Private Health Insurance
Summit 2014
Impact of government rebate
amendments
Presented by: Mitchell Watson, Research Manage...
First amendment to PHI rebates
July 2012 – Rebates are income tested and broken into four
income levels:
– Incomes are ind...
Second amendment to PHI rebates
April 2014 – Rebates are adjusted annually by a rebate
adjustment factor i.e. the rebate w...
Second amendment to PHI rebates
2.75%
6.20%
0.968 30% 29.04%
Singles
Families
≤$90,000
≤$180,000
$90,001-105,000
$180,001-...
Based on the current formula, the
rebate will be around for some time
Year
Financial Year Rebate
2013/14 30.0% 20.0% 10.0%...
Second amendment to PHI rebates
6
Premium increases in April 2014
Weighted industry average increase – 6.20%
Single Couple
Single Parent
Family
Family
$91.8...
How the new rebate structures have
hit the hip pocket
Tier Base Premium Standard Tier 1 Tier 2
Rebate - 29.04% 19.36% 9.68...
How the new rebate structures have
hit the hip pocket cont’d
Tier Standard Tier 1 Tier 2 Tier 3
Rebate 29.04% 19.36% 9.68%...
Expected consumer decision
behaviour
They receive the news 30 days before the
increase hits…what do they do?
Decision
Beha...
So how are we observing funds
responding?
Placing restraints on costs within their control:
11
Restraints
Extras
Group Lim...
So how are we observing funds
responding? Cont’d
Product and Service Development:
• Life Stage Policies – allowing consume...
Maintaining engagement
Two main points of contact:
1. Time of renewal
2. When claiming
Initiatives by other insurers to in...
Yes, Private Health Insurance is now
less affordable, however…
14
Thank you
15
COMPLIANCE DISCLOSURE and LIABILITY DISCLAIMER
To the extent that the information in this report constitutes general advic...
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Mitchell Watson - CANSTAR - Changes to the way rebates are calculated has compounded the impacts of 1 April premium increases on PHI customers

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Mitchell Watson delivered the presentation at the 2014 Health Insurance Summit.

The 2014 Health Insurance Summit focused on how legislative changes affect the future of health insurance in funding, membership and services.

For more information about the event, please visit: http://bit.ly/HISummit14

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Mitchell Watson - CANSTAR - Changes to the way rebates are calculated has compounded the impacts of 1 April premium increases on PHI customers

  1. 1. Private Health Insurance Summit 2014 Impact of government rebate amendments Presented by: Mitchell Watson, Research Manager, CANSTAR
  2. 2. First amendment to PHI rebates July 2012 – Rebates are income tested and broken into four income levels: – Incomes are indexed annually – $1,500 for each additional child – Higher rebates available for those aged 65 and over 2 Level Single Income Family Income Rebate Standard $84,000 or less $168,000 or less 30% Tier 1 $84,001-$97,000 $168,001-$194,000 20% Tier 2 $97,001-$130,000 $194,001-$260,000 10% Tier 3 $130,001 or more $260,001 or more 0%
  3. 3. Second amendment to PHI rebates April 2014 – Rebates are adjusted annually by a rebate adjustment factor i.e. the rebate will be adjusted based on the difference between Consumer Price Index and the industry weighted average premium increase Consumer Price Index (CPI) Industry weighted average increase in premiums Rate adjustment factor Rebate 3
  4. 4. Second amendment to PHI rebates 2.75% 6.20% 0.968 30% 29.04% Singles Families ≤$90,000 ≤$180,000 $90,001-105,000 $180,001-210,000 $105,001-140,000 $210,001-280,000 ≥$140,001 ≥$280,001 Rebate Standard Tier 1 Tier 2 Tier 3 < age 65 29.04% 19.36% 9.68% 0% Age 65-69 33.88% 24.20% 14.52% 0% Age 70+ 38.72% 29.04% 19.36% 0% 4
  5. 5. Based on the current formula, the rebate will be around for some time Year Financial Year Rebate 2013/14 30.0% 20.0% 10.0% 1 2014/15 29.04% 19.36% 9.68% 2 2015/16 28.11% 18.74% 9.37% 3 2016/17 27.21% 18.14% 9.07% 4 2017/18 26.34% 17.56% 8.78% 5 2018/19 25.50% 17.00% 8.50% 6 2019/20 24.68% 16.45% 8.23% 7 2020/21 23.89% 15.93% 7.96% 8 2021/22 23.13% 15.42% 7.71% 9 2022/23 22.39% 14.92% 7.46% 10 2023/24 21.67% 14.45% 7.22% Based on an inflation figure of 2.75% and annual increase amount of 6.20%. 5
  6. 6. Second amendment to PHI rebates 6
  7. 7. Premium increases in April 2014 Weighted industry average increase – 6.20% Single Couple Single Parent Family Family $91.85 $183.03 $156.02 $188.83 Average Annual private health insurance premium increase based on policy holders – Hospital cover 7
  8. 8. How the new rebate structures have hit the hip pocket Tier Base Premium Standard Tier 1 Tier 2 Rebate - 29.04% 19.36% 9.68% Single $1,778.14 $1,261.77 $1,433.90 $1,606.02 Family $3,560.30 $2,526.39 $2,871.03 $3,215.66 Tier Standard Tier 1 Tier 2 Rebate 29.04% 19.36% 9.68% Single $17.07 $11.38 $5.69 Family $34.18 $22.79 $11.39 8 2014 – Average Hospital Premiums across the various rebate levels: The additional amount consumers are now paying due to the recent changes on the rebate structures:
  9. 9. How the new rebate structures have hit the hip pocket cont’d Tier Standard Tier 1 Tier 2 Tier 3 Rebate 29.04% 19.36% 9.68% 0% Single $17.07 $189.19 $361.32 $ 533.44 Family $34.18 $378.82 $723.45 $ 1,068.09 9 The two amendments to the private health insurance rebate have had the following overall impact on average private health insurance premiums: Item Standard Tier 1 Tier 2 Tier 3 Regular Big Mac Meal ($9.65) 3 39 74 110 Coffee ($4) 8 94 180 267 Movie Ticket ($15) 2 25 48 71 Day Care ($80 per day) 0 4 9 13 Weekly Food & Drink ($285) 0 1 2 3 The rebate impacts on families measured by common luxury and standard items:
  10. 10. Expected consumer decision behaviour They receive the news 30 days before the increase hits…what do they do? Decision Behaviour Stay Satisfied Complacent Switch Downgrade Policy Change Provider Cancel 10
  11. 11. So how are we observing funds responding? Placing restraints on costs within their control: 11 Restraints Extras Group Limits Item Limits Hospital Excess Waivers Constraints on preferred providers costs
  12. 12. So how are we observing funds responding? Cont’d Product and Service Development: • Life Stage Policies – allowing consumers to self identify which policy matches their life stage • Simplifying policies – fewer restrictions and more clarity • Greater networks • More benefit adds 12
  13. 13. Maintaining engagement Two main points of contact: 1. Time of renewal 2. When claiming Initiatives by other insurers to increase engagement: 13
  14. 14. Yes, Private Health Insurance is now less affordable, however… 14
  15. 15. Thank you 15
  16. 16. COMPLIANCE DISCLOSURE and LIABILITY DISCLAIMER To the extent that the information in this report constitutes general advice, this advice has been prepared by Canstar Research Pty Ltd A.C.N. 114 422 909 AFSL and ACL 437917 (“Canstar”). The information has been prepared without taking into account your individual investment objectives, financial circumstances or needs. Before you decide whether or not to acquire a particular financial product you should assess whether it is appropriate for you in the light of your own personal circumstances, having regard to your own objectives, financial situation and needs. You may wish to obtain financial advice from a suitably qualified adviser before making any decision to acquire a financial product. Canstar provides information about credit products. It is not a credit provider and in giving you information it is not making any suggestion or recommendation to you about a particular credit product. Please refer to Canstar’s FSG for more information. The information in this report must not be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any purpose, in whole or in part, in any form or manner or by means whatsoever, by any person without CANSTAR’s prior written consent. All information obtained by Canstar from external sources is believed to be accurate and reliable. Under no circumstances shall Canstar have any liability to any person or entity due to error (negligence or otherwise) or other circumstances or contingency within or outside the control of Canstar or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication, or delivery of any such information. Copyright 2014 CANSTAR Research Pty Ltd A.C.N. 114 422 909 The word “CANSTAR", the gold star in a circle logo (with or without surmounting stars), are trademarks or registered trademarks of CANSTAR Pty Ltd. Reference to third party products, services or other information by trade name, trademark or otherwise does not constitute or imply endorsement, sponsorship or recommendation of CANSTAR by the respective trademark owner. 16

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