Private Health Insurance: Members Last?

This rant post has been coming for a while if I’m honest, but I generally like to keep things positive. Some recent experiences have pushed me to the point where I need to get stuff off my chest regarding private health insurance and “preferred providers” schemes.

Physiotherapy is a healing, people-focused profession. Most, if not all, Physios choose our career because we want to “help people” or “reduce pain and suffering” not because it was a highly paid, lucrative profession. Most Physio owners fall into business and not many would have started Uni aiming to be the CEO of a large business where profit is the main driver for what they do.

Physiotherapy in private practice from an economics perspective is not fantastically financially lucrative. Industry benchmarking tells us most Physio businesses operate at a 10-12% profit margin. Factors which affect profitability of a Physio practice include mainly

  • salaries of highly qualified Physio and admin staff
  • quality of care provided to clients being directly linked to appointment length (30 minutes vs 15 minutes for example)
  • Fees paid directly by clients or third parties like employers, workers compensation insurers etc

Private Health Insurance is an important component of this equation for private practices like ours. Being in a health fund makes Physio more affordable for a majority of our clients. Recently premium increases have made insurance less affordable for a lot of Australians. Insurers claim the cost of health care has eroded their profitability and driven significant premium increases. It is true, our fees increase from time to time to account for increases in all our expenses like rent, utilities, insurance and salaries. But, many health funds pay a set dollar amount as a rebate, and have not increased the rebate their members receive when they swipe their card and claim on a Physio visit. Some haven’t changed their rebate for a decade. The rebate as a percentage of the consultation fee is going backwards and your “gap” keeps widening. 

Private Health Funds try to improve their profitability by reducing the amount they payout in claims and increasing their premiums. Many of them do this by signing providers up to schemes with names such as “Member’s First”, “Member’s Choice”,  “Members Plus”. They market these heavily. The carrot for providers is that the health fund then advertises the provider as a preferred option for the health fund members, driving new patients to their practice. The positive for the client is that the fee will often be lower and the rebate higher.

In reality, the Health Fund is dictating to the Physio what fee they are allowed to charge, the fee is set and often is significantly below the market rate being charged to everyone else. There is no monitoring of quality or value of the health care provided, only what the fee is. Does this sound scarily like the USA model of health care? 

So the downside for the Physio is they are charging less for their service. BUPA is one of the largest Health Insurers and they have one of these schemes. They won’t tell us what the maximum fee is or what the rebate is unless we sign a contract with them and that takes up to 2 years to process. Going by advertised fees for a nearby clinic who is signed up, it looks like it’s at least 25% less than the market rate. Existing schemes that we do have numbers for have not increased the fee for 5 years. 

The maths of this is pretty simple for an owner. If you are making 10% profit seeing a patient every 30 minutes, and then drop your fees 25%, you can only stay afloat by seeing more patients, and the only way you can do this is by cutting appointment times to 20, or even 15 minutes.

From a patient perspective: you are paying significantly more for your health insurance, you are choosing a Physio based on an insurers fee setting arrangement, and then getting a shorter appointment time, after travelling further to get to your appointment. Does this sound like it is benefiting the Member?

From a Physio perspective, you may attract new clients, but ones that are shopping on price, not on value, expertise or outcomes. You are rushing appointments, spending the same amount of time on a new client as a follow up appointment and chasing your tail to stand still. You are trading your integrity for staying afloat.

From an insurers perspective you are limiting your expenses, increasing your premiums at triple the rate of CPI or wages and advertising that you are acting in the Member’s best interests.

It seems that these schemes should be named “Insurer First” or “Insurer’s Choice”. So when your Health Fund actively tries to get you to move to another practice for your Physiotherapy care, do it with your eyes open. The Insurer is the only one who won’t lose if you do. You will save money on the day, but at what cost?