Health fund predicts big exodus
19 05 08 - 18:03
Leo Shanahan and Ari Sharp
May 20, 2008
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PRIVATE health funds are budgeting for an exodus of customers because of changes to the Medicare levy threshold.
Private health insurer NIB became the first insurer to detail expected losses, predicting a "shock loss" of 25,000 policy holders after the changes kick in on July 1.
The exodus of 6% to 8% of the publicly listed insurer's customer base would be exacerbated by a projected drop-off of 13% to 17% in future sales growth.
NIB said those likely to drop out were younger policy holders and those with more basic cover, who were more likely to be motivated by avoiding the surcharge.
NIB's share price plunged more than 20% last week after the Government announced it would lift the income threshold for the Medicare surcharge, which applies to those without private health insurance, from $50,000 to $100,000 for singles and from $100,000 to $150,000 for couples.
Insurers will not be able to raise premiums until next April, but the surcharge change is likely to heavily influence the industry's approach to its next review. Premiums need to be approved by Health Minister Nicola Roxon.
The estimates follow the release of a contentious report commissioned by the Australian Private Health Insurance Association, which claimed that almost a million people will leave private health funds as a result of the budget decision. Victoria is projected to lose $440 million in health revenue.
A spokesman for state Health Minister Daniel Andrews said the Government was concerned about an influx of patients from the private system and Victoria could demand more cash from the Federal Government.
"We're concerned that these extra patients will eat up any expected additional Commonwealth funding under the health care agreements," he said.
"We'll certainly raise it at the next health ministers' meeting."
Ian McAuley from the Centre for Policy Development said NIB's poor outlook was partly because it issued large numbers of cheap policies and those customers would have the strongest incentive to dump the coverage.
Mr McAuley said the threat to the industry was being overstated. "The first-round effect will be a drop-off in private health insurance, but these are people who are largely not claiming, and there will be no change in aggregate resources for patients in hospitals," he said.
The brawl between the Government and private insurers widened yesterday with the head of the Australian Health Insurance Association, Michael Armitage, accusing the Government of breaking election promises by planning to make private hospitals foot more of the bill for private patients treated in public hospitals.
Currently patients with private health insurance can enter public hospitals as private patients, with the public system and the insurer sharing the cost of the treatment.
Before the election, Ms Roxon promised the industry that Labor would not introduce "equivalent payments", whereby a health fund would be charged the cost of that patient in a private hospital, but she has now indicated that the Government is examining the proposal after an outcry by the states.