Interview With Dr Michael Armitage, CEO, Private Healthcare Australia On People Who Make Unhealthy Lifestyle Choices By Smoking Or Being Overweight Could Pay Higher Health Insurance Premiums Under Proposals Put To The Federal Government By The Commission Of Audit

Station: ABC News Radio
Program: Mornings
Date: 5th May 2014
Time: 9:45AM
Compere: Glen Bartholomew
Interviewee: Dr Michael Armitage, CEO, Private Healthcare Australia

Well, people who make unhealthy lifestyle choices by smoking or even being overweight would pay higher health insurance premiums under the proposals put to the Federal Government by its Commission of Audit. At the moment, health funds here aren’t allowed to adjust charges according to an individual’s health.

Dr Michael Armitage is the CEO of Private Healthcare Australia which represents 21 health funds throughout Australia. He says it’s a difficult proposal with implications for the cost of policies for everyone.

MICHAEL ARMITAGE: Well Glen, it’s one of the issues that is most, perhaps, misunderstood but frustrating for people who hold health insurance policies. It’s the sort of issue that we are asked about all the time. And people say why can’t it happen? However, the dilemma with it is that it does break the principle of community rating.

And that is the difference between life insurance and health insurance, or fire insurance and health insurance. Because the health insurance population is rated as a community rather than as an individual risk and that is done solely because the really sick people possibly couldn’t even afford health insurance if they were risk rated. So it’s certainly something that is of interest. I think we will have to have a look at all of the figures and I think the population of Australia should say, show us what the policies will cost if in fact the principle of community rating is broken.

GLEN BARTHOLOMEW:: Is it very different though to companies such as the NIB already offering discounts to non-smokers for example?
Well at the moment they don’t. They can’t do that.
GLEN BARTHOLOMEW: In New Zealand they do.
MICHAEL ARMITAGE: Oh that’s in New Zealand. But that’s not in Australia. And their health insurance market is a completely different one. So I’m not saying it can’t be done. Administratively it might be difficult. But it certainly can be done and is done in other parts of the world. But it is a pretty fundamental change to the health insurance market.

And it’s not just a case of the insurer saying oh we don’t want to do it. It’s actually based in good solid fact which is that if someone who is older and sicker and is going to use the health system much more often is going to have to pay, perhaps, five or six times what they are paying now because they are risk rated rather than community rated. That’s something that the community needs to understand before the change is made.

GLEN BARTHOLOMEW: Former Abbott advisor Terry Barnes is quoted in the papers today as saying it’s perfectly reasonable for insurers to bury the premiums on the basis of a person’s voluntary choices like smoking or drinking or failing to comply with some disease management methods.
MICHAEL ARMITAGE: I understand exactly why he might say that and that’s the sort of issue that people raise with me on a regular basis. I do reiterate this is not a new principle that the Audit Commission’s come up with. I think there are several things about that. One is if someone is a smoker there is clearly an addictive element to that. People may have made a choice when they were a teenager and they may be greatly regretting that choice now and so is that fair? I don’t know. Perhaps society would say that it is.

Certainly, obesity is not always just a lifestyle choice. If it were just a lifestyle choice most obese Australians actually would change the way they are. Remember there are lots and lots of endocrinology reasons and poor food choices and all that sort of stuff, so it’s not just easy. But again as I say it can be done, it’s not new but it would lead to a pretty fundamental change in the way health insurance is paid for and of course if you are young and fit and healthy and go to the gym and don’t smoke, you would like this change. However, if you are a little older or perhaps unwell and maybe obese and maybe have a chronic disease like diabetes or something, this change in fact would be bad for you. So that’s the choice that we’re going to – Australians are going to have to make in chasing this rabbit down the burrow.

GLEN BARTHOLOMEW: Because indeed something like drinking and smoking may be seen as a voluntary choice, a personal choice, but something like weight gain can be for a myriad of reasons. How would you tell the reasons behind someone’s excess weight?
MICHAEL ARMITAGE: Well, that is exactly right and of course the other thing is at the moment no one knows quite how this will be implemented but what people I imagine will be asking is when they go to sign the form which says will I have a premium at X or X-minus a certain quantity, they’re going to be asked to volunteer whether they smoke or not or whether they are obese or not or whether they undertake a weight management program or whatever. Who knows whether they’ll actually tell the truth. I mean there are lots of opportunities in fact for this to be gamed and that again is a bad thing for the overall insurance market – health insurance market.
GLEN BARTHOLOMEW: So despite the recommendations keep the status quo?
MICHAEL ARMITAGE: No I’m not saying that. It requires a lot of investigation before the community says yes, that’s the most fantastic idea, let’s do it. It’s very attractive superficially. People raise it with us all the time but when the objections which relate to the older and sicker people having to pay vastly increased premiums because they would then be insured on their risk, if you get rid of whole of a community rating, people tend to say oh maybe not, maybe we should think about it.

Now, I do acknowledge that the Audit Commission is only saying let’s do it for some particular things but already I think we’re seeing that some people are saying well let’s expand that. So I think this is a case of the boy taking his finger out of the dike basically. Perhaps we could investigate it, but everyone needs to understand that there’ll be some consequences.

GLEN BARTHOLOMEW: Let’s watch out what might flow if you do so. Dr Michael Armitage, the CEO of Private Health Care Australia informing us all about the implications of such a move. What do you think? You can have your say. It’s the subject of our Web Poll question today – – should people who smoke or are overweight pay more for health insurance? You tell us. It’s only just gone up so it’s early days. You can influence the vote.
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