When Is Private Health Insurance Not a Good Thing from an Economic Perspective - Coursework Example

When Is Private Health Insurance Not A Good Thing from An Economic Perspective? Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Executive Summary The need for a health care system which assures quality health care for all has given rise to the private health insurance providers. The private health insurance providers have given a relief to the public health insurance providers hence ensuring quality health care to all. Due to the high pressures on the public systems, the government has also made a move to sustain private health insurance. In Australia, the government has given rebates to the private health insurance providers. However, private health insurers are not always a good option from an economic perspective. The report will analyze some of the aspects of private health insurance which make it inappropriate. Some of its aspects which will be discussed include cost, accessibility and exclusions among others. Lastly, the report will give recommendations as which an individual should consider while acquiring a private health insurance cover. Table of Contents Executive Summary 1 Table of Contents 2 When Is Private Health Insurance Not A Good Thing from An Economic Perspective? 3 1.0 Introduction 3 2.0 Analysis 4 2.1 Overview of Private Medical Insurance 4 2.2 Cost 4 2.3 Access 6 2.4 Exclusions 7 2.5 Other Factors 8 3.0 Recommendations 9 4.0 Conclusion 9 References 10 Australian Government, (2012e). The Right to Change, Private Health Ombudsman, 1-4 11 Bennett, C.(2010). Restrictions and Inclusions In Private Health Insurance, Consumers Health Forum Of Australia, 1-14 11 Deloitte, (2011).Australian Health Insurance Association Economic Impact Assessment of the Proposed Reforms to Private Health Insurance, Commercial In Confidence. 1-64 11 When Is Private Health Insurance Not A Good Thing from An Economic Perspective? 1.0 Introduction Private health insurance has elicited a lot of fuss in the medical insurance field. The fuss has been with respect to its appropriateness in providing quality services to its clients. There lie several advantages and disadvantages associated with a private health insurance cover. All in all, the health insurance field cannot do without private insurance. This is due to the fact that private practitioners reduce the amount of pressure exerted on the public health insurance systems. For this reason, many governments in the world, with Australia included have made several moves aimed at ensuring that private health insurance is sustainable (Australian Government, 2011c). The following report gives reasons as to why private insurance covers are not always appropriate from an economical perspective. 2.0 Analysis 2.1 Overview of Private Medical Insurance The need for a medical insurance which is able to respond fast to the needs of a patient was the reason behind the establishment of the private medical insurance. In addition to this, private medical insurance is able to give a personalized insurance care to its clients as opposed to public medical insurance (Litow, 2007). Since the government cannot be able to provide medical services and insurance to all people, the rise of the private medical insurance and medical services has brought with it the much needed relief on the public resources. This is the reason as to why governments in various parts of the world are moving in to subsidize the services offered at the private medical insurance firms so as to guarantee basic medical care and insurance to all (Australian Government, 2012b). However, there are some economic, professional and social negative aspects of private medical insurance which discourage people from seeking the private medical insurance services. The following section will analyze these aspects with reference to the economics of getting a private medical insurance cover. It will show when it is not a good thing to go for private health insurance from an economic perspective. 2.2 Cost One of the major disadvantages of private health insurance is its high cost. Due to the personalization of services; which is one of the issues which lure people into going for private health insurance, the cost of private health insurance is higher (Deloitte, 2011). There are several factors which lead to the high cost of private health insurance. One them is the increased / personalized medical services given via private health insurance. More often than not, private health insurance is associated with increased efficiency as compared to public health insurance (Private Health Care Australia, 2012). Due to the increased costs of ensuring that the personalization of health insurance and medical services is available, there is an increased cost which must be borne by the person seeking a premium. Another factor which increases the cost of private health care is administrative costs. Due to the high level of efficiency that is desired of from an insurer, he / she must incur extra administrative costs as compared to public insurance. In most cases, the response time of private insures is very high as compared to the public insurance. Secondly, most private health insurers are linked with private hospitals that are equally expensive as compared to private insurance. In order to ensure that the practices of the insurers are synchronized towards improving insurance efficiency, the costs of the premiums are hiked. Another reason as to why private insurance is costly is due to the market forces which affect insurance covers. Therefore, it is not advisable for an individual to seek private health insurance if he/she does not have an income which will be able to support the high premiums associated with it. In such an instance, it is advisable for an individual to seek services from a public insurance provider (Harley, Willis, Gabe, Short, Coyllyer, Natalier & Calnan, 2012). In addition to getting a stable insurance cover, he / she will be able to save a lot of money which would have otherwise been lost with the private insurers. However, the government is involved in several programs which are aimed at reducing the costs of private health insurance. The most common form of Australian government’s involvement in the reduction of the cost of private health insurance is the government rebates (Australian Government, 2012). 2.3 Access A good insurance cover / policy is one in which an individual can e able to access with ease either to pay his / her premiums or to make a claim. One underlying factor which makes private health insurance a problem is access. Access to private health insurance may be hampered by several factors. One of the factors is its high costs which have been discussed above (Katterl, 2012). However, another access problem to private health insurance is due to the proximity of access of the insurance providers to potential clients. When compared with public health insurance which is accessible to every person across the country, private insurance is only limited to the market in which the insures have been able to venture in. The economical linkage between access and private health care comes in when an individual is may have paid the premiums with a private insurer but is not able to access services from the company (Sekhri & Savedoff, 2009). In such a situation, an individual will be forced to seek other health services due to the urgency associated with health care (Australian Government, 2012e). The situation whereby an individual has paid the premiums required of him by a private insurer but cannot be access the services leads to a failure of the individual getting value for his/ her money hence leading to an economical financial loss on the clients side (Jeon, Black, Govett, Yen & McRae, 2011). Therefore, one is not advised to seek a private health insurance cover if he/ she does not have access to it. In such a situation one is advised to get a public health insurance cover. 2.4 Exclusions As indicated above, the aim of each and every person seeking a private health insurance cover is to seek for the increased efficiency associated with it. Since private health insurance is expensive, the utmost desire of an individual is to get a value for his / her money (Pearson, 2012). However, most of the private health insurers fail to give value for money to their clients because of the exclusions which are associated with their insurance covers (Australian Government, 2012d). It is sometimes very frustrating to a client when he / she visits a hospital with a specific type of ailment only to be told that his health insurer does not cover that specific kind of condition. At such an instance, the client feels that he/ she has been given a raw deal. This is in comparison to the amount of money which he / she is paying as premium to the insurance company. There are a several exclusions associated with private health insurers. They are outlined below. One of the exclusions of many private health insures is preexisting conditions (Macleod, 2011). Many private health insurance providers do not give a cover to a preexisting health condition for instance diabetes. Mental health problem is another exclusion of private health insurances. Other exclusion s associated with private health insurance includes drug benefits exclusions, cosmetic surgery, and homecare and private nursing (Bennett, 2010). Since the exclusions associated with the private health insurances do not match the large amount of money paid as premiums, it therefore becomes uneconomical for an individual suffering from such conditions to seek a private health insurance. However, the 30% rebates which the Australian government pumped into the private insurance in a bid to sustain it have slowly transformed the health insurance practices in private insurance providers (Paolucci, Butler & Ven, 2008). There is a growth of many cheaper and client friendlier private health insurance policies in the market. However, public health insurance remains to be the best type of health insurance cover in terms of its comprehensiveness. 2.5 Other Factors Other factors as to why private health insurance is not a good option at certain times with respect to economy are outlined below. The non predictability of health is one of the factors which renders private health insurance uneconomical. This might be due to several factors, one of which is the exclusions discussed earlier. On an economic perspective, it is not every day that an individual gets sick, requiring him/ her to seek expensive medical care. For this reason, the payment of expensive insurance premiums is not equivalent to the amount of money that an individual claims (Srivastave & Zhao, 2008). For this reason, it is more economical to get a public health insurance cover. Another factor which renders private health insurance uneconomical is the biasness of the guidance which is given by private health insurers. Since their objective is to make money, they often engage clients in policies which have hidden aspects. These aspects impact adversely on the economical state of the client in the long run (Price Water House Coopers, 2007). Other factors which would make an individual not to consider private health insurance is the economic might of the insurance provider. There are many instances where insurance companies have collapsed; hence leading to their clients making immense losses. Since public insurance systems are more secure, it is advisable for an individual seeking security in a long term insurance policy to seek the services of a public system. 3.0 Recommendations Due to the fact that there are many needs which lead an individual to seeking a health insurance policy, it is therefore important that he/ she makes sure that he is covered by an insurance policy which satisfies his needs. With respect to economic terms, it is recommended that an individual does the following: Analyze the terms and conditions of the private health insurance policy that he/ she is getting. With this, the client is able to take into consideration any exclusion associated with private health insurance. With respect to Australia, many people seek private health insurance in order to compliment the public health covers offered by Medicare, the national health insurer. Knowing what one needs from a private insurer ensures that he/ she is able to make the right decision with respect to the insurance cover he/ she gets (Peter, 2010). Another recommendation to individuals is that they should do an analysis of their financial situation so as to decide on the insurance cover to get. More often than not, private insurers have a very severe penalty for defiance of payment of insurance premiums. For this reason, it is always advisable that one gets a cover which he or she can be able to sustain. Taking an analysis of one’s lifestyle is also important since its enables him/ her to choose the most convenient insurance cover (Australian Private Hospital Association, 2012). 4.0 Conclusion In conclusion, the report has given an outline of the major factors which would render a private insurance policy in appropriate with reference to an economical perspective. The report has emphasized on the need of a client to get value for his/ her money while seeking an insurance cover. For this reason, it is always important to ensure then one gets an insurance cover from a provider who is able to meet the specific needs of the client. The report has identified and discussed several factors which affect the economic availabilities of a private insurance cover. They include the cost of a private insurance cover, its accessibility, exclusions in the cover amongst other factors. From this report it is clear that it is not always that a private health insurance cover guarantees quality services; therefore, an individual needs to well informed about the terms and conditions of a policy in addition to the types of policies available in the market. References Australian Government, (2012a).Australian Government Rebate On Private Health Insurance. Retrieved on 2nd October 2012 From < http://www.humanservices.gov.au/customer/services/medicare/australian-government-rebate-on-private-health-insurance > Australian Government, (2012b). Australian Government 2012-13 Health And Ageing Portfolio Budget Statements Retrieved on 2nd October 2012 From http://www.health.gov.au/internet/budget/publishing.nsf/Content/2012-2013_Health_PBS Australian Government, (2011c). Private Health Insurance Ombudsman, Retrieved on 2nd October 2012 From < http://www.privatehealth.gov.au/assets/doc/PrivateHealthWebsiteBrochure.pdf > Australian Government, (2012d). Policy Exclusions an Restrictions. Retrieved on 2nd October 2012 From < http://www.phio.org.au/facts-and-advice/policy-exclusions-and-restrictions.aspx > Australian Private Hospital Association, (2012). Am I adequately covered for private Hospital care? . Retrieved on 2nd October 2012 From http://www.ramsayhealth.com.au/About-Us/documents/are-you-covered.pdf Australian Government, (2012e). The Right to Change, Private Health Ombudsman, 1-4 Bennett, C.(2010). Restrictions and Inclusions In Private Health Insurance, Consumers Health Forum Of Australia, 1-14 Deloitte, (2011).Australian Health Insurance Association Economic Impact Assessment of the Proposed Reforms to Private Health Insurance, Commercial In Confidence. 1-64 Harley, K., Willis, K., Gabe, J., Short, S., Coyllyer, F., Natalier, K., & Calnan, M., (2012). Constructing health consumers: Private health insurance discourses in Australia and the United Kingdom, The International Journal of Health Sociology: Policy, Promotion, Equity and Practice, 20 (3), 306-320. Jeon, Y., Black, A., Govett, J.M Yen, L., & McRae, I.(2011).Private Health Insurance And Quality Of Life: Perspectives Of Older Australians With Multiple Chronic Conditions, Australian Journal of Primary Health, 18 (3), 212-219 Katterl, R (2012). Socioeconomic Status And Accessibility To Health Care Services In Australia, Research Round Up, 22(1), 1-3 Litow, M., 2007. Medicare Versus Private Health Insurance: The Cost Of Administration. FSA, Milliman, 1-14. Macleod, L. (2011). ACCC Report To The Australian Senate On Private Health Insurance, Consumers Health Forum of Australia. 1-2 Paolucci, F., Butler, J., & Ven. W., (2008) Subsidizing Private Health Insurance in Australia : Why, How, and How to Proceed? ACERH Working Paper Number 2. Pearson, J., (2012). How to Get Value from Private Health Insurance. The Sydney Herald [Online] < http://www.smh.com.au/money/planning/how-to-get-value-from-private-health-insurance-20100823-13ebn.html > Peter, (2010). Private health Insurance, St. Vicent’s Hospital Darlinghurst-Male Nurses [Online] Retrieved on 2nd October 2012 from < http://stvincentsdarlinghurstmalenurses.blogspot.com/2010/02/case-for-compulsory-private-health.html> Private Health Care Australia, (2012). 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