Mandatory Code of Conduct essential for regulating health insurance companies

A MANDATORY Code of Conduct is needed to bring the unconscionable conduct of health insurance companies to heel. Their bad faith tactics must be dragged into the light.

The clandestine nature of contracting between private hospitals and the health insurance industry negatively impacts patient care, consumer choice and has forced hospitals to close or shutdown services.

The Australian Private Hospitals Association, as the peak body representing private hospitals across the country, has asked the Prime Minister, Treasurer and Health Minister to safeguard the private hospital system that treats over 5.14 million patients a year.

The 12.5 million Aussies with private hospital insurance are paying more but getting less for it. Annual premium hikes are banked by insurers rather than trickle down to healthcare providers.

The health insurance industry in Australia is pocketing the biggest profits in its history, some $2 billion a year. That's quite a feat during a cost-of-living crisis and an era where annual premiums increases are at historic lows.

On top of that, in 2023-24 the insurers increased their 'management fees' by a whopping 18% to reap another $3.5 billion a year from customers' premiums.

So the fat cats are getting fatter, hospitals are pushed to closures while the contract tactics of insurers reduce patient choice, access and put a cap on patients' clinical care needs.

Insurers use their market power to not pass through adequate payments to cover health costs, with the shortfall in funding to private hospitals running at $1 billion a year.

The unequal bargaining position in contracting between hospitals and insurers makes ministerial urges to sort it out yourselves unworkable in what has become a murky and fraught arena rife with market abuses.

These include take-it or leave-it contract offers. Insurers refuse to negotiate in good faith, making one inadequate offer only and using market power to influence other parties, for example doctors, to effectively boycott hospitals that do not comply.

Bundling and provisions to penalties hospitals for referrals. These impose restrictions on hospital operators for the post-hospital care of patients to limit the duration of patient rehabilitation. These pre-determined timeframes are imposed by insurers regardless of patient clinical needs.

Playing hospitals against one another via the imbalance in information access between most hospitals and insurance giants disadvantages hospitals. Insurers are privy to more data, including the practises and caseloads of hospital competitors, and use this information in negotiations to force positions.

Failure to pay on time, where payment schedules are notoriously unmet, and delays of many months are typical.

Delays in contracting, whereby contract renegotiations are being delayed by months and in some cases by more than a year.

The failure to contract at all. An increasing trend sees insurers simply refused to re-contract, forcing affected insured patients to pay significant out-of-pocket expenses or be funnelled to other hospitals. This distorts the market based on who insurers favour based on unknown criteria.

Aggressive audits are regularly employed by insures go beyond the remit of insurers' rights to patient information. In many instances insurers are insisting on patients' full medical history, not just the procedure, treatment and services involved in the relevant admission.

These practises have been allowed to infiltrate and fester in contracting negotiations over a long period of time, to now be considered 'the norm'.

Unaddressed, these practises will continue to reduce patient access and choice, more services will close, investment in quality further compromised, and private hospitals' vital role in supporting the entire health system will falter – resulting in massive new caseload pressure and costs on public hospitals.

A Mandatory Code is a positive way to ensure transparency, fairness and proper funding. Enforceable protections and minimum standards provide certainty, stop insurer abuses, restore equitable prices and protect Australians' right to quality healthcare.

Such a Code with an arbitration model and price transparency would cost taxpayers and patients nothing, but it would make insurance companies accountable. It is the least interventionist option, so should be palatable to government, and would be quick, easy and positive in holding all parties to account.

A Voluntary Code, established in 2001, lapsed after just a few years as the inbuilt review mechanism was never fulfilled due to health insurer intransigence.

The lack of price transparency in contracting, along with bad faith tactics employed by insurance companies, is reducing quality and limiting patient needs to line the pockets of insurance companies.

Private hospitals are up for a transparent contracting system overseen by the ACCC. We have nothing to hide. If health insurers think their contracting tactics pass muster then, surely, they too have nothing to hide?

Brett Heffernan is Chief Executive Officer for the Australian Private Hospitals Association. Published in the September-October Edition of Australian Doctor magazine (available by subscription only).

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