The facts. Private health insurance.

The facts. Private health insurance.

Fact. The rebate on private health insurance reduces pressure on public health spending.

Private healthcare is funded through a combination of private health insurance benefits, the personal contributions of patients and the Government rebate on private health insurance. The Government rebate goes to the policy-holder and directly impacts the price they pay for private health insurance. Healthcare expenditure, estimated at $147.4b in 2012-13 1 represents 16% of Commonwealth expenditure and 26% of State Government expenditure 2. In the 2014 calendar year, private health insurers paid $17.2 billion in benefits for hospital treatment and extras 3. This is $17.2 billion that would otherwise be picked up by the Commonwealth and States. In real terms, health expenditure in Australia has grown from $4,593 per person in 2002-03 to $6,430 in 2012-13 4. New medical technologies, an aging population and longer life expectancies means that health expenditure will continue to grow. The private system reduces pressure on public hospitals and public finances by helping those that can afford it to take personal responsibility for their health, freeing up places in the public system for those that need it most. The facts Australian governments pay for 90.9% of the cost of treatment in the public system 5. Australian governments pay for 34.5% of the cost of treatment in the private system (inclusive of the Government rebate on PHI) 6. Health insurers paid $17.2billion in benefits in 2014. 47.3% of Australians hold hospital treatment insurance and 55.6% of the population hold extras insurance for things like dental, optical and ambulance services 7. In 2012-13, private hospitals accounted for 45% of Australia s hospitals and 34% of all hospital beds 8. In 2012-13, 41% of all procedures occurred in private hospitals, including 2 out of every 3 procedures involving elective surgery 9.

Fact. The private health system delivers value. In 1999, private health insurance coverage was at an historical low of 30.5% and total benefits paid were $10.3 billion less than they are today, in real terms 10. The facts The Medicare Levy Surcharge, the 30% rebate and the Lifetime Health Cover loading policies have been extremely successful, increasing PHI coverage and reducing pressure on public hospitals and public finances. The Government rebate on PHI provides value for money. Through the rebate on PHI, Australian governments pay for 34.5% of the cost of treatment in the private system, whereas governments pay 90.9% of the cost of treatment in the public system. Excluding private health from the GST has allowed it to remain competitive with the public health system. Applying taxes to private health would place it at a competitive disadvantage to the public system and shift cost pressures back to government finances.

Hospital treatment coverage by insured persons 11 1 July 1997. A Medicare Levy Surcharge (MLS) of 1% of taxable income is introduced for higher income earners who do not take out private health insurance. 12 000 000 11 000 000 Introduction of 30% Rebate from 1 January 1999. Introduction of Life Time Health Cover from 1 July 2000. 10 000 000 9 000 000 Medibank began on 1 July 1975. A program of universal, non contributory, health insurance, it replaced a system of government subsidised voluntary health insurance. Introduction of 30% Rebate means testing from 1 July 2012. 8 000 000 7 000 000 7 000 000 Introduction of Medicare from 1 February 1984. Higher rebates for older persons from 1 April 2005. 6 000 000 6 000 000 Commonwealth medical benefits at 30% flat rate restricted to those with at least basic medical cover from September 1981. 31 October 2008. Increase in MLS income thresholds, subject to annual adjustment. 5 000 000 5 000 000 June 1971 June 1975 June 1977 June 1978 June 1979 June 1980 June 1981 June 1982 June 1983 June 1984 June 1985 June 1986 June 1987 June 1988 June 1989 June 1990 June 1991 June 1992 June 1993 June 1994 June 1996 June 1997 June 1998 June 1999 June 2000 June 2001 June 2002 June 2003 June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 June 2014

Fact. Private Health Insurance is for all Australians. Affordability and accessibility are cornerstones of private health insurance in Australia, an important product for over 13.2 million Australians nation-wide 12. The facts PHI in Australia has been community-rated since 1953, meaning consumers pay the same premium for a product, regardless of their age, gender or health condition. Private health insurance provides peace of mind to Australian families who know that they can have greater control over where and when they are treated. Private health insurance provides Australians the choice of their own doctor in hospital, it allows them to avoid public hospital waiting lists and in doing so, take strain off of the public system. Private health insurance not only helps in hospital, but with numerous extras products on offer, insurance can be provided for many services not covered by Medicare, including ambulance services and dental, optical, chiropractic and physiotherapy treatments.

Fact. Private health insurance products are valued by consumers Independent surveying of hirmaa-fund members has consistently demonstrated that 98% of customers are satisfied with their health fund 13. The facts Insurers on average pay 87.4% of premium revenue back to members in benefits 14. In 2014, $47m was spent on over 61,000 Chronic Disease Management Programs nation-wide 15. In 2014, almost 90% of all medical services were undertaken with no gap charged to the patient. 93% of all medical services were undertaken with no gap or under a known-gap arrangement 16. In the March 2015 quarter, the average gap paid by patients across all services was $18.63 17.

Fact. The Private Health Insurance market is competitive and efficient A competitive market provides choice, driving improved customer service, efficiency, lower prices and innovation. The facts There are 34 private health insurers competing in the market. 10 insurers are for-profit, 24 are not-for-profit. 10 insurers are restrictedaccess to particular industries or professions, 24 are open-access. The private health insurance market has full portability, meaning consumers can freely switch between funds without having to re-serve waiting periods on hospital treatments. In 2013-14, the industry paid 87.4% of premium revenue back to members in benefits. In 2013-14, the industry management expense ratio (administration costs) was just 8.5% of total revenue 18. Premiums rises are calculated each year under intense actuarial and regulatory scrutiny. They are raised in order to ensure health insurers remain solvent. Healthcare costs rise as medical technologies improve and as utilisation by the growing and ageing population inevitably increases. While premiums rose 6.2% on average in 2015, benefits paid were 7.4% higher in 2014 than the previous year 19.

1. Australian Institute of Health and Welfare, Health Expenditure Australia, 2012-13., p.6. 2. National Commission of Audit, Phase One report, February 2014., p. 17. 3. Derived from Private Health Insurance Administration Council, PHIAC quarterly statistics, 2014. 4. Australian Institute of Health and Welfare, Health Expenditure Australia, 2012-13., p.19 5. Ibid., p.85 6. Australian Institute of Health and Welfare, Australian Hospital Statistics Private Hospitals, 2012-13., p.23 7. Private Health Insurance Administration Council, PHI Quarterly Statistics, March 2015., p.3 8. Australian Institute of Health and Welfare, Australian Hospital Statistics Private Hospitals, 2012-13., p.14 9. Ibid., p.14 10. Private Health Insurance Administration Council, The Operations of Private Health Insurers Annual Report data, 1998-99 11. Derived from Private Health Insurance Administration Council, Statistical Trends in Membership and Benefits Data Tables, March 2015. 12. Private Health Insurance Administration Council, PHI Quarterly Statistics, March 2015., p.3 13. Available on request: Discovery Research, hirmaa member satisfaction research, 2015 14. Derived from Private Health Insurance Administration Council, The Operations of Private Health Insurers Annual Report data, 2013-14 15. Private Health Insurance Administration Council, PHI Quarterly Statistics, December 2014., p.3 16. Ibid., p.10 17. Private Health Insurance Administration Council, PHI Quarterly Statistics, March 2015., p.10 18. Derived from Private Health Insurance Administration Council, The Operations of Private Health Insurers Annual Report data, 2013-14 19. Derived from Private Health Insurance Administration Council, PHIAC A reports, 2013-2014

hirmaa is the peak industry body for eighteen private health insurers which are community based and not-for-profit. In all, the hirmaa funds provide private health insurance to over one million Australians.

hirmaa 2/826 Whitehorse Road (PO Box 172) Box Hill VIC 3128 Telephone (03) 9896 9370 Facsimile (03) 9896 9393 Email info@hirmaa.org Visit hirmaa.com.au