On 1 April 2007, a new regime regulating private health insurance came into force. The Government has described the package of reforms as the most significant change to health insurance legislation in more than a decade. The Private Health Insurance Act 2007 and a collection of Private Health Insurance Rules propose to clarify and simplify legislation relating to private health insurance and provide a legislative framework for important reforms to private health insurance.
Central to these reforms is the introduction of Broader Health Cover which expands the range of services that can be covered by private health insurance. These services are broader than those traditionally allowed to be provided by health funds, hence the title Broader Health Cover. Part of Broader Health Cover is the ability for health insurers to fund chronic disease management programs ("CDMPs") for conditions such as diabetes, cardiovascular disease and asthma, and disease prevention measures. The intention is to allow health insurers to design and offer more flexible and innovative products that better help their members to manage their own health care. For pharmaceutical companies with a focus on chronic disease, CDMPs will be of particular interest.
Private health insurance regime prior to 1 April 2007
Previously, private health insurers were restricted in the insurance they could offer. Health funds were restricted from paying hospital benefits for services that assisted members in the management of their own health, if these services were provided outside the hospital. Under the old regime, hospital cover was primarily there to cover surgical procedures or in-hospital care, while ancillary cover was for treatments such as physiotherapy, optical or dental care.
Health funds were unable to offer insurance to cover some preventive health or disease management programs, which have shown to be effective in keeping people healthy and out of hospital. Moreover, they were restricted in their ability to cover certain preventive treatments and services which could easily and effectively have been provided as a substitute for in-hospital care. As a result, many patients were seeking in-hospital treatment to use their private health insurance when safe, suitable and possibly less expensive out-of-hospital services may have existed for that particular treatment.
Private health insurance regime commencing 1 April 2007
This situation has changed under the new legislation, with the Act and associated rules removing those restrictions. Combined with the Private Health Insurance (Risk Equalisation Policy) Rules 2007 and the Act, the Private Health Insurance (Health Insurance Business) Rules 2007 provide for private health insurers to expand hospital products to cover a broader range of services that substitute for or prevent hospitalisation, and categorise privately insured services as being hospital or general treatment.
Chronic disease management programs will be for people with clinically diagnosed chronic disease and will be designed to manage the disease in order to prevent hospitalisation, which would be inevitable without interventions to reduce complications. For example, management programs will be available to sufferers of conditions such as arthritis, asthma, chronic back pain, diabetes and congestive heart failure. The incentive for health funds to cover such programs lies in potential savings as a result of lower readmission rates to hospital and shorter hospital stays.
Where to from here?
Ultimately, it will be up to the individual health funds to determine what is covered by their products. On this basis, the starting point is for private health insurers to come together with health providers, doctors, hospitals and other groups to look at options or different programs and see whether they make sense from both a medical and commercial perspective. Pharmaceutical companies should stay in touch with developments in CDMPs as:
consumers of their products may be attracted to CDMPs; and
there is the potential for overlap with existing patient support programs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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