, it means they know everything—absolutely everything—about their competition.

The PHA's Dr David has admitted to making use of that data and it raises all sorts of questions about privacy. It opens the door for insurers potentially misusing sensitive market information to decide where to set up their own clinics. The Senate committee considered the matter and did not make its recommendation lightly. I note that the committee received evidence from the Australian Competition and Consumer Commission (ACCC) that it had previously considered preferred provider schemes and found that they were not anticompetitive. However, the committee was of the firm understanding that those findings were made on the basis that dentists were able to join those schemes.

The committee raised concerns about whether private health insurers' use of data obtained from HICAPS terminals could be used inappropriately when offering competing dental services, and asked the ACCC to look into this issue, especially in light of the Productivity Commission's report on data availability and use, where it was noted:

…that the use of sharing membership data exemplify 'the advantage that access to cast quantities of data could offer by way of market power'.

I close with a recent announcement of HBF, WA's biggest health insurer, that it was replacing its longstanding preferred provider scheme in a major overhaul of its dental coverage. This is welcome news and a great achievement for the ADA's Western Australian branch, that has worked diligently to help bring about change. The new arrangements announced by HBF last week appear to be much fairer for patients and practitioners alike, with the changes due to commence on 1 January 2019.

HBF has recognised that it is important to have an agreement that is more transparent and more sustainable in the long term. HBF chief executive, John Van Der Wielen, said of the changes:

We recognise that the current arrangement is no longer fit for purpose for the future, so we've listened and acted on feedback from the Australian Dental Association, dentists and our members.

Given the precedence set by HBF, we as a party call on all health funds to dismantle their two-tier schemes and pay the same rebate for the same treatment under the same policies. The writing is on the wall for companies like Bupa and Medibank Private to follow HBF's path or wait for likely legislation to force change. Or, worse still for them, the onslaught of customers will show their disdain for such bullying behaviour by switching to more receptive private health insurers. Go figure!

I have worked on this issue now for some three years and it is one of those campaigns that is taking a while to gain momentum but I think, with the decision of HBF, we are slowly getting there. On behalf of SA-Best, I will continue to advocate on this issue, along with our Centre Alliance colleague Senator Stirling Griff, until the change is legislated to ensure that private health insurers can no longer sink their teeth into independent practitioners and we return to a level playing field that benefits both consumers and providers alike.

Debate adjourned on motion of Hon. J.S.L. Dawkins.