CEO of Private Healthcare Australia Dr Michael Armitage responds to a comment from CEO of NIB Health Insurance Mark Fitzgibbon that health insurers should be able to charge higher premiums for people who make poor lifestyle choices

 

Transcript
Station: 3AW
Program: Drive
Date: 5th May 2014
Time: 4:10PM
Compere: Tom Elliott
Interviewee: Dr Michael Armitage, CEO, Private Healthcare Australia
TOM ELLIOTT:
Again, it’s probably up to the health insurance industry. What do they regard? Would they regard people who did a lot of exercise might suffer a few injuries, are they a better bet than people who do absolutely no exercise whatsoever? Our next guest might have an idea. He’s the CEO of Private Healthcare Australia, Dr Michael Armitage. 

Dr Armitage, good afternoon.

MICHAEL ARMITAGE: Good afternoon.
TOM ELLIOTT: Now, what do you think about what Mark Fitzgibbon has said, the CEO of NIB Health Insurance. Should heath care companies – health insurance providers, I should say – should they be allowed to discriminate against different people based on lifestyle choices?
MICHAEL ARMITAGE:
Well firstly, let me say that the recommendation that’s come to prominence because of the Audit Commission report is nothing new. This is something that’s been raised with us as an industry time after time after time because it sort of seems sensible, doesn’t it?
TOM ELLIOTT: Well…
MICHAEL ARMITAGE: And we understand that. However, one of the dilemmas is that the whole health insurance market runs on what’s called community rating as opposed to risk rating. For argument’s sake, house insurance and fire insurance and car insurance and so on are all risk-rated. In other words, if you’re a greater risk, you pay more. The dilemma is in health insurance, if you risk rate, what that means is someone such as your father that you just quoted who is older and has smoked and is going to be more of a burden on the health system is likely perhaps to be charged prohibitive amounts to be in the health insurance company because their risk is so high.
TOM ELLIOTT: Mmm.
MICHAEL ARMITAGE: So what the system does is it says, look, we’re insuring a community. We want the community to be able to afford health insurance premiums if they want to take it, and the only way we can do that is to spread the risk. And so we spread the risk around the community, and hence, it’s what’s called community rating.
TOM ELLIOTT: Okay. But, I mean, Mark Fitzgibbon points out that’s NIB health care – or, NIB Health Insurance, I should say, also operates in New Zealand. And in New Zealand, non-smokers get cheaper premiums than smokers. Now, that does seem reasonable to me.
MICHAEL ARMITAGE: Of course it does. Seems reasonable all the time because it is reasonable. But until you then say, okay, so the effect of that is the people who are sicker and who are more likely to use the system will continue to pay higher and higher premiums, the community needs to know all that detail before they say yes, what seems like a very good idea and reasonable one is what we want to address.
TOM ELLIOTT: Yeah.
MICHAEL ARMITAGE: And the New Zealand example is a little but spurious because their whole market conditions are different from Australia.
TOM ELLIOTT: Is it possible that the higher insurance prices might actually cause people to stop the bad behaviour or the, you know, the bad lifestyle choices, whether it’s eating too much, drinking too much, or smoking too much, or whatever it is?
MICHAEL ARMITAGE: Well, look, that assumes that all of those things are choices. What about if someone starts smoking when they’re in their early teens? That’s hardly a lifestyle choice. That’s peer pressure and all the other reasons…
TOM ELLIOTT: Sure.
MICHAEL ARMITAGE: …why people take up smoking, and then it becomes addictive. If it wasn’t addictive, everyone would give it up because it’s such a dumb habit in my view.
TOM ELLIOTT: Well, plenty of people have given it up.
MICHAEL ARMITAGE: Yeah, but plenty of people haven’t, too. They might have tried time and time and time again and haven’t been able to give it up. Is it reasonable? I don’t think that’s necessarily a lifestyle choice. There are lots of reasons why people are obese, which can relate to things as simple as not a good knowledge about what’s appropriate exercise regimes or what is appropriate food.
TOM ELLIOTT: Mmm.
MICHAEL ARMITAGE: I mean, the fast food pressure, advertising for fast foods, et cetera – they’re aimed at the people who maybe don’t take the best decisions.
TOM ELLIOTT: Well, I think most people would know that eating fast food is bad for you. People might feel they don’t have much choice or whatever. But we all know a diet of three meals at a takeaway food restaurant every day will not be good for you. But look, be that as it may, I mean, I guess the issue is, what you’re saying is, that under the community insurance model, everybody carries the can for everybody else. So it’s a bit like the TAC. We all pay the same rego and third party insurance for our cars whether we’re an 18 year old driving a car or a 50 year old who’s never had an accident before, it’s the same. You’re saying it should remain the same for health insurance?
MICHAEL ARMITAGE: I don’t know that I’m saying it definitively as that, Tom. What I’m saying is it’s not just as easy as saying, golly, that seems the sensible thing to do. Let’s do it. There are real consequences for the whole system if we were to remove the community rating principle. Can be done – I mean, America – in America, health insurance is provided on a risk-rated basis. Most people don’t want the same sort of system as they’ve got in America, and that is the prime difference between our insurance and America. 

You might remember the movie Sicko, which got vast publicity all around the world as being one of the sort of dreadful things about American health insurance. The real difference is they’re risk-rated, rather than community-rated. So all I’m saying is, if we’re going down this path, we need to be very clear as to what all of the effects are, and then if society says, look, we want to do that because we think it’s sensible, but we know the risks, we’re still happy to do it, that’s fine. You know, we can cope with that. It’s been done, it can be done, but it’s not just as easy as it seems and there are really quite major consequences.

TOM ELLIOTT: Dr Armitage, thanks for your insight and for your time.
MICHAEL ARMITAGE: Thanks, Tom.
TOM ELLIOTT: Michael Armitage there, CEO of Private Healthcare Australia, makes a very good point. 

The Australian system is community-based, and as he says, the American system is risk-based. So if you’re perceived to be a high risk even if it’s through no fault of your own, you will struggle to get health insurance. And if you’re the sort of person who – or, frankly, we have very cheap health insurance. In America, you probably don’t even need it. I don’t know. It’s a difficult one.

I must say, I’ve wrestled with this for some time. Part of me thinks that, look, in Western medicine most of what we do these days is all based on people’s lifestyle choices. Whether you’re a mountain bike rider who goes too fast down a cliff and smashes your face in, well, that’s your decision to have done a risky sport, but I guess our system should take care of you. Whether you sit around and eat takeaway food all day and get absolutely no exercise. Whether you choose to smoke. Most of the things our medical system deals with are, in a sense, related to our lifestyles. 96900693. 131332. But it does mean that if you lead a rather healthy, abstemious life your health insurance premiums subsidise those who don’t.

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