Are the health funds' bubbles bursting?

The two great issues facing Australian dentistry in the past twenty years have been:

• The explosion of dental numbers through the huge increase in Australian dental school places and dentists being included in the category of migrants designated as filling skilled shortages in Australia.
• The substantial inroads of the private health insurers.

Recently the government has deleted dentists from the skilled immigrant list, but there are substantial numbers of dentists who have entered Australia under this program and who have yet to pass Australian Dental Council examinations.  There is about a 50 percent failure rate and some dentists fail more than once.  Many of these dentists have been trained in dental schools which do not have the high standards of those mutually recognised dental schools in the UK, USA, New Zealand and South Africa.

Additionally, the huge expansion in dentists trained within Australia where the number of dental schools has jumped from five to nine in recent years, means that a huge proportion of dentists practicing have had little clinical experience.  These have tended to sign up with health funds as preferred providers in order to get work.  Naturally health fund members think that being a preferred provider means that dentists are of a particularly high standard.  In reality, some of the best and most successful dentists shun association with health funds.

With respect to private health insurers, the issue of funds profiteering from ancillary tables at the expense of dentists and dentists' patients has been widely known for many years. It is good to see the current ADA President raising important issues concerning ancillary health insurance.

Health funds exhibiting weakness

Between February 2012 and December 2014 it is reported that 1,576,409 health insurance policies were dumped, and a further 985,211 downgraded, with the industry regulator reporting just 5.4 million policies with hospital cover at 31 December 2014. The proportion of the population having health insurance has remained steady, so it is apparent that the comparators have caused a huge churn rate, with more expensive policies being dumped in favour of policies in other funds with cheaper options.

Huge health insurance churn

It's also apparent that since 17 March 2015, when the above was reported in the Australian, there has been a lot more activity on behalf of comparators, including significant television advertising and letterboxing. It seems likely that with large premium increases applying from 1 April 2015 onwards, many more health insurance policyholders will have taken comparators' advice to transfer to cheaper policy cover, and that this activity is continuing.

Also noted are the banding together of the mutual funds under a joint heading of 'members' own' to combat:

• BUPA, which remits its profit to its UK parent.
• ASX listed Medibank Private and nib, which have to satisfy shareholders as to profitability by paying sufficient dividends.

It is unlikely that BUPA, Medibank and nib can offer sufficient additional value to members compared to mutual funds to compensate members for funds' profits being directed to the UK parents in the case of BUPA or to shareholder dividends in the case of Medibank Private or nib, whereas mutual funds put all of their profits back into fund reserves to benefit members.

Medibank Private CEO sounds off