Posted on Nov 24, 2010 by Sergio Ulloa
Australia's public health system, Medicare, provides a substantial cover of healthcare treatment. However the public health system is currently under threat. There is a shortage of medical staff, hospital beds, and medical facilities such as brain scans. Patients under the public health system are therefore having to endure considerably long waiting lists.
Medicare was introduced in 1983, allowing Australian citizens to receive emergency, hospital treatment, diagnostic investigations, and prescribed surgery for free. Under the public health system, General Practitioner appointments, chiropractic, physiotherapy, specialist services, and pharmaceutical medications are either fully or partially subsidized by the Government. Services not included under Medicare include ambulance cover, dental care, elective treatments, and access to private hospital services. Medicare covers 75 per cent of private healthcare costs.
The Australian Government wants more people to obtain private health insurance to ease the impact of large numbers of patients on the public healthcare system. With Government incentives and insurance rebates introduced in the last decade, there are now more reasons for Australians to take out private health insurance.
In 2000, the Government introduced the Lifetime Health Cover (LHC) policy, which provides incentives for younger Australians taking out health insurance. The initiative may have been proven successful, given the last quarterly report reveals the largest increase in Australian private medical insurance coverage were among individuals aged between 20 and 24.
With the LHC policy, people can save considerable amounts on their health insurance costs if they take out hospital coverage prior to their 31st birthday. Individuals who do not have hospital cover on the 1st July following your 31st birthday, will pay a 2 percent loading for every year they are aged over 30. The maximum loading is 70 percent. The exception is for individuals who took out hospital cover before 1 July 2000 and maintained it - pursuant to the initiative, as these individuals pay a base rate regardless of their age.
Further incentives have included the Private Health Insurance Rebate, introduced in 1999, which offers at least 30 per cent rebate on private health insurance costs. The rebate is increased to 35 per cent for people aged between 65 and 69 and 40 per cent for those aged 70 and over.
Many Australians are also taking out private health insurance to enable choice of doctor and hospital, as well as avoiding long waiting lists endured under the public health system.
Given the introduction of Government incentives to purchase individual coverage, private health insurance has soared in Australia, reaching record membership coverage in decades.
"This is the first time there has ever been more than 10 million people in Australia with hospital insurance since the introduction of Medicare", the Private Health Insurance Administration Council revealed in its' September 2010 quarterly report.
The Private Health Insurance Rebate has undoubtedly proven successful, given the upswing in private health coverage since the introduction of the scheme. In order to save $1.4 billion, Health Minister Nicola Roxon announced her intentions to reintroduce legislation aimed at means-testing the rebate. Although her initiative was blocked by the Senate, Nicola Roxon aims to use the growth in the number of health insurance policies to gain approval.
Despite high increases in insurance premiums, doubling the inflation rate, last year Australia had the highest incline of new memberships since 2001. Australia's Health Minister Nicola Roxon argued that the premium increase of 6.0 per cent this year was actually lower than last year's increase of 6.02 per cent. Although it was higher than 2008's rise of 4.99 per cent.
On the other end of the scale, the United Kingdom has experienced a record decline in private health insurance members, driven by recession pressures forcing employers and individuals to cut back in costs. This is the lowest record of coverage since the 1970s. The number of private health insurance members have fallen to around 7.2 million, 11.7 per cent of the population. This compares to 12.5 per cent private health insurance coverage among the UK population in 2007, market researchers Laing & Buisson report.
Given the increase in private health insurance coverage in Australia, the industry has grown considerably as a result. Key competitors in Australia on the health insurance market are Medibank Private, BUPA, Hospitals Contribution Fund of Australia, and HBF, listed by market researchers IBISWorld.
Over the last decade, leading health insurers have emerged with Medibank controlling 30 per cent of the private health insurance market. Around 100,000 health insurance policy holders were added in the last year, taking the total number of members to 3.7 million. Bupa Australia also shares a large proportion of the health insurance market with over 3 million members.
Medibank's revenue of $4.6 billion this year, was a 17 per cent increase on the previous year, with $4.4 billion coming from premium revenue. Medibank Private's expansion into healthcare, through the acquisition of Australian Health Management in 2009, increased the company's profit growth further, contributing $19 million in the last year. In the last 18 months Medibank has also purchased Health Services Australia and McKesson Asia-Pacific.
Following the merging of Bupa Australia with MBF in 2008, Bupa has become the second largest health insurer in Australia. In year end report 2009, Bupa Australia announced increased revenues and surplus with membership growth of 1 per cent since year end.
Overall there are good opportunities for further growth in the Australian health insurance market due to the government incentives that encourage the uptake of private health insurance, as well as the country's strong economy and growing population.