A digital treatment for a private health insurer's malaise
Vinay Chand, Managing Director, Health Solutions
This article first appeared in Hospital and Healthcare in February 2020
Amid escalating public debate over the value of private health insurance (PHI), the government and key industry bodies are scrambling to take steps to reduce premium increases and counter the decline in membership.
Out-of-pocket expenses have taken centre stage. Half of all Australian patients faced out-of-pocket costs for non-hospital Medicare services in the last year. A report by the Australian Institute of Health and Welfare found this equates to around $3 billion in out-of-pocket expenses annually.
There is a growing perception that members are not receiving value for money from their premiums, having been left out of pocket for a service that would have been free in the public system. For example, it is common for parents having babies in the private system to incur out-of-pocket expenses of up to $10,000. A third (35%) of out-of-pocket expenses is spent on specialist services,1 while almost a quarter goes to GP gap payments. A further 12% is spent on diagnostic imaging services.2
With the number of Australians with private cover already at a low,3 common criticisms of PHI offerings are that they are not affordable, easy to understand and/or delivering truly patient-centred care experiences. Many patients simply believe that health insurance is not warranted.
The issue of gap payment is complex and there is no quick fix. The stakes are high. Private health insurance is a key component of the Australian healthcare industry. The industry provides coverage to almost half of the population (45.5%),4 and covers paid hospital benefits worth $15.1 billion and extras treatment benefits worth $5.2 billion in 2017–18.
Insurers are battling challenges rising out of an ageing population, rising chronic diseases, an ever-increasing demand for new treatments and more hospital beds,5 and negative customer attitudes. Although gap and fee transparency has been an increasing focus for the private health insurance industry, progress has been very limited.
Funds have made some efforts towards addressing the problem by providing lists of hospitals and providers that will not result in a payment gap for patients; however, timing is a challenge. Members often do not have the visibility of these at the right time and funds do not know when a member is seeking specialist services until the claims are received. As a result, patients mostly follow their general practitioner’s advice when choosing their specialist and do not have an opportunity to compare costs.
Transparency is key
New digital tools that can educate fund members by improving financial literacy and transparency for patients have enormous potential to treat this epidemic of distrust. These emerging smart technology solutions can provide an answer to the poor customer experience caused by large and unknown gap costs.
It’s imperative that health funds and hospitals alike use technology to educate the user and overcome some of the challenges while the government and industry regulators deploy a longer-term solution beneficial to the customers.
One leading not-for-profit health fund has launched a digital platform to inform their fund members about out-of-pocket expenses charged by individual specialists and to avoid or minimise gap payments. It is doing so by partnering with start-ups and private partners like Civica.
Another popular PHI provider introduced a ‘going to hospital tool’ that helps patients have an improved, more informed and potentially less costly experience during their hospital admission,6 transforming the customer experience and increasing patient perceptions of value provided.
Through our digital platform, ECF web — an online checking tool that identifies patient eligibility and excess hospital costs upfront in real time — we’re continuing to help hospitals give health fund members a better understanding of what their out-of-pocket expenses for in-hospital care will be. A similar solution for overall medical costs will resolve the issue we currently have with bill shock.
These types of digital solutions not only ensure transparency but also enable patients to make informed decisions about their treatments. In the process, members become better educated about what and how much their fund covers and improve their knowledge of their policies.
Rising out-of-pocket costs are afflicting patients and driving down patient satisfaction with private health insurers and hospitals. A solution is urgently needed before we reach a critical state. While the government and regulators work towards a holistic, long-term solution, digital tools can and should be used to bring much-needed transparency and competition into the system.