Affordability, access and equity: the issue of private health insurance

The complexity, cost and lack of transparency in the private health insurance industry is making it increasingly difficult for vulnerable Australians to access the psychiatric care they need and deserve.

Despite the fact that mental illness represents one of the largest burdens of disease in Australia, 13 per cent of the non-fatal burden of disease and 24 per cent when you include substance use disorders, fewer than half of all private health policies from the major insurers cover the cost of admission into a private psychiatric facility.

Is it morally justifiable for insurance companies not to cover such a large percentage of the burden of disease?

Increasingly restrictive policies for psychiatric care mean that more and more people are finding that they are not covered for a range of psychiatric services. Many policies, in some cases even top level private health policies, do not offer cover for ongoing psychiatric services such as out of hospital care, outreach programs, day programs, checkups, consultations and electro-convulsive therapy.

There is no doubt that private health insurance is an important part of the health system in Australia and covers valuable services and care. We know that it affords people greater choice in the provision of treatment, coverage for services not covered by Medicare, and that it also offers shorter waiting times on some services. Importantly, by providing cover for private services the private health insurance industry does take the pressure off an over-burdened public system. As of December 2016, 46.6 per cent of the Australian population had private hospital insurance policies.

Currently there are 68 private psychiatric hospitals across Australia providing 3,200 specialised mental health beds. These services are accessed by 36,000 people each year with 63 per cent of overnight stays being for people aged 25-44.

The Royal Australian and New Zealand College of Psychiatrists (RANZCP) is particularly concerned about the limited coverage for psychiatric care currently available under many private health insurance policies, the increasing out-of-pocket costs for consumers, and the lack of comparative information about what the policies actually cover.

The Private Health Insurance Act 2007 indicates that people are only required to serve a two month waiting period to be covered for psychiatric services, even if they have a pre-existing condition. The Act also says that all hospital policies must include a ‘minimum benefit’ for psychiatric care. The reality, however, is that the ‘minimum benefit’ often only provides limited coverage and consumers are left with significant out-of-pocket costs.

The lack of information available about what a person’s policy actually covers is also of great concern and makes it difficult for people to make informed decisions. The RANZCP regularly receives feedback that many people have poor experiences in trying to get access to accurate and complete information about their private health insurance policies.

Limited information about policy exclusions such as pathology and radiology treatments, multiple psychiatric admissions and a limited number of electroconvulsive treatments (ECT) are just some of the areas we hear about. Some people have also discovered that their policy does not fully cover psychiatric admission to hospital and they have then been referred to the public system which we know is already overstretched. Others have been advised that the waiting period for psychiatric services is 12 months when it is, by law, actually 2 months.

Young people also have been given advice by health insurance companies that diminishes the importance of taking out psychiatric cover.

Another area requiring attention is the need for greater parity of care in the treatment of a person’s physical and mental health needs. Patients who are admitted to a private psychiatric hospital for the treatment of a mental health disorder should be able to have their co-existing physical health needs treated at the same time, whenever possible.

There is extensive evidence that people with complex mental illness have higher rates of chronic physical illness compared to the general population. For example, a person with a serious mental illness is two to three times more likely to have diabetes, six times more likely to die from a cardiovascular disease, and generally more likely to die from almost all key chronic conditions.

On this basis, the experiences of people with private health insurance, who have combined mental and physical health needs, can be particularly detrimental. Many mental health consumers are already in a situation where they experience significant gaps between what is covered by their private health insurance policy and what they must actually pay in terms of their mental health care.

It is an artificial divide and contradictory for private health insurers to separate the costs of care for both physical and mental health. This situation is discriminatory for people with mental health conditions and reinforces the stigma that they can face on a daily basis.

Most importantly, this approach is detrimental to patients and society as a whole if patients actively avoid treatment for their physical health conditions due to the likelihood of significant out-of-pocket costs.

The RANZCP is advocating that the Government consider private health funds’ psychiatric cover within the broader review of private health insurance with a view to improving transparency and understanding for consumers.

We also believe that it is crucial that educational tools are developed for consumers, carers, psychiatrists and health fund providers to raise public awareness of the risk factors associated with mental illness and the physical health needs of people with mental illness.

In recent years great strides have been made in destigmatizing mental illness and increasing the knowledge and understanding of the wider community. Unfortunately, at the same time, many private health insurance companies have restricted access to psychiatric services and made it more difficult for people to navigate the complexities of private health insurance and manage their mental illness.