Like most sectors, private health has had to adapt to the uncertain and fast-changing environment caused by the COVID-19 pandemic.

Doctors’ Health Fund CEO Peter Aroney discusses how private health insurance has responded in this complex environment, its opportunities, challenges, and what he sees ahead for the industry.

Q1. Firstly, what has the private health insurance industry done to support customers during COVID-19?

A range of support measures have been introduced by the private health insurance industry in response to COVID-19, which include deferring of rate increases for 6 months, extending cover across products for COVID-19 related hospital admissions, financial relief for members suffering financial hardship and benefits for tele and video allied health services. As well as these measures, Doctors’ Health Fund provided premium reductions for two months, one of only three health funds to do so.

Q2. How has COVID-19 impacted the claiming trends and financials of private health insurance?

The COVID-19 pandemic has resulted in a unique set of circumstances for us all. The elective surgery suspension in particular, is not something many of us would have imagined, let alone planned for.

Health funds will have all seen reductions in claiming in April and May, due to social distancing measures and elective surgery suspensions. In turn, there will be an unplanned surplus in their short-term financials. Although, the extent in which this is a temporary aberration, and whether these claims will simply defer to a later period, are the biggest uncertainties we are still dealing with.

The return to ‘pre-COVID-19’ elective surgery is unknown territory. There have been varied predictions on whether we will see an influx of claims from surgery, once we return to its full recommencement. Questions also remain around the capacity constraints of our private hospitals and clinical practices, waiting times, and the continuing possibility of a ‘second wave’. While the public system would bear the burden of this care, the on-charging of these admissions to private health insurance would be probable.

With the financial year-end approaching, APRA, the prudential regulator of the health insurance industry, has already put the industry on notice that it will be scrutinising the financial statements of health insurers to ensure their reserving adequately caters for the projected bounce-back in claims. Such reserving would offset the surplus profits generated from the lock-downs.

As mentioned previously, health funds have responded with a range of financial measures to assist their customers, and many, including Doctors’ Health Fund, have guaranteed they will look to share any unplanned surpluses with members.

The industry has responded based on unfolding events, and time will tell if individual health funds’ actions are in fact commensurate with the ultimate downturn in claiming.

Q3. What would you say to customers considering downgrading or even dropping their private health insurance completely, in response to COVID-19 restrictions on accessing health services?

During the height of restrictions in April and May to contain the spread of COVID-19, there were certainly limitations to claiming on private health insurance, particularly for non-urgent treatment and certain allied health services. Measures implemented across the industry were designed to support members during these short-term disruptions. However, our needs to access health services and the appeal to access these in the private sector haven’t been removed completely during this pandemic, nor disappeared permanently.

Knee-jerk responses during this time could leave customers without the security provided by the private health system when they need it most. It is also important to consider potential tax implications, which may well outweigh any saving to premiums, and the need to re-serve waiting periods when they re-commence full cover once we return to some normalcy.

Commentary has been circulating that uses the events of COVID-19 to encourage customers to drop their private health insurance. While headline grabbing, this shows a fundamental misunderstanding of the role of private health insurance in Australia. While many of these commentators also acknowledge the benefits our dual private/public system brings to our population, its funding often gets conveniently ignored. We have a community rated system, with no discrimination, that requires a broad spectrum of the population to participate; healthy, unhealthy, young and old.

Q4. COVID-19 has changed the way we engage with services and it has shown how adaptable our society can truly be. How has private health insurance demonstrated itself as an adaptable industry, even beyond this pandemic?

COVID-19 has been a catalyst for us to reimagine how we can support the delivery and receiving of medical and allied health services, particularly in digital health. The coverage of tele and video consultations for allied health services has been a key initiative for us during COVID-19, and it has shown the possibilities and diversification available in the future of healthcare. Service providers within private health have also embraced digital health, from pregnancy care services to hospital in the home.

Collaboration will be key to maintaining this momentum beyond the pandemic, and it is important that we monitor patient responses and uptake to assess its viability as a supported practice. If anything, digital health certainly benefits our community by improving access to health services for those limited by their age, health or location.

Q5. What is the outlook for private health insurance?

Thankfully we have, to date, escaped the worst of the potential impact of COVID-19 on our population’s health. There is no denying COVID-19 has showcased the quality of our healthcare system, which is testament to all those who work in it.

In the absence of a vaccine, we now face the challenge of how to safely return our population to some level of normality, amidst continuing uncertainties. This gives rise to a new set of challenges.

As a flow-on from the inevitable economic downturn, we may see greater numbers of Australians downgrading or dropping their private health cover. This will impact both the public and private health sectors. Governments could face increased pressure with more Australians dependant on our public system. In turn, private health could be left covering those of higher health risk, putting greater pressure on premiums.

The government’s most recent industry reforms for private health insurance have been positive, however, there are elements of the private system that warrant further review to ensure continued sustainability. Our current fiscal situation could stall this progress as governments grapple with the fallout of their fiscal stimulus packages.

COVID-19 has shown that we can respond positively and adapt to jarring events in health when we have a clear plan, strong leadership and a resolve to unite behind a common purpose. There are learnings we can take from these events to carry into wider industry reform, to ensure we keep private health insurance a valued and sustainable part of our healthcare system.