The purpose of risk equalisation is to support the community rating principle. Insurers are not allowed to risk rate premiums and risk equalisation partially compensates insurers with a riskier demographic profile by re-distributing money from those insurers paying less than average benefits to those paying higher than average benefits. The Risk Equalisation Trust Fund is administered by APRA.
The principle of community rating
To ensure that everybody who chooses has access to health insurance, the principle of community rating prevents private health Funds from discriminating between people on the basis of their:
- health
- gender
- race
- sexual orientation or religious beliefs
- age (except to the extent allowed under lifetime health cover)
- place of residence (except to the extent that they live in different risk equalisation jurisdictions
- any other characteristic of a person that is likely to result in increased need for hospital treatment or general treatment
- frequency with which a person requires treatment
- amount of extent of the benefits to which a person becomes entitles during a period
The latest private health insurance risk equalisation statistics is available for download from the APRA website.
Purpose of Risk Equalisation
The principle of community rating
health,
gender,
race,
sexual orientation or religious belief,
age (except to the extent allowed under lifetime health cover);
place of residence (except to the extent that they live in different Risk Equalisation jurisdictions)
the frequency with which a person needs hospital treatment or general treatment;
the amount or extent of the benefits to which a person becomes entitled during a period
Example calculation
To assist anyone unfamiliar with the Risk Equalisation method of calculation, an example is given.
This publication shows the Risk Equalisation results for each insurer by financial year.The information was published in PHIAC’s annual report, Operations of the Private Health Insurers, up to the 2006-07 report. The results for 2005-06 and 2006-07 are repeated in this report.
The functions of the Private Health Insurance Administration Council include to administer the Risk Equalisation Trust Fund;The Risk Equalisation Trust Fund began on 1 April 2007 and succeeds a similar scheme, the Reinsurance Trust Fund.The Risk Equalisation Trust Fund is a zero sum pool calculated on a quarterly basis where private health insurance funds that have paid “eligible benefits” at a rate per single equivalent unit less than average paid in the Risk Equalisation jurisdiction pay money into the Fund. Those private health insurance funds that have paid “eligible benefits” at a rate per single equivalent unit more than the average paid in the Risk Equalisation jurisdiction receive money from the Fund.
The purpose of Risk Equalisation is to support the community rating principle legislated under the Private Health Insurance Act 2007. Insurers are not allowed to risk rate premiums and Risk Equalisation partially compensates insurers with a riskier demographic profile by re-distributing money from those insurers paying less than average benefits to those paying higher than average benefits.
To ensure that everybody who chooses has access to health insurance, the principle of community rating prevents private health insurers from discriminating between people on the basis of their
any other characteristic of a person that is likely to result in an increased need for *hospital treatment or *general treatment;
The principle of community rating
health,
gender,
race,
sexual orientation or religious belief,
age (except to the extent allowed under lifetime health cover);
place of residence (except to the extent that they live in different Risk Equalisation jurisdictions)
the frequency with which a person needs hospital treatment or general treatment;
the amount or extent of the benefits to which a person becomes entitled during a period
Example calculation
To assist anyone unfamiliar with the Risk Equalisation method of calculation, an example is given.
This publication shows the Risk Equalisation results for each insurer by financial year.The information was published in PHIAC’s annual report, Operations of the Private Health Insurers, up to the 2006-07 report. The results for 2005-06 and 2006-07 are repeated in this report.
The functions of the Private Health Insurance Administration Council include to administer the Risk Equalisation Trust Fund;The Risk Equalisation Trust Fund began on 1 April 2007 and succeeds a similar scheme, the Reinsurance Trust Fund.The Risk Equalisation Trust Fund is a zero sum pool calculated on a quarterly basis where private health insurance funds that have paid “eligible benefits” at a rate per single equivalent unit less than average paid in the Risk Equalisation jurisdiction pay money into the Fund. Those private health insurance funds that have paid “eligible benefits” at a rate per single equivalent unit more than the average paid in the Risk Equalisation jurisdiction receive money from the Fund.
The purpose of Risk Equalisation is to support the community rating principle legislated under the Private Health Insurance Act 2007. Insurers are not allowed to risk rate premiums and Risk Equalisation partially compensates insurers with a riskier demographic profile by re-distributing money from those insurers paying less than average benefits to those paying higher than average benefits.
To ensure that everybody who chooses has access to health insurance, the principle of community rating prevents private health insurers from discriminating between people on the basis of their
any other characteristic of a person that is likely to result in an increased need for *hospital treatment or *general treatment;