Private Health Insurance Premium Application Form - 2018
Section 66-10 of the Private Health Insurance Act 2007 provides that
(1) A private health insurer that proposes to change the premiums charged under a*complying health insurance product must apply to the Minister for approval of the change:
(a) in the approved form; and
(b) at least 60 days before the day on which the insurer proposes the change to take effect.
A written report and three spreadsheet templates (Template A, Template B and Template C) is the approved form (referred to as the premium application form) - if completed in accordance with the guidance in this document. Covering letters to the premium application form will also be considered part of the premium application form.
The premium application form will be assessed by the Department of Health (Health) and the Australian Prudential Regulation Authority (APRA).
The Department’s intention is to provide the Minister a package of information that comprises:
· For each private health insurer:
o Template C; and
o Additional supplementary comments prepared by Health/APRA.
· For the industry as a whole:
o An aggregated Template C including only those parts that are meaningfully summed across insurers; and
o Additional pages with supplementary comments from Health/APRA; and
o Responses to the Minister’s questions and requests.
It is important that all Templates are completed correctly. Notably, the insurer's name at cell B4 of Template C - this ensures the insurer's details flow into other parts of the spreadsheet.
The Box "Reason for Change" in Template C gives insurers the opportunity to concisely describe the reasons for this year’s change in premiums which will be provided to the Minister.
The second box in Template C at row 27, gives insurers the opportunity to describe how the changes to prostheses benefits have impacted future contribution rates.
In submitting the premium application form, please note:
· all information must be provided as outlined in this document
· data should be cross checked with information provided to APRA, notably the HRF601 and HRF602 returns
· the format and/or structure of the spreadsheets must not be changed in any way
o applications which alter the format and/or structure of the spreadsheet may be considered not to be in the approved form and may require resubmission
· the spreadsheets submitted should be in excel format and not include external links
· pages must be numbered in the written report
· the premium application form must not be submitted in PDF format
· the focus of the assessment is on the health insurance business. Health related business is relevant to the extent that it impacts the financial condition of the insurer.
Previously the Department has used the insurer’s calculation of percentage increase in Forecast Contribution Income (FCI) including rate protection as the quantification of an insurer's average premium change, and the industry's weighted average premium change. With Template A correctly completed, Template C will calculate the percentage increase in FCI including rate protection. This calculation ignores the impact of discounts and LHC loadings.
Insurers are required to provide conversion factors at row 31 of Template C - see guidance on Template C - and commentary from the Appointed Actuary on its suitability -see page 7.
The Minister and the Department will continue to use the percentage increase in FCI including rate protection as the published indicator.
The Department will reject applications that do not comply with the guidance provided in this document.
Applications must be submitted via box by 3pm 10 November 2017. APRA will provide the applications to the Department of Health. Please direct queries regarding the premium application form to .
The Written Report - Private Health Insurance - Premium Application Form
Valid applications for premium changes must include the below information. Guidance to assist insurers respond to questions is outlined below.
Reference / Question / Guidance /1 / Insurer name / Provide the name of the insurer as registered with APRA at the premium application date.
2 / Date(s) of effect of premium change / Provide the date(s) on which the premium change(s) are to take effect. It is preferable for insurers to implement a date of effect of 1 April.
3 / Consistency with Pricing Philosophy / Outline the extent to which this year’s premium application is consistent with the insurer’s pricing philosophy.
This should be completed at a similar level of granularity as the granularity in the pricing philosophy.
This may include consistency with the philosophy for:
- Individual products
- Product groups
- Risk equalisation jurisdictions
- Hospital and general treatment products
- Product hierarchies
- Aggregate performance.
This should include commentary on products for which performance is expected to fall outside of targets set in the pricing philosophy and the insurer’s strategy for these products.
4 / Consistency with Capital Management Plan / Outline the extent to which this year’s premium application is consistent with the insurer’s capital management plan.
This should include reference to the insurer’s forecast capital target levels and expected level of capital as stated in template B.
5 / Key risks over the forecast period / Outline the key risks and uncertainties to the performance and capital position of the fund over the forecast period.
This should be a brief high level description of the main financial risks to the fund over the next two and a half years – until March 2020. This is not intended to duplicate the risk register or the risk management framework. Rather, it should provide a concise description of the areas of uncertainty in the projections.
Some examples may include:
- A change in the profile of policyholders, either through material new joiners or lapses
- Material ‘duration effects’
- New products
- Material product changes or recent changes in margins
- Volatile experience or large changes in benefit payments, making assumption setting difficult
- Changes in strategy
- Changes in the health or competitive environment.
It is suggested that insurers be specific and comment on the risks that are applicable to the insurer’s risk profile in this year’s premium application.
6 / Management of key risks identified / Outline how the insurer is managing the risks and uncertainties outlined at 5.
Insurers should briefly discuss the insurer’s approach to these risks. The discussion should be sufficient to get a high-level understanding of the approach, actions taken and where further detail can be found; for example in the insurer’s strategic plan, risk management plan, capital management plan and/or capital adequacy requirement.
This section is not designed to replicate the insurer’s existing documents.
7 / Reasons identified for the changes in benefit payments or drawing rates / Outline the causes identified for changes in benefit payments. Insurers should also outline the causes expected to impact future benefit payments or drawing rates.
This should be specific and quantified where possible. Insurers must provide information regarding recently announced prostheses savings and how these savings are reflected in the proposed premium change (this will reinforce the information provided in Template C).
Examples of causes could include:
- Changes in demographic mix
- Changes in the price of health services
- Changes in product coverage
- Changes in utilisation
- Changes in the calculated deficit
- Changes in regulated health services charges that directly or indirectly impact benefits payments (public hospital charges, prostheses amounts, MBS fee levels, ambulance/PHI levies).
Insurers are asked to be mindful that the reasons for premium changes are not always well understood by the public. This is especially the case for the relationship between premium changes, CPI and AWE. Clarity in this section could assist in communicating these messages and ensure that the reasons for premium changes are better understood by the Department and Minister for Health.
8 / Other matters considered relevant / This section is designed to provide an opportunity for the insurer to comment on any other matters or concerns which the insurer considers relevant.
This may include matters that influenced the premium increase or matters that are worth considering in its assessment.
Some examples of such matters could include:
- The insurer’s competitive position, including premiums in relation to the market
- The insurer’s strategy
- Broader health programs
- Extent of downgrades or lapses
- Health related business
- Broader industry risks
- Recent performance.
9 / Consistency with Act and Rules / Provide a declaration that the changes are consistent with the Private Health Insurance Act 2007 and Private Health Insurance (Prudential Supervision) Act 2015, and the associated Rules
10 / Actuarial experience analysis / Provide an experience analysis comparing actual experience to the forecasts submitted during last year’s premium round.
The commentary should include the extent of the differences, the reasons for the differences, if known, and the impact these differences had on this year’s approach to determining the forecasts.
This can include experience up to June or September. Specifically, it can include the experience analysis completed in the recent Financial Condition Report (FCR), provided the forecasts assessed in the FCR were those submitted in last year’s premium application.
If experience up to June is used, this section should include a statement whether any material deviations from expected experience have arisen in the September quarter.
The experience analysis should be signed by the Appointed Actuary.
11 / Actuarial risks / Provide an opinion from the Appointed Actuary on whether there are any other material risks impacting the insurer in addition to those provided under 5 of this premium application.
12 / Actuarial opinion / Provide commentary from the Appointed Actuary on the extent to which duration effects have been incorporated into the forecasts.
Provide commentary from the Appointed Actuary on the extent to which changes in the demographic profile have been incorporated into the forecasts.
Provide an opinion from the Appointed Actuary regarding whether the financial forecasts and assumptions are reasonable central estimates.
Provide commentary from the Appointed Actuary on the suitability of the conversion factors, provided by the insurer in Template C, to calculate FCI including rate protection.
13 / Contact person / Provide the contact details of a primary contact person, and an alternate contact person.
This should include:
· name;
· position title;
· landline telephone number;
· mobile phone number;
· e-mail address
· availability.
Template A (Product Information) - Private Health Insurance - Premium Application Form
The Australian Government (Health, APRA and Ombudsman) is interested in better data quality. It is expected that the premium rates approved by the Minister for Health will reconcile with those shown in Standard Information Statements and in insurer rules. The 2017 monthly premium rates in Template A should be the rates approved by the Minister for Health in the 2017 Premium Round.
Please note the following guidance in completing Template A.
· Product information should be supplied for all complying health insurance products, regardless of whether a change in premium is being sought. The product names and labels in Template A, SIS and Fund Rules should be identical. Where there is not a SIS for given products listed in Template A insurers are requested to include commentary on this in the written report.
· The previous columns for Hospital Class and General Class are now omitted.
· Ambulance Only policies should be included in Template A where they are complying health insurance products, and the counts are included in HRF601 returns.
· Information should be provided for all products, even if some products have the same price (i.e. information must be provided for couple policies even if they are priced the same as family policies and information has already been included for family policies).
· Do not include Overseas Visitors Health Cover products or Overseas Student Health Cover products.
· Do not create new categories or terminology as a substitute for drop down list options – select from the options allowed for in the drop-down menu.
· Each insured group should have its own unique Standard Information Statement product code (except for Ambulance Only).
· Insurers should note that their Template A policy counts should be reconcilable with HRF601 for the September quarter. Where the policy counts are not reconcilable, insurers are requested to include commentary on this in the written report.
· Use of ‘product building blocks’ is allowed so long as usage is consistent with HRF601 reporting.
Example- If an insurer allows GT products A and D to be taken separately or together, this should be shown as:
· Product A - when alone
· Product D - when alone
· Product A and Product D - as a combination
Field / Data Entry Guidelines / Example /State / Select from the drop down list the State or Territory in which the product is available. This should be consistent with the risk equalisation jurisdiction for APRA reporting with the exception of NSW/ACT. It is recognised that NSW and ACT products must be identically priced and packaged and therefore much of the information provided will be identical (e.g. product code, product name, 2017 monthly premium). However, some information will be different depending upon whether the policyholders reside in NSW or ACT (e.g. total number of people covered by this product). Each State/Territory must be recorded separately (i.e. if the same product is available in multiple states do not record in the same row as NSW/ACT/VIC but in individual rows). / Drop down list:
NSW
ACT
NT
QLD
SA
TAS
VIC
WA
Product Code / Enter in full the unique product identification code for the product, exactly as generated in the Standard Information Statement by privatehealth.gov.au (i.e. do not truncate by omitting insurer identifier component of code). This includes products that are closed, or have zero policies, or zero people. / AAA/H9/Z0000T
Product Name / Enter the product name. If the name is duplicated across products, do not leave any rows blank, but instead enter the identical name for each product. As far as possible, this should be consistent with the information recorded in the Standard Information Statement for the product. Where the product name will be changing, enter the recent name rather than the proposed new name. / Gold Extras Cover