HCF boss calls for health insurance reform

3 November 2016: In a recent exclusive interview with The Australian, HCF’s managing director Shaun Larkin calls for much needed reform to the private health insurance industry. Read full article from The Australian below…

Mr Larkin says change is needed in the health insurance sector to ­address affordability concerns, as he flags the product is evolving, with consumers taking more control of their health needs.

Mr Larkin said the question around the affordability of health insurance was becoming an important one for consumers.

“We need to work out how to solve it,” he said. “The challenge will be that solving it isn’t going to be through some incremental change of what we currently have in place, it will have to be significant change.”

Health insurers have been under pressure to address affordability, with many members wind­ing back their cover to save money. The industry has also been under fire for not being transparent enough on what policies cover.

Minutes of the first meeting of the private health ministerial ­advisory committee showed that inconsistent terminology over what was covered was a “major factor contributing to the complexity of private health insurance”, Mr Larkin said.

He said there was now enough concern being expressed by enough people that the status quo was not an option.

“The important thing in that environment is that what is put in place and the changes that take place don’t have unintended consequences,” he said.

“From our perspective, we think there are a number of ­opportunities for change that can be done relatively quickly that would make a difference in terms of ­affordability and value.”

Health insurers scored a small win in their fight to address ­affordability when Health Minister Sussan Ley announced last month she would cut some prices on the Prostheses List, which ­dictates how much insurers pay for surgical implants given to members.

While premiums are still set to rise in April, they will now rise by less than they would have before the federal government’s move.

Mr Larkin said understanding how risk equalisation worked in the industry so that it incentivised behaviours rather than acted as a disincentive was a crucial part of the broader industry changes that were being considered. “That is more likely to drive ­investment in things like out-of-hospital care and digital healthcare than may well be the case in the current ­environment,” he said.

Insurers are not allowed to risk rate premiums, so risk equalisation partially compensates in­surers with a riskier demographic profile by redistributing money from those insurers paying less than average benefits to those paying more.

Mr Larkin said he had seen the industry at its lowest and its highest point and everything in between.

He added that engaging with politicians and bureaucrats was something he had come to appreciate far more now than when he took the top job six years ago. “The reality is for any person in my job in a health insurer is we are transitioning,” he said.

“We aren’t organisations that pay invoices or just pass money around, we are actively seeking to improve the health of the people who buy our policies.

“Customers are increasingly active in seeking input in terms of addressing issues they have raised and we actively seek to encourage that.”

Mr Larkin said insurers were looking at how to design and deliver a product to align with people’s desire to take more responsibility for the management of their healthcare.

“There is a much clearer understanding today of the different circumstances of customers and the different needs they have,” he said.

Mr Larkin said when he took on the job, one of his challenges internally was getting the message on the need for change understood.

“I inherited an organisation that had been successful for decades, so there is sometimes a desire we should just keep doing what we are doing and a question of why is there a need to change,” he said.

He added the company was comfortable with the direction it had now set, which was significantly different to where it might have been positioned 10 years ago.

The not-for-profit health insurer started more than 80 years ago with people shaking the can in the pubs on the Balmain peninsula of Sydney on a Saturday afternoon to raise money for patients in the local hospital.

Mr Larkin said despite the changes in the industry, HCF continued to stay true to the philosophy embedded 80-plus years ago.

“That idea of people in the community helping each other continues to drive us today,” he said.