The document discusses ways to reform private health insurance (PHI) in Australia to better balance affordability and value for consumers. It provides background on the PHI industry and findings from consumer surveys. Key points include: consumers value predictability and treatment for urgent conditions but affordability is a major issue; online sources and health funds are preferred for information but have limitations; and changes are needed to simplify complex products and address rising costs while maintaining coverage levels important to consumers like protection from high costs.

1. Putting consumers at the centre of PHI
reform:
Balancing affordability and value
July 27, 2017

2. Over 13.5 Million Australians Strong
Who we are:
• Australian private health insurance
industry's peak representative body
• Represents 20 health funds consisting
of for-profit and not-for-profit health
funds in Australia
• Member funds collectively represents
96% of people covered by private
health insurance

3. PHI is an important part of Australia’s health ecosystem
Private health, public benefit
37 13.5 $19.5
competing health insurance
funds
MILLION
Australians (55%) rely on
PHI for treatment when
they need it
BILLION
in annual benefits paid to
members
96% 2 of 3 86c
of the PHI industry is
represented by Private
Healthcare Australia (PHA)
non-emergency
procedures are performed
under PHI cover
Australians get 86 cents back
for every $1 premium paid,
compared to only 66 cents in
general insurance

4. Over 65s

5. Under 30s

6. Over 80% of members find PHI to be good value for money
Consumers regarding PHI cover as “very good” or “fairly good” value for money
80
84
78
82
76
86
88
90
Hospital
Extras
SOURCE: IPSOS consumer survey 2015
Percent

7. Question 7 n = 6,284
Which of the following aspects, if any, of the health system are most important
for the government to address?
3%
8%
13%
14%
17%
18%
27%
Helping compare health outcomes of medical professionals
Helping compare OOP costs of medical professionals
Eliminating waste and fraud
Ensuring maximum value from healthcare spend
Improving the quality of healthcare
Improving access to healthcare
Improving affordability of healthcare
Aspect of health most important to address
Again, #1 issue
directly
impacted by any
moveon the
rebate

8. Most people are satisfied with their PHI, but affordability is a problem
6%
6%
6%
7%
7%
15%
48%
51%
72%
Other
How I gottreatedwhenIclaimed
on myinsurance wasnotoptimal
The processof contacting and
communicatingwithmyinsureris difficult
I receive toomanyseparate bills
fromdifferentproviders
I don’thave accessto health
specialistsandhospitals
I can use inmy region
I’mnot coveredforareas expected
or neededwithinmypolicy
My premiumsare toohigh
My out-of-pocketcostsfordental,
alliedhealthandotherextrasare toohigh
My out-of-pocketfeesand
chargesfor medical specialists
are toohigh
SOURCE: PHA Consumer survey 2016, n=2,384
How satisfied are you with your private
health insurance?
Percent
3
3
10
36
33
15
Very Dissatisfied
Somewhat
Dissatisfied
Somewhat
Satisfied
Satisfied
Dissatisfied
Very satisfied
Why are you less than satisfied with your current private
health insurance product?
Percent times mentioned by those less than satisfied

9. The proportion of specialist services with out-of-pocket costs has been
stable or declining over the past decade, but average costs are increasing
SOURCE: Analysisof APRA (2016) Private Health InsuranceMedical Services 2005-2016
20
5
15
10
0
2008 2009 2010
30
20112007
35
2012 20162013
25
2014 2015
-3%
p.a.
Specialist services with gap in private hospitals1
Percent of services
Average gap per service where gap is paid1
$ per service
400
200
600
0
800
2007 2009 2011 2014 20162008 2010 2012 2013 2015
+4%
p.a.
1 For in-hospital medical services paid for by Privatehealth Insurers in servicegroups excluding consultations,anaesthetics,diagnostic imaging,pathology and ‘other
items’. Does not includeall OOP costs associated with singleepisode

10. Many procedures have charges within 200% of MBS rates, but charges for
other procedures commonly exceed 300%
31%
13%
18%
2%
26%
6%
1%3% 0% 0%
150-175%<100% 125-150%100-125% 175-200% 200-225% 275-300%225-250% >300%250-275%
3%2% 1%5%
22%26% 31%
8%1%1%
9% 7%6%4%10%
18%
43%
1%1%1%
1 MBS item:32090 2 MBS item: 42702 3 MBS item: 49518 4 MBS item: 49318 5 MBS item: 16519
Cataract
surgery2
Colonoscopy1
Management
of labour and
delivery5
Hip
replacement4
SOURCE: HCP data collection 2014-15
Knee
replacement3 27%
5% 5%5%8%2% 2%
45%
1%1%
1% 1%2%2% 0%0%
76%
1% 3%
16%
Distribution of claims by chargeas a percent of MBS;Percentof claims

11. Consumers prefer to get information on expected OOP costs and quality
online, and from their insurer
SOURCE: PHA Consumer survey 2016, n=2,384
Expectedout of pocket costs of visiting
various specialists or hospitals
Averagequality (e.g. ratings) of
healthcare providers
Information documents
that I can compare
Online (incl. comparison
websites)
From my insurer
42
39
21
Through my GP
Through a healthcare
specialist (non-GP)
14
12
At a hospital 11
4
Governmentsponsored
communication
11
Friends and family
18
8
6
20
52
25
6
12
Preferred sourcefor thefollowing information;Percent1
1 Respondents were allowed multipleresponses,so percentages sumto more than 100%

12. GP recommendation is the most important factor for assessing the quality
of providers
28%
39%
45%
60%
67%
Specialist qualifications
What my family doctor/
GP recommends
Other patients' experiences
Clinical quality metrics (e.g. number
of procedures completed,
number of re-admissions)
Professional affiliations
SOURCE: PHA Consumer survey 2016, n=2,384
What factors areimportantto you for measuring the quality of healthcare providers?
Percent1
of time selected
1 Respondents were allowed multipleresponses,so percentages sumto more than 100%

13. Most people are satisfied with their experience purchasing PHI,
but some are confused by product features
SOURCE: PHA Consumer survey 2016, n=2,384
How satisfied were you with your experience
purchasing private health insurance?
Percent
2
1
5
30
44
18Very satisfied
Somewhat
Dissatisfied
Somewhat
Satisfied
Very Dissatisfied
Dissatisfied
Satisfied
10
12
13
23
25
28
29
35
45
Premiumswere toohighforthe
productI wantedtopurchase
Other
Online informationwasdifficultto
accessor use
There wasno or poor supportavailable
to answermyquestions
There were toomanydifferentproduct
typesthatwere confusing
There were toomanyproductsto
choose from
Terminologyusedbydifferenthealth
insurance providerswasconfusing
Informationonproductinclusionsand
exclusionswasdifficultto understand
Couldn’tbuyacheapenough
productto suitmybudget
Why were you less than satisfied with your experience
purchasing private health insurance?
Percent times mentioned by those less than satisfied
Inclusionand
exclusioninformation
isa particularissue
for hospital product
owners(33% of
hospital onlyholders
mentioneditasan
issue,vs.13% of
extrasonlyholders)

14. The last two decades have seen an increase in the complexity of available
PHI products
1 The increasein exclusionary products in June2010 is partly dueto a re-classification of policies between exclusionsand restrictionsby some insurers.Further, there
is a break in the excess and co-payment data in June 2007 due to a change in the definition used.
30
60
20
10
0
50
70
80
40
Exclusions in policy
Excess and/or co-payment
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
30
15
25
20
1999
2001
2003
2005
2007
2009
2011
2013
2015
Proportion of hospital cover policy holders with
excess and/or co-payment or exclusions1
Percent
Proportion of people not taking up private health insurance
because ‘I don’t understand the different policies and it is
just too hard’
Percent
SOURCE: PHIAC (2015) Competition in the Australian PrivateHealth InsuranceMarket;IPSOS2015

15. Coverage levels should take into account factors of importance to
consumers
6%
2%
4%
5%
6%
6%
8%
9%
10%
12%
13%
18%
Employer covers it
Protection against high costs of care
Receive Private Health
Insurance rebate benefits
Other
Minimise Medicare Levy Surcharge
Friends or family recommended it
Reduced wait times for services
Thought I should get it considering
my age/family situation
Minimise penalties under Lifetime
Health Cover requirements
Access to a wider choice of healthcare
providers (e.g. specialists, hospitals)
Access to higher quality healthcare
providers (e.g. specialists, hospitals)
To have control over the timing for a
procedure if needed
SOURCE: PHA Consumer survey2016, n=2,384
What is the main reason you purchased PHI? Percent
Consumers value
predictability, and treat-
ment for urgent conditions
Consumers value protection
against high costs of care
Consumers consider life-
stage when taking up
insurance

16. Limit-
ations
Government and private product information channels both have
limitations
Government Private
▪ No recommendation or overallscore
(policies of ‘bestfit’ with inputs)
▪ Difficult for consumers to use
▪ No information on expected out-of-pocket
costs (e.g., impact of exclusions on OOP)
▪ Not all policies and health funds listed
▪ Variable clarity on inclusions and exclusions
▪ Advertised and sponsored results
▪ Differing formats for each health fund
▪ No information on expected out-of-pocketcosts
Interface
SOURCE: privatehealth.gov.au;iSelect.com.au; comparethemarket.com.au

17. Perceived service offered by public and private hospitals
Community View
Section 4.6.1 Question A4(#5) n = 5,473
How would you rate GPs and the service they offer?
59
51
56
60
57
55 54
58
56
50
56
50
54 53 54
53
49
52
58
49
47
43
45 46 47 47 45
50 49
55
0
10
20
30
40
50
60
70
80
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Rating of Service Offeredby Public and Private Hospitals
% Rating Very High or Fairly High
Private
Public
Public edges
privatefor the
firsttime

18. 4.3 4.2
5.1
4.6
4.2
5.1 5.2
4.8
5.6
5.9
5.4 5.4 5.4
4.8
0
2
4
6
8
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Average Perceived Waiting Time for Treatment
of Non-Life Threatening Ailment
(Months)
Section 4.7.2 Question D4 n = 2,741
If you or another member of your familyhad to go into a public hospitalfor
treatment of an ailment which was not life-threatening, but was a cause of
discomfort and pain, how long, if at all do you think you would have to wait
to be admitted into a public hospitalin your area?
Section 4.7.3 Question A17b(i) n = 2,269
From the time you discovered you required hospital treatment, how long did
you have to wait before being admitted to this hospital?
57
49
72
84 84 81
74
103
97
119
103
32
22
37
44
39 39 39
57
52
59 59
0
20
40
60
80
100
120
140
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Elective admissions: (Excluding Emergency Admission)
Elective + Emergency Admissions (Including Emergency Admission)
Average Reported Waiting Period for Treatment in Public Hospital
(Days)
Public hospital waiting times … perception versus reality
Perception Reality (Reported)
FACT: Averageelective waiting times have morethan doubled sinceturn
of century

19. 35.8% 34.6% 34.8%
38.5%
16.9%
12.4% 12.4%
14.5%13.5%
9.9% 10.0%
11.6%
Scenario 1 (No change) Scenario 2 (25% Removal) Scenario 3 (75% Removal) Scenario 4 (100% Removal)
Initial Demand (Very / Fairly Likely) Initial Demand (Very Likely)
After Price prompt and MLS advice Very Likely (Stated) After Price prompt and MLS advice Demand (Forecast)
Question 21 n =3,339
Which ofthe following aspects,ifany,ofthe healthsystem are mostimportant
for the governmenttoaddress?
Impact of rebate changes on NTM
Demand 1.9%
of uninsured
Demand 1.2%
of uninsured
(-0.7%)
Demand 1.4%
of uninsured
(-0.5%)
Demand 1.5%
of uninsured
(-0.4%)

20. Rising input costs have an inflationary effect on PHI premiums
Increase in PHI input costs in the last 12-24 months
Hospital costs
7.6% in 2014/15
4.7% in 2015/16
Medical specialists
7.1% in 2014/15
3.0% in 2015/16
Medical devices
8.9% in 2014/15
5.4% in 2015/16
Allied health
6.3% in 2014/15
3.9% in 2015/16
Source: APRA

21. Further reduction in medical device benefits
Reduction in wasteful and low value care
through payment integrity and the MBS review
Changes to contracting rules & default benefits:
consumer protection
Lifetime Health Cover discount
FOCUS ON AFFORDABILITY

22. Gold/Silver/Bronze/Basic

23. Standard Medical Terms

24. Improved Consumer Choice