Medibank boss floats no-claim bonus amid health cover reforms

Medibank has outlines a scheme to give young Australians greater incentive to take out health insurance.

Medibank managing director George Savvides.

Young Australians would have greater incentive to take out health insurance, members who stay healthy would receive a no-claim bonus and long-time members would have their loyalty rewarded under proposals from the nation’s largest health fund.

Medibank Private managing director George Savvides has called on the Turnbull government to deliver landmark reforms that would allow funds to give “frustrated” members value for money, transparency and certainty over their level of care and expenses.

Mr Savvides said demographic and membership trends were driving up costs and making premiums unaffordable for some, as insurers sought to meet the needs of an ageing population with fewer younger, healthy members to help cover the costs.

With premiums set to rise again in April, the industry veteran called on the government to examine the low participation rate of young people moving off family policies and being hit by lifetime health cover loadings.

Under lifetime health cover, people who delay taking out insurance pay a 2 per cent loading on top of their premium for every year they are aged over 30.

“It would be clever for us to incentivate younger Australians to take out cover,” Mr Savvides said. “Should we offer them a higher rebate or should we start lifetime health cover at the age of 25? We think both options have merit.”

Participation also drops as people retire on fixed incomes and give up their insurance while they are still relatively healthy. Mr Savvides suggested they also have a higher rebate, or perhaps more manageable premiums.

Mr Savvides revealed Medibank Private had examined loyalty rewards, believing if insurers could offer corporate discounts of 8 to 10 per cent — taken up now by about 20 per cent of the market — they should be allowed to reward positive health practices.

Mr Savvides said members who did not claim on hospital cover could earn a 2 per cent reward on their premium, rising with each year without a claim to a level of perhaps 10 per cent. That reward technically would be held by the fund rather than returned to members, but would be available to help members cover out-of-pocket expenses as required.

While community rating requires insurers to offer the same policies to people regardless of health status, Mr Savvides argued incentives and penalties should be allowed to balance participation rates and make the industry more sustainable, especially if it improved health outcomes.

“In our assessment it actually improves the community rating effect because it reduces churn and rewards royalty, so the management cost for insurers goes down overall,” he said.

“It becomes quite a clever mechanism for rewarding people for staying healthy.”

Although the government recently ran an online survey that included a question on whether smokers should pay higher premiums, Mr Savvides said Medibank Private had done the sums and did not believe it was feasible. He said a 20 per cent premium increase for smokers would deliver a benefit to non-smokers — if ­either could be identified by the fund — of about 1 per cent.

“We don’t think that is a clever strategy,” Mr Savvides said. “And if you start with smoking, where do you finish? What other lifestyle choices would we target?”

Mr Savvides also called for standardised policy options and greater transparency, including making private hospitals and specialists quote upfront, to allow people to make informed choices.