New Medibank Private Managing Director George Savvides told a private health insurance industry conference today that his initial impressions in his new role are that changes need to be made at Australia's largest health fund - and across the industry.
"I know I am the new kid on the block and should not jump to hasty conclusions. But I already have a very clear early view that private health insurance is too complicated for consumers. And the cost of running private health insurance is too high," he said.
Mr Savvides took his new role in mid-April and has already moved quickly to cut Medibank Private costs, reducing the fund's management structure by about one-third in June.
In his first public comment since being appointed, he today told the Inaugural Australian Health Insurance Summit in Sydney that he plans, subject to regulatory approval, to cut Medibank Private's range of insurance policies back from the more than 1000 products it currently maintains to a smaller, simplified range presented to customers in a plain English format that they can easily understand.
He said private health insurance offers significant benefits to its customers - - in Medibank Private' case, it has paid medical bills of up to $250,000 for individual members, and it pays about $2 billion in benefits a year. But the industry should be worried that many Australians do not fully understand the private health insurance they hold or the benefits to which they are entitled.
Simplifying Medibank Private`s range of products is his priority project, he said.
Mr Savvides also said Medibank Private management expenses are being reduced as an urgent priority. Medibank's Private's management expenses ratio - the measure of management expenses expressed as a percentage of premium income - was 12.2% for the year ending June 2001 (the last published results) but would approach 9% within the next 12 months.
As well as reducing management numbers, costs could be cut by improving back office processing, restructuring product to reduce the cost of maintaining low-selling products, and reducing the marketing emphasis on increasing market share and instead focussing on providing value and better service to existing members.
Mr Savvides also said he wanted Medibank Private to upgrade relationships with providers such as hospitals and specialists to seek more innovative funding agreements in areas such as stepped-down care.