In May 2018, Peter Aroney celebrated 10 years as CEO of Doctors’ Health Fund. To mark the occasion, Peter reflected on his time in the private health insurance industry and with Doctors’ Health Fund.
What changes have you seen in the industry over the past 10 years?
The private health insurance (PHI) industry has changed considerably in the past 10 years; and not always for the better. Although, like now, there were a few well-known large funds, the industry was rather neglected and not well understood by the public. Compare that to now where rarely a day goes by without PHI under public scrutiny.
In 2008, economies around the world were being buffeted by the Global Financial Crisis and Government budgets were under unprecedented pressure. Whilst Australian Governments acknowledged the importance of the private healthcare sector, moves were afoot to constrain their funding.
Privately insured patients were somewhat immunised from rising healthcare costs through the Australian Government’s rebate. Means testing of the rebate in 2012 and other changes to the rebate process were pivotal events which have impacted consumers, treating doctors and health funds alike. At the same time, we were about to enter a protracted period of low inflation and subdued wages growth.
Some health insurers responded to affordability concerns with so-called junk policies to contain premium rises, retain members and provide at least some contribution to the overall system cost. Unfortunately, given the limited coverage afforded by these policies, this often resulted in disillusioned patients, public backlash and higher public hospital admissions.
Other insurers restricted their medical benefits, giving rise to higher and more frequent out-of-pocket costs, as doctors found it increasingly challenging to adhere to schedule benefits.
Ownership of health insurers has changed dramatically with the sale of AHM to Medibank, the demutualisation and sale of MBF to Bupa and the privatisation of Medibank. What was an industry dominated by mutual, not-for-profit companies, has become a predominantly shareholder owned, for-profit sector (by number of policies covered). This in turn has coincided with the rise of the private hospital sector, with companies like Ramsay and Healthscope now comprising a combined 19%1 of private hospitals in Australia.
How has Doctors’ Health Fund changed over this period?
We are very proud of what’s been achieved at Doctors’ Health Fund. With a base of approximately 5,000 members in 2008, Doctors’ Health has just surpassed 19,000, with over 40,000 insured lives. This equates to an average annual growth rate of 14.2% per year, at a time when participation in private health insurance continues to decline.
Whilst our growth rate may be impressive, our real achievement is that we have not diverted from the focused strategy envisaged by those who established the Fund back in 1977. That is, to serve doctors, their families and the medical community by providing quality products, excellent service and value for money.
We have invested in new technologies such as our mobile app, improved website and industry-leading systems to improve the speed and efficiency of claims processing.
The association with Avant from 2012 has been a large part of our success. Not only has Avant provided the financial security which has supported our growth, but we have been able to leverage some centralised services whilst maintaining our independence in operations and management. I put down our successful demutualisation and sale to Avant Mutual as a major achievement during my time with Doctors’ Health.
Doctors’ Health Fund has been fortunate to have some dedicated, civic-minded people involved over the years. Starting with the establishment of the Fund in 1977, the brainchild of Dr Philip Cocks and later Directors such as Dr Peter Arnold, Dr Paul Niselle, the late Dr Phil Douglas, Mrs Patria Mann; and more recently Professor Simon Willcock and Hon John Fahey. The early Directors in particular steered the Fund through some challenging times when significant regulatory developments imposed sweeping changes on the industry.
Through my time, I’ve been fortunate to work with a fantastic team including Andy Phillips and Carla Azzi, both of whom have been part of our management since 2009. Our teams are passionately committed to serving our members and we are proud of every one of them as they strive every day for the best outcomes.
I am also very grateful for the loyal support of our members. I have been privileged to engage with many of you over the years and can truly say that it is gratifying to be part of a business that is ultimately member-owned and exists to serve the medical profession.
What lies ahead?
The access to quality healthcare has to be amongst the top few measures that mark the success of a nation. There is little doubt that we enjoy world-class healthcare in Australia, but many would agree that the system is under pressure. Whilst we have become accustomed to our universal access and community rated system, we continue to question its sustainability. As our population ages and the rate of chronic disease increases, the trajectory is only going to deteriorate.
Despite this often portrayed gloomy outlook, I’m confident that by working collaboratively we can find workable solutions. At Doctors’ Health Fund we continue to strive for excellence and do our part to contribute positively towards the future of healthcare in Australia.
1 Healthscope, 45 hospitals, Pg 4, Annual Report 2017, http://healthscope.com.au/application/files/3715/0344/5418/HS_Annual%20Report%20FY17_v15_FA_low.pdf | Ramsay, 73 hospitals: Pg 3, Annual Report 2017, http://www.ramsayhealth.com/common/emag/rhc/annualreport2017/pubData/source/RHCAR2017.pdf | Total private hospitals: 630 hospitals, Pg 13: Hospital resources 2016–17: Australian hospital statistics, https://www.aihw.gov.au/getmedia/c5fd554a-3356-474a-808a-5aab43d24708/aihw-hse-205.pdf.aspx?inline=true