Download ppt - Private Health Insurance

Private Health Insurance

University of New South Wales

13 October 2003

2

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

3

PHIAC Role

Four main purposes

Efficient and effective industry

Protect consumers

Minimise premiums

Ensure prudential safety of funds

4

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

5

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

6

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

7

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

8

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

9


Heavy product regulationNeed approval from DHACMust be community ratedCannot be discountedMust cover psychiatric, rehabilitation and

palliative care

10


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

11


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

12


Pricing - Premiums increases can be disallowed if:Breach of the NHAUnfair condition on contributorsAdversely effect the fund financiallyNot in the public interest

13


• 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

14

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

15

PHIAC Regulatory Processes (cont.)

Powers of supervisionSet conditions of registrationExamine books and recordsAppoint an inspectorAppoint an administrator Apply to wind up a fund

16

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

17

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

18

Reinsurance

HBRTF - It is a Trust Fund

Reinsurance is a zero sum pool

PHIAC collects data from all funds on a State

basis

19

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

20

Requirement of Fund Boards

Board and Management need to focus on risks to the fund by either:Mitigating the risks, orReserving against the risks

21

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

22

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

23

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

24

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

25

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?

26

Summary

• Industry is highly regulated

• Unlikely to change in short term

• Costs will increase

• Appointed Actuary from 2004 -05 FY– Increased involvement of actuaries

27

PHIAC Contact Details

http://www.phiac.gov.auTelephone: 02 6215 7900Facsimile: 02 6215 7977Email: [email protected]