Australia's peak dental body is urging the federal government to encourage consumers to save for their own dental and allied health care, a move which it says can remove many of the weaknesses of the current system without undermining the existing hospital private health insurance (PHI) system.
The Australian Dental Association (ADA), giving its feedback on proposed PHI reforms, said, “Savings in an health savings account (HSA) can be used to fund any treatment that is needed, unlike PHI extras cover which is increasingly characterised by rebate exclusions, restrictions and caps of various kinds that often effectively prevent the consumer from accessing the full value of cover available for various treatment categories under the policy.
“Further, with an HSA system, consumer choice of health practitioner is not constrained by artificial price imposts on the services of providers who are not in preferred provider arrangements with the fund.”
ADA notes that on average, general treatment insurance returns less than 75% of premiums paid by consumers to them in the form of rebates each year, and for consumers who use only the dental cover provided under their policy, major for-profit health funds will typically only return around half of the cost of the premium in the form of dental treatment rebates. The proportion of the premium retained as gross surplus by the health fund covers management costs, the costs of administering claims, profit (if a for-profit fund) and some cross-subsidisation of hospital insurance offered by the fund.
By contrast, a consumer funding their treatment through an HSA can apply their health savings to the full cost of any treatment they need without artificial restriction, and exercise genuine choice of health service provider. Rather than losing 25% or more of the money they have spent on health fund policy premiums each year, without any appreciable benefit to show for it, they can accumulate and earn interest on unused health savings in their HSA over time to cover themselves against healthcare cost increases, and the cost of more expensive health interventions they may need as they age.
Furthermore, ADA argues, the full value of tax incentives used to encourage self-financing goes towards facilitating consumer access to dental and allied health care, rather than the current situation, where a proportion of the PHI tax rebate on general treatment policy premiums subsidises the management costs and profit margins of health funds.