Message from the ChairmanPeter MacCuspie Chairman
On behalf of the Board, I am pleased to present the 2019 Annual Report in my second year as Chairman.
The health and happiness of our members is at the heart of everything we do. Over the years we have helped our members access affordable private health care so they can maintain or return to good health.
By making proactive health and wellbeing options available, we aim to prevent illnesses and promote better health. With our Better Living programs, we have also been able to help our members manage their chronic health concerns and improve their quality of life.
“Seeing the strong correlation between my blood glucose level and exercise was dramatic for me. Before this program, exercise was the worst for me, but now I‛m committed to daily exercise because I know the positive effects it has.”
– Jane –
These programs are not only improving our members’ lives, they are helping to maintain the long-term sustainability of the fund through reducing the number of hospital admissions.
As part of the Australian Government’s private health insurance reforms that took effect from 1 April 2019, we made several changes to our product range to help deliver more value and make hospital cover more affordable. This included the introduction of age based discounts, $750 excess on some Hospital covers and the categorisation of hospital products into Gold, Silver, Bronze and Basic.
The reforms are intended to make private health insurance (PHI) more transparent, affordable and simple and allow members and prospective members to better understand the value of their cover. We look forward to continuing to work with the Australian Government as they assess the impact of these changes and consider any further changes into the future.
We want our members to make better and more informed choices when selecting health care providers. That’s why in late 2018 we partnered with Whitecoat, Australia’s most comprehensive healthcare provider directory. Whitecoat’s directory includes more than 250,000 healthcare providers and over 750,000 customer reviews. More than four million Australians already use the service to find, choose and review healthcare providers based on their experience and we are encouraging our members to take advantage of the directory and submit their own provider reviews
As we continue to grow we remain focused on maintaining the same level of award-winning service that our members have come to expect. In 2019 we again invested in our Member Care team to ensure our members are satisfied and remain loyal. This has included making more staff available to speak to members when they need it and more investment in world-class digital services.
At the end of a challenging financial year for the PHI industry, we are pleased to have achieved growth above the industry rate. In addition to this, our investment in a robust risk framework and culture and the continued strong relationship we have built with CBA puts CBHS in a solid position moving into the 2020 financial year.
As we move into next year, we will continue to focus on ensuring that our members have products that provide the best value and their needs are being met with excellent service, whether it be face-to-face, on the phone or through one of our digital channels.
For whatever stage of life you and your family are at, CBHS is committed to your health and happiness.
On behalf of the Board, I am pleased to present the 2019 Annual Report in my second year as Chairman.
The Board last year outlined several initiatives to address some of the key challenges facing the private health insurance (PHI) industry including affordability, out-of-pocket expenses and participation in PHI amongst our youth. Positive progress has been made with many of these initiatives including expansion of the CBHS Choice Network to assist with managing out-of-pocket dental and optical expenses, another year of low premiums rate rise (for the third year in a row) and the introduction of age-based discounting for members aged under 30 to attract and retain the youth.
The Board is cognisant that more needs to be done in this area and has focused on ensuring that many of our strategies and initiatives address these challenges. Despite these challenges, CBHS continues to achieve above market growth due in part to our loyal member base who advocate for CBHS and our focus on making PHI more affordable.
The Board is aware that the financial services sector continues to see increased supervision and regulatory changes with a focus on balancing the interests of the shareholder and the policy holder. As a member owned not-for-profit, we are strongly aligned, because our members are both policy holders and owners. The Board continues to work with management to ensure that in this ever-changing environment, CBHS remains focused, sustainable, culturally aligned and agile.
Total number of memberships increased from 100,800 in June 2018 to 105,239 in June 2019 resulting in an increase in premium revenue by 5.6% to $440.5 million. We now have more than 235,000 people insured.
Benefit payments were up by 7.1% to $409.2 million resulting in a claims payout ratio of 93.1%. This is the highest it’s been in five years and is the percentage of what we pay for total member claims for each dollar we collect.
Overall, as we forecasted last year, we achieved a modest surplus of $4.9 million as a result of another year of good investment returns. As you would appreciate investment returns can be volatile, however in years where investment returns are better than expected, we will endeavour to pass on these returns to our members in the form of lower premium rate increases.
CBHS has a conservative and long-term investment philosophy and continues to be highly defensive. Our investment portfolio stood at $290.2 million at 30 June 2019, compared to $282.6 million at 30 June 2018. Our capital position remains strong, with total assets of almost $315.6 million, no debt and net assets of $211.7 million, compared to $206.9 million a year earlier.
In October 2017, the Honourable Greg Hunt MP, Minister for Health, announced a series of reforms to the PHI industry which came into effect on 1 April 2019. The purpose of these reforms was to make PHI simpler and more affordable for Australians.
Pleasingly we’ve been able to implement all significant changes from 1 April 2019 without utilising the government allowed transitional period which many of our competitors have opted to do. Some of the reform initiatives we’ve adopted include:
Hospital policies, whether on their own or as part of a package, have been categorised into one of four tiers: Gold, Silver, Bronze or Basic. The tiering is designed to make it easier for members to understand what they are covered for and to enable simpler comparison of products from different health funds.
Health funds can now offer discounts to younger members. To encourage young eligible Australians to join CBHS and to maintain the long-term sustainability of the fund, we are offering discounts of up to 10% on Hospital policies where the main member or their partner is aged 18 – 29.
Members can now choose a higher $750 excess option ($1500 for families) on the Gold tier hospital products which enables members to get the best possible cover at an affordable price. CBHS also offers this option on Basic tier products encouraging more young members to join at an earlier age.
Management is proactively engaged with the Health Minister, Industry Associations and Health related stakeholders for the benefit of our members to restore the PHI sector to a more sustainable and affordable position. Both private and public patients must demand further reform, because private health is of public benefit.
The Board of Directors are conscious of the rapidly changing and increasingly competitive PHI environment in which CBHS operates. As a result, whilst the Board has signed off its strategic imperatives over the next 5 years, we are cognisant that we need to constantly review our strategies to ensure we remain agile and responsive to changes in the future.
At the heart of our corporate strategy are the four key themes which we believe will deliver on our commitment to the Health and Happiness of our members:
CBHS has taken an investment in a company called Whitecoat that we believe will provide our members with greater transparency of their health care. Whitecoat is currently an online directory of doctors, surgeons, dentists and other practitioners that allows consumers to leave reviews based on their service experience.
In the coming months, Whitecoat will roll out their payment solution which will allow members a fast and convenient way to search, book, pay and claim. To achieve this, Whitecoat will integrate their payment solution with the medical service providers’ Practice Management System. This is linked to a CBA Albert terminal and accessed by the patient via our mobile app.
Once fully deployed, our members will have greater access to information to help them make informed decisions about medical health services. It’s then simply one step to claim and pay.
I would like to welcome Hugh Podmore and Jayne Drinkwater who joined the CBHS Corporate Health Board (100% owned subsidiary of CBHS) in January 2019. Hugh and Jayne have extensive strategic and operational experience in financial services, private health insurance, policy frameworks and governance. They bring a wealth of experience to the CBHS Corporate Health Board and we warmly welcome them.
We remain confident that our robust financial position will sustain our long-term future and allow us to take advantage of growth opportunities and meet any new challenges that may emerge.
CBHS operates exclusively for the benefit of our members. We remain resolutely focused on providing value by operating our business as efficiently and effectively as possible.
I thank my fellow directors for their much valued input throughout the year. I also thank all our staff for their sustained and dedicated contribution during the year.
Finally, I particularly thank you, our members, for your ongoing support and engagement with CBHS. We look forward to a rewarding financial year 2020.
We look forward to delivering on our commitment to you, Healthier and Happier.
The Chairman’s Address provides an overview of our performance for the financial year 2019. The most gratifying aspect for me this financial year has been that we have once again delivered a premium rate rise that is lower than the annual increase in hospital and medical costs.
As a not-for-profit, we’re able to return any surpluses to our members, in this case, in the form of a low rate rise instead of distributing surpluses to shareholders. This is due to our strong investment returns and is one of the many ways CBHS is making health insurance more affordable for our members.
Three years of low rate rises have had a significant impact on the pricing of CBHS products relative to our competitors, especially in the Gold Hospital category which accounts for approximately 63% of our members. The chart below shows how CBHS Comprehensive Hospital (Gold) monthly premiums compares against various excess options available in the market.
CBHS Comprehensive Hospital (Gold) v CBHS′ main competitor′s Gold HospitalThe prices shown are as at 1 April 2019 for a Single policy in NSW without rebate. Source: privatehealth.gov.
In addition to providing the lowest premiums to most members, we also made significant progress in the following areas:
During the year we increased the number of providers on our CBHS Choice Network by 23%. We now offer our members access to more than 6,000 Choice Network providers across Australia to assist with reducing out-of-pocket costs for preventative dental care and optical services. 150,000 members accessed the Choice Network in the financial year 2019.
For a provider to be a part of the CBHS Choice Network they must be accredited to a high clinical standard and demonstrate a commitment to delivering excellent service. This means the Choice Network offers members access to quality clinical care combined with a positive experience. We will continue to grow the CBHS Choice Network as part of our commitment to providing our members with access to quality care and reducing out-of-pocket expenses.
Utilisation of our HST and Better Living Programs has continued to grow. HST programs mainly focus on helping members who require complex medical care and/or rehabilitation to shorten their hospital stays. Whereas Better Living Programs focus on reducing the effects of risk factors associated with chronic disease and assists members through earlier identification and intervention to avoid hospital stays altogether. During the year, we broadened the scope of care available under both HST and Better Living Programs with a particular emphasis on more mental health care options; introduced cancer support programs to members and their families; and increased the focus on earlier clinical intervention, thereby reducing the number of preventable hospital admissions. Members participating in both HST and Better Living Programs receive care in the comfort of their own home that is comparable to what they would have received in hospital. Members can stay in their own environment, with continuing access to their social networks and maintain their regular lives as much as possible.
As a result of our efforts, compared to financial year 2018, the number of members who engaged in HST Programs doubled, whilst participation in Better Living Programs focusing on hospital avoidance tripled. Both initiatives have had excellent clinical outcomes and received very positive member feedback. We will continue to grow the range of HST and Better Living Programs and maintain their relevance and accessibility for our members.
We’ve introduced several initiatives to improve our service level to our members. As a result, we achieved outstanding outcomes on two of our internal measures of member satisfaction. These are: (1) Grade of Service – which is the percentage of inbound calls answered in under three minutes – exceeding 80% and (2) Net Promoter Score (NPS) of over 67%. NPS is a reflection that our members are satisfied and loyal, which was most pleasing given the challenges the broader industry faces to increase membership and maintain trust.
We continue to invest in our digital solutions to deliver world-class digital channel service and support. Our aim is to ensure that all member-facing digital services offer a world-class experience, with a high level of innovative solutions for our Member Care team. Key to this is the partnership with Salesforce as our CRM platform provider, supporting sales, marketing and service with a single 360 degree member view. This enables our team to have access to information at their fingertips when assisting members through their preferred service channel (phone, email or digital). The popularity of the digital channel continues to grow year-on-year with more than 80% of our interactions with members being digital or supported by a digital platform. This is evidenced by the growing popularity of the CBHS mobile app which nearly 50% of our members have adopted, close to 30,000 web chat sessions and more than 20% year-on-year increase in website visits. We’re continuing to make further improvements into the financial year 2020, with a significant refresh of our website and mobile app targeting higher levels of personalisation, performance and DIY functionality.
The Health Hubs continue to go from strength to strength. Health Hubs are now located right across Australia, in key CBA offices including Melbourne, Brisbane, Parramatta, Sydney Olympic Park, Darling Harbour’s Commonwealth Bank Square, Sussex Street and Perth’s Bankwest Place. In September 2018, we also introduced two mobile hubs that visit smaller locations in Hobart, Launceston, Adelaide, Melbourne and Sydney. These hubs are fully supported by the CBA and form a part of CBA’s Health & Wellbeing Strategy.
The goal of the Health Hubs is to empower CBA staff (including many CBHS members) and provide them with easy access to health checks and onsite technology, coaching and information to allow them to manage and improve their health and wellbeing journey. The Health Hubs offer qualified allied health professionals in each location who conduct 1 to 1 consultations and coaching, plus group presentations that align with CBA’s monthly health and wellbeing themes. The consultation focuses on several key themes including mental health support, mental resilience, nutrition, diet and general health. This improvement in CBA staff and our members’ health leads to reduced claims costs and better health outcomes for our members. We are aware that the results from Health Hubs have been instrumental in potentially saving 110 lives and have identified numerous other people who required assistance as a result of high blood pressure and a high heart rate.
Some key statistics since the first Health Hub opened in September 2017 include:
A white paper has been prepared, in conjunction with CBA, that quantifies the benefits of the Health Hubs to key stakeholders, including CBA.
Our subsidiary, CBHS Corporate Health, has made significant progress in the financial year 2019. The fund was established in July 2017, with the express purpose of generating greater scale for CBHS and to provide greater opportunities for growth for the CBHS Group. As at the end of June 2019, CBHS Corporate had grown to over 3,000 members. The business continues to evolve and has served as a testing ground for many innovative ideas. During the last financial year, CBHS Corporate launched health insurance products for international students studying here in Australia. We consider this as a complementary business to Overseas Visitors Health Insurance, which was launched in financial year 2018. The progression of a member from a student to overseas visitor, to an Australian resident policy holder will ensure a seamless transition of health insurance cover for all these different statuses.
The CBHS Corporate business remains on track to be profitable in the financial year 2021, and we expect that it will make a significant contribution to the value of the CBHS Group and our members.
During the financial year we relocated some of our service staff to a new office in the Sydney CBD. The new office enables some of our service staff to be more closely located to the larger CBA offices. The new office also serves as a Disaster Recovery site, which has enabled a rationalising of our existing Disaster Recovery sites.
On an annual basis, we conduct an employee engagement survey to gauge the opinions of staff across a range of areas including morale, health and wellbeing, communication and leadership. The survey is designed to assist CBHS to improve the quality of working life for employees and improve the level of service to our members.
In terms of overall employee engagement, CBHS achieved a score of 79.2% versus 77.4% in the previous year. This compares to the AON Hewitt HR Policies and Practices Report 2017 median engagement score of 71% and an average of 69 which indicates a strong level of engagement amongst CBHS employees.
|25th Percentile||Median||75th Percentile||Average||CBHS|
Aon Hewitt HR Policies & Practices Report 2017
I want to thank our loyal members who are such great advocates of CBHS. I would also like to thank our staff for their dedication throughout the year as we see the organisation respond to many challenges and opportunities. And, finally, I want to thank the Board and Executive team for their unwavering commitment to our members, staff and key stakeholders and for their diligence throughout the year.
I’ve been a member of CBHS for nearly 40 years since I joined CBA at 16 years old. I’ve had around 20 surgeries during this time and CBHS has always been amazing. I would never go anywhere else and now my daughter has her own cover.
Our family has comprehensive private health cover with CBHS – always have and definitely always will now. CBHS helped my family immensely, mainly my mother who died of brain cancer a few years ago. Without the help of CBHS we would have lost our family home to pay for all the hospital and medical bills and my dad would have been forced to work rather than care for my mother in her final days. CBHS not only gave us peace of mind with finances but peace of mind with life, freeing us up to be with Mum.
CBHS came to our aid greatly, some years ago after I had had my first cancer surgery. I needed two extremely expensive injections prior to radioactive treatment, and having dealt with so many other hospital accounts, surgeon accounts, other specialists’ accounts, we approached CBHS for help. CBHS granted our special consideration request which provided a one-off payment towards the injections which were unfortunately not claimable through Medicare. We will always be grateful and remember the awesome assistance CBHS granted us at that truly difficult time.
I was delighted when we visited CBHS preferred providers. Dental became much more affordable for us. We switched to a CBHS Choice Network preferred provider and we had no out of pocket expense for the children’s mouth guards, along with several other dental services.
CBHS' member focus ensures we give back more to members than the industry average. In 2019 we paid out almost 93.1 cents in claims* for every premium dollar received.
now experience the benefits of CBHS membership.
The management expense ratio has increased by 0.9% in financial year 2019 due mainly to further investments in our core systems, digital platforms, implementation of the Private Health Insurance reforms and building a presence in the overseas student market.
CBHS continues to provide more members with peace of mind, with now more than 105,000 memberships
Membership growth has been better than industry average.
Increase in premium revenue is driven by membership growth and premium increases.
Profit after tax in FY19 is decreased due in part to providing our members with a lower rate increase whilst benefit payments have increased.
Investment returns in FY19 were marginally above FY18 and above forecast long term expectations. We expect investment returns to trend lower given market uncertainties and volatility.
Growth in net assets is underpinned by strong investment returns.
|Direct premium revenue|
|Health benefits risk equalisation trust fund|
|Net claims incurred|
|Net movement in unexpired risk liability|
|Investment and other income|
|Depreciation and amortisation|
|Profit / surplus before tax|
|Income tax benefit/(expense)|
|Profit / surplus after tax|
|Direct premium revenue||440,506||416,977||392,015||360,713||324,147|
|Health benefits risk equalisation trust fund||(40,987)||(40,274)||(40,587)||(39,610)||(37,222)|
|Net claims incurred||(409,173)||(382,187)||(357,417)||(330,744)||(299,601)|
|Net movement in unexpired risk liability||(2,771)||-||-||-||2,154|
|Investment and other income||16,986||14,602||14,765||4,300||12,087|
|Depreciation and amortisation||(1,660)||(981)||(594)||(471)||(495)|
|Profit / surplus before tax||4,928||14,291||17,568||7,755||17,218|
|Income tax benefit/(expense)||(34)||(26)||348||-||-|
|Profit / surplus after tax||4,894||14,265||17,916||7,755||17,218|
|Non current assets|
|Non current liabilities|
|Non current assets||224,653||205,872||192,219||116,257||135,437|
|Non current liabilities||1,768||1,654||1,508||674||606|
* Values refer to CBHS only as CBHS Corporate did not begin trading unti FY 2017.
You will note many references to the term "profit" throughout this report.
This is an accounting requirement.
It reflects CBHS' investment in CBHS Corporate Health Pty Ltd, which has been established as a "for profit" business, for the long-term benefit of CBHS members.
The use of this terminology throughout this report does not change in any way the core values of the parent company, being a member owned, 'not for profit', organisation.
This statement outlines the key aspects of the corporate governance framework of CBHS Health Fund Limited and its wholly owned subsidiary (“CBHS”) for the year ended 30 June 2019.
For the purposes of the Corporate Governance Statement, a reference to a Prudential Standard is a reference to an Australian Prudential Regulation Authority (“APRA”) Prudential Standard.
The Governance Standard is a Prudential Standard and was developed to ensure that Private Health Insurers are managed prudently, that boards have access to appropriate independent expertise and that the Board includes Directors who have suitable competencies and experience to understand the relevant business issues and risks they are likely to encounter.
The Board endeavours, where applicable and where in the best interest of CBHS, to adopt the Corporate Governance Principles and Recommendations (4th edition) published by the ASX Corporate Governance Council.
This statement is current as at 30 August 2019 and has been approved by the Board of CBHS.