The Australian government passed legislation that aims to make private health insurance easier to understand and more affordable for consumers. The Private Health Insurance Legislation Amendment Act 2018 (the Act) received royal assent on 21 September 2018, and was followed by the Private Health Insurance Amendment Rules 2018 (the Rules) implementing the Act. The Act and the Rules take effect progressively from 22 September 2018, to 1 April 2020, with most of the provisions taking effect on 1 April 2019.
Background
Private health insurance is a key part of Australia’s mixed public-private health system, providing coverage for about 50 percent of Australians. Private health insurance reforms were first announced by the Australian government on 13 October 2017, with the objective of simplifying the system and reducing insurance costs to encourage consumers to keep their private health insurance.
Key details
The new Act, which amends the Private Health Insurance Act 2007 and the Ombudsman Act 1976, was the result of extensive consultation with the Private Health Ministerial Advisory Committee and the medical profession on mechanisms to ensure cost transparency and simplify hospitalization insurance products.
The investigation powers of the Private Health Insurance Ombudsman (PHIO) have been strengthened. The PHIO will be able to perform inspections and audits at the premises of private health insurers and brokers at its own initiative.
To ensure consumer transparency, the use of benefit limitation periods in private health insurance policies has been removed. Consumers who have purchased policies with benefit limitation periods (i) do not need to repay the premium rebates they have received, (ii) are not retroactively liable for the Medicare levy surcharge, and (iii) are not liable for Lifetime Health Cover loadings.
The following changes will take effect on 1 April 2019:
- An increase in the maximum voluntary excess (deductible) that members can select in plans that will qualify them for exemption from the Medicare levy surcharge. This will give consumers the ability to purchase qualifying products with higher deductibles for a lower premium. The government has also amended the relevant tax laws to qualify plans with higher deductibles.
- Categorization of all hospital insurance products in gold, silver, bronze and basic tiers by no later than 1 April 2020. If additional coverage is already being offered in plans that are categorized as silver, bronze or basic, the coverage should not be reduced because of the introduction of the new categories.
- Adoption of standardized clinical categories for treatments to make it clearer to consumers what is and isn’t covered in policies.
- Introduction of a Lifetime Health Cover discount to encourage people under the age of 30 to purchase and maintain private health coverage. Insurers will be able to offer age-based discounts of up to 10 percent on products sold to individuals from age 18 to 29 (inclusive), which will phase out when the insured reaches age 41.
- Introduction of a Private Health Information Statement to replace the current Standard Information Statement as the regulated method by which insurers provide information to consumers.
- A reduction in prostheses benefits achieved through an agreement with the Medical Technology Association of Australia.
- Requiring insurers to allow people with hospital insurance that does not offer full coverage for mental health treatment to upgrade their coverage and access mental health services without a waiting period on a one-off basis.
- Allowing insurers to offer travel and accommodation benefits as part of hospital treatment cover.
- Elimination of some natural therapies coverage, such as kinesiology and homeopathy.
Next steps
Employers who offer private health insurance to their employees will most likely see a cost reduction and may wish to shop for more attractive insurance packages, including those with higher deductibles, once the Act is fully implemented. Employers who do not currently offer a corporate health plan for their employees may find greater opportunity to offer a valuable benefit to their employees at a more affordable price.