Explaining the 2018 premium increase
Annual increases to health insurance premiums has become a fact of life for policy holders. We look at why they increase and what that means for you.
Today Bupa announced their lowest annual health insurance premium increase in 16 years. The average rate increase for Bupa customers is 3.99%, which translates roughly to $2 extra a week for singles and $4 a week for families. This is the lowest increase to health insurance premiums since 2002.
To put that in perspective, 2002 was a year where Nickelback, Avril Lavigne and Nelly topped the Billboard charts, Kath & Kim graced our screens for the first time, Steve Bradbury won Australia’s first Winter Olympic gold medal (by staying upright) and we were going through the worst drought in nearly 100 years. Even Ansett was still a thing (for the early part of the year).
You were probably in a fairly different situation yourself, 16 years ago. You might have just started primary school, and now you’re working. Or maybe you were working hard, and now you’re retired. Maybe there was no one else in your house, and now it’s packed to the rafters, or maybe everyone that once filled it has flown the nest.
Whether you look back fondly on that year, or you breathe a sigh of relief in comparison of where you are now, premium increases of any amount aren’t usually a happy moment. You might be thinking ‘why do they need to go up in the first place?’
While we often assume they only reflect the cost of health insurance (after all, an increase may make your policy cost more), any increase actually takes into account the overall cost of healthcare. Because health insurance, by nature, covers some, or all, of the costs of certain healthcare requirements, as their costs increase, so does insurance.
There are a few reasons why healthcare costs can rise. One is because healthcare technology is often more advanced (and more expensive). Another is because we tend to live longer now, so people need to be cared for over a longer period.
“If we look at where the money goes, about half the increase will go to pay people – like nurses’ wages and hospital running costs – the other half will be more operations and more things for our ageing community” says Managing Director of Bupa Health Insurance, Dwayne Crombie.
It’s important to us that we provide high quality healthcare at an affordable price. Part of that means following the lead of researchers and other health professionals to find out what works and what doesn’t. “We’re doing more, however sometimes we do have to cut other things that don’t really add value” says Dwayne.
These ‘non-value adding’ things might include surgeries that research says aren’t effective, like spinal fusion, or extras cover for things that are rarely necessary. We also work with other insurers, doctors, hospitals, the government and other medical providers to explore whole system reforms. “We spend a lot of time trying to negotiate the best deal” says Dwayne.
So, to find savings and keep increases to a minimum, we help drive large scale change, as well as making our own changes, which focus on making things more affordable and easier to understand. These include:
- passing on reductions in prostheses pricing following the government reforms last year
- taking steps to remove procedures that aren’t proven to have a clinical benefit
- looking at how to provide care in different ways
- reducing selected out of pocket and excess costs
- introducing a new Mental Health service category on selected extras cover and
- making products simpler so you know what you’re covered for and what your out-of-pocket expenses will be if you’re admitted to hospital.
So, when will this actually affect you? The changes take effect from 1 April this year. Before that, we will tell you about any changes to your premium or significant product changes via email or mail. Yours might be different to another policy, as each are reviewed individually. This helps us make sure that we can still pay claims at the current level, and is based on overall claims activity from the previous year.For more information on these changes, you can read our media release here.