Premium reviews

Teachers Health Fund’s CEO, Brad Joyce tells us more about the factors that influence premium reviews

Through a process of research and analysis, Teachers Health Fund reviews its premiums annually to ensure that its range of products and benefits remain affordable, competitive and sustainable. Actuarial advice is also obtained to confirm the reliability of the fund's projections and premium review. Any decision to increase premiums is not taken lightly. Ultimately the fund's pricing policy continues to reflect the need to meet the increasing costs of covering our members' claims if and when needed, while achieving a responsible level of operating surplus to ensure the commercial sustainability and stability of the Fund.

Teachers Health Fund's average premium increase over the past five years sits at 5.19%, significantly lower than the industry's 5.76%. This demonstrates how hard we work to keep any increases as low as possible, with the aim of making our products affordable and accessible for all eligible members. Our administrative expenses are one of the lowest in the industry, representing just 7% of contribution income and well below the industry average of 8.5%. We will continue to work hard to produce further efficiencies and lower administration costs over the longer term.

As a not for profit insurer, Teachers Health Fund operates at low but financially sustainable margins, guaranteeing that our members obtain value for their premiums whilst ensuring that we can continue to sustain and strengthen the business.

Healthcare costs continue to rise across the industry with Hospital and Medical benefits paid by Teachers Health Fund increasing by 67% in the past five years. This reflects two things:

Higher costs for services

The costs of healthcare in Australia are increasing across the board as a result of our ageing population leading to increased utilisation of health services, growth in chronic disease, advances in medical technology and higher charges by healthcare providers. For the June 2015 quarter, industry data indicates $4.6 billion was paid to providers, up seven per cent from the same period in 2014. These increased provider costs understandably put pressure on Teachers Health Fund's already low margins.

Prostheses benefit payments have been one of the fastest growing areas of healthcare expenditure over the past decade. Excessive prices for prostheses, such as replacement knees and hips, pacemakers and other medical devices, have contributed to premium increases. Currently the federal government sets a fixed-price benefit that private health insurers are required to pay on behalf of their members for over 10,000 internal medical devices. This can result in private health insurers paying well in excess of what public hospitals are paying for medical devices, sometimes twice as much as the public system, where there is no set price and greater competition around purchasing.

The Government has recently announced plans to reform prostheses pricing which Teachers Health Fund welcomes. Redesigning and renegotiating prostheses pricing is an important step in helping to keep premiums affordable and removing the cost burden on private patients.

Growth in claims

Claims costs remain the single biggest expense for Teachers Health Fund. Increased utilisation of services, in addition to a growing and ageing membership base, means it is vital that we hold sufficient capital to pay these claims, both now and in the future. Over the 2014/15 financial year, Teachers Health Fund's claims grew by $36.4m to $438.3m and our premium increases must reflect inevitable need to cover this growth.

Despite the increased pressures that the private health insurance industry is facing, our members can be assured that Teachers Health Fund is focussed on operating the Fund in a responsible and sustainable manner whilst providing enhanced products and services to our members. The Board and management are vigilant in monitoring and managing the escalating costs of healthcare and, through effective governance and risk management frameworks, we remain well positioned to meet these challenges.

As a not-for-profit health fund, any surplus generated by Teachers Health Fund is reinvested in the business for the benefit of its members, enabling the Fund to improve benefits and keep premiums as low as financially sustainable. On average over the past five years, the Fund has returned 91 cents in Hospital, Medical and Extras benefits for every dollar of contributions received.

We are focussed on member satisfaction and are proud of our industry leading member retention rate of 97%. We are dedicated to our members and are honoured that more than 280,000 people in the education community have chosen us as their preferred health insurance provider.