Industry Project Report On The Australian Private Health Fund Industry

3248 words - 13 pages

Executive SummaryPrivate Health Insurance occupies a significant but ambiguous position within Australia's health care system. It is a voluntary facility for private funding of hospital care and ancillaries, sitting alongside a compulsory tax-financed public system (Medicare) that is available to all. It is also constrained by regulations designed to pursue similar non-discriminatory access objectives to those in the public systemDeclining membership numbers, particularly among the young and healthy, has led to concerns about the longer term viability of private health insurance (Brisbane Institute, 2003). Some even see a crisis developing in the industry, fuelled by the fact that despite generous government incentives and funding, most funds are unable to perform profitably.The paper follows up these concerns and provides an analysis of the industry. It seeks to present an insight into the major factors which drive the conduct and performance of the Australian Private Health Fund Industry and looks to explore the rationale behind the actions of the organisations within. It discusses its future viability and examines steps required for their success.Introduction to the IndustryPrivate Health Insurance in Australia has a very long history, starting in the early 1800's with the importation of friendly societies from Britain (Hopkins et al, 2001). In 1952, the National Health Act was introduced which has since governed the private health insurance industry. It is noted, however, that private health insurance funds are not insurers in the generally accepted sense of the term. They are closer to co-operatives with all members' contributions being pooled and substantially paid out as benefits (Quinn, 2002).The history of private health insurance in Australia is a chequered one, due in part to both the existence and nature of publicly financed and/or provided health care (Hopkins et al, 2001). Australia had, at one point in time, the distinction of being the only country to have instituted compulsory universal health insurance and then removed it (Hall, 1999), only to have re-instituted it with the introduction of Medicare in 1984.By 1997 only about 30% of the Australian population was covered by private health insurance and using what has been labelled as a "carrot and stick" approach, the government implemented three policies to alternatively entice and coerce Australians into joining private health funds (PHIAC, 1997). These were the Private Health Insurance Incentives Scheme, the Private Health Insurance Incentives Act 1998 and lifetime community rating. They were essentially either financial or equity incentives.Since the introduction of Medicare, private health insurance has diminished considerably in terms of its coverage of the population, but has maintained its contribution to the funding of health care.Figure 1: Facts about Private Health Insurance.Source: PHIAC Annual ReportIntroduction to the ParadigmsThe model of the Five Competitive Forces...

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