The certified voting results against each of the five resolutions are shown below.

Final Voting Result of the rt health AGM held on 28 January 2021

* Due to an administrative error, one member was unable to cast their vote on the poll during the meeting.  This was an isolated case and no other members were affected by an administrative error of this kind during voting on the poll.  Had the administrative error not occurred, the member has informed us that they would have voted for Resolutions 1 and 2, and against Resolutions 3, 4 and 5.  Accordingly, had this member’s vote been counted, this would have meant that the votes for Resolutions 1 and 2 would have increased by a single vote, and the votes against Resolutions 3, 4 and 5 would have increased by a single vote.  

On behalf of the Board I’d like to thank Mr Mackie for the valuable contributions he made during his time on our Board and wish him all the best.

As many of you will be aware, we have been reviewing an opportunity to merge with not-for-profit health fund HCF, an industry leader who shares with us an unflinching commitment to putting members at the heart of everything it does.

This proposed merger will provide a number of benefits for you, our members, including sustained lower premiums, greater clinical coverage, and investment in better health programs and facilities. The Board and I look forward to sharing more information with you on this proposed merger in the coming weeks.

Once again, thank you for your ongoing support and commitment rt health.

Alan Bardwell

Chairman

The Private Health Insurance industry has continued to experience declining policyholder numbers, rising health care costs, and worsening affordability.  As well as contributing to the intensity of all these factors, COVID 19 has also impacted the availability and timing of key medical procedures and services and rt, like all other private health insurance funds, is holding additional claims provisions to cover this uncertainty. 

The final underlying result for FY20 was positive and the current and short-term position of the business is sound.  Since 2019, however, the Board has been concerned that the pressures facing rt significantly threaten the fund’s medium to longer term sustainability.  The concept of sustainability is not just a question of mere financial viability and organisational survival.  Sustainability incorporates much broader considerations including but not limited to:

• Long term ability to maintain growth in profit and cashflow;
• The ability to grow capital to meet growing and stringent regulatory demands and remain resilient to extreme but plausible shocks;
• The ability of rt health to remain competitive and meet its members’ needs through its pricing and investment in its systems, products and services; and
• Being able to find an appropriate balance between financial sustainability and affordability outcomes for members.

Rt is a relatively small fund within the private health insurance industry with relatively low levels of capital compared to other funds and limited ability to increase capital.  Rt is also subject to the pressures across the industry where membership is dwindling, supply costs are rising much faster than premiums and the regulatory burden continues to get heavier.  As a small fund rt also has limited cash and human resources to invest in new technology, products and services, and that investment gap between the larger funds and smaller funds continues to get wider with the inevitable impact on small fund competitiveness.

The Board confirmed its assessment of rt’s sustainability with an independent expert, the fund’s appointed actuary and the industry regulator, APRA.  The Board’s conclusion from this careful and considered assessment over many months was that rt acting alone could not resolve these issues and that it was in the best interests of members to explore a merger with another fund to secure a sustainable future. 

During 2020, with the assistance of independent advisors, the Board invited a select group of health funds and other potential partners to submit non-binding proposals.  Eight parties submitted proposals.  Each of these were evaluated against extensive best interests of members criteria that had been developed with independent advisors.  The Board selected HCF as being the superior proposal, and, in September 2020, advised members that rt health would proceed exclusively with HCF through to developing final binding terms and conditions that could see the two funds merge. 

There are a number of critically important aspects of HCF and its proposal that are fundamental to it being the Board’s preferred partner. These include:

– HCF is a not-for-profit, mutual fund, just like rt health;

– like rt health, HCF has a genuine and single-minded focus on delivering value to its members;

– HCF recognises, respects and values rt health’s 130-year history, its rail and transport industry heritage, and the vital role played within the communities it serves; and

– HCF has scale through a larger balance sheet, which enables significantly more investment in new services for the benefit of members and an enhanced ability to withstand industry challenges.

Since September 2020, we have been working productively with HCF to finalise terms and conditions of the proposed merger and are close to agreeing on the final term sheet.  During this same period, the repeated actions of the National Secretary of the RTBU to remove all the Board Directors, other than Mr. Bruce Mackie, the RTBU representative on the Board, has made the task of completing the HCF transaction particularly challenging.  Members’ vote on Resolution 1 later in the meeting will either support retaining the current Board and so provide a mandate from members for the current Board to complete the merger or, will result in the Directors being removed leaving Mr. Mackie as the sole director to reappoint new directors, and a new Board to then govern the fund going forward.  If this occurs it is currently unclear how Mr. Mackie and a new Board will address the sustainability concerns identified by the current Board.

Whichever way the vote goes on Resolution 1, I would like to sincerely thank all members for your patience and forbearance while receiving a far greater level of communication and calls for action through multiple media sources during this difficult time.

In March 2020, long-term Director and former Chair of rt health and Transport Health, Julie Pascoe, sadly passed away following a courageous battle with cancer. The fund and the welfare of its members and staff were foremost in Julie’s mind throughout her illness and her commitment to the organisation remained steadfast throughout. We are very grateful for Julie’s contribution to the organisation over her eight-and-a-half years on the Board and miss her greatly around our Boardroom table. Julie’s family chose the rt Families Foundation to be the recipient of funds raised in her name and a special Julie Pascoe Memorial Fund has been established to help disadvantaged children gain access to opportunities for a better future.

In July 2020 we were very pleased to welcome Elaine Collins to the Board.  Elaine has brought to the Board a wealth of insurance industry experience, actuarial expertise, and a great passion for a customer-centric focus.

I would like to take this opportunity to thank all the Directors for their professionalism, commitment and support during a very challenging year.  There has never been any doubt in my mind that at all times all of the Directors have worked tirelessly to act in the best interests of all members.

Simone Tregeagle, our CEO, continues to provide strong and effective leadership to a highly capable executive management team and the broader organisation.  The Board thanks Simone, the executive management team and all the staff for their constant care and commitment to achieve the best outcomes for members while navigating the group safely through the challenges of difficult industry circumstances and the COVID 19 pandemic.

To all our members, thank you for your loyalty and the opportunity for us to continue to serve you.

I will now hand over to Simone to present her report.

It is a great privilege for me to lead this organisation through this period of its history, and to present to you on the performance and operations of the fund for FY20.

2020 has been a time of great change and challenge, even for an organisation that has seen much in its 130 years.

For those of us charged with managing the operations of the business, the most distinctive aspect of the year has been the COVID-19 pandemic.

Having started the year supporting our members in bushfire affected areas, our attention quickly turned to the unprecedented prospect of entire cities and countries being locked down to avoid the spread of coronavirus. And it was only a matter of weeks between the time we first saw this happening around the world and when we were sending our own team home, and into a future that we had no way of foreseeing.

At that time there were four significant concerns on my mind.

First, could we run the business reliably, securely and seamlessly from not three office locations but from more than 80 staff homes?

Second, would we lose significant capacity through staff becoming ill with the virus?

Third, how would the virus impact our members and how could we support them?

And finally, would the health and economic impacts in the community and among our membership cause such significant membership losses or claims costs that the business would be at risk?

At the very heart of a mutual organisation is its mandate to maximise benefit and value for its members, and this year provided a unique opportunity for the fund to do that.

As the COVID-19 shutdowns were closing workplaces across the country we were able to defer our usual
1 April premium increase for six months, giving a small reprieve to all members from increasing costs at an uncertain time.

We were able to offer premium waivers for those members most affected by job and income losses to help them maintain their health cover at a time when it might become more important than ever.

We changed members’ ability to suspend their cover and resume it when their circumstances allowed.

And in addition, the rt Families Foundation, the charity run by rt staff, made $50,000 in grants available for members and others in our community.

For the health and safety of our staff and members we continue to operate in a work from home environment today and are pleased that we’ve been able to give our staff and their families the certainty and safety of being able to work from home.

The fact that the fund has been able to achieve a sound operating performance, to manage the unexpected and previously unexperienced, and to deliver many improvements for members despite the challenging circumstances has been extraordinary.

I am incredibly grateful for the expertise, resilience, good grace and good humour of my executive team and every member of staff. What has bound us together throughout this time has been a single-minded focus on ensuring that we continued to be there for our members, without disruption, any time they needed us.

The underlying results for FY20 have been positive and the short-term financial position of the business is sound. The Group recorded an underlying surplus, after tax of $2.5m for the year.

Alan has already mentioned some of the challenging characteristics of the private health insurance sector, and we have not been immune to their affects.

Our membership is slowly declining as is the average premium paid per member, as people understandably look for lower cost cover options to help improve their ability to keep their health cover. We saw a 4% decline in rt health membership in FY20 and a growing number of members downgrading to lower levels of cover, resulting in a 2% reduction in premium revenue compared with FY19.

We have benefited from the results of a significant focus on operational cost savings over the past couple of years, which delivered a $1.8m reduction in underwriting operating expenses. But we continue to see the cost of claims increasing both through increased utilisation and increased cost per claim, reflecting the cost of health care services. 

The year saw a number of large changes and transactions, aimed at strengthening the capital position of the fund, both for today and in anticipation of future capital requirements under forthcoming APRA standards. These included the sale of the Surry Hills and Brisbane properties, the permanent closure of our dental and optical clinics, and of our Brisbane and Charlestown branch offices.

But there have also been a number of service and benefit improvements introduced for members during the year. Among them, a new preferred dental provider arrangement with a national organisation that can offer members gap-free preventative dental in 60 locations, giving value to many more members than we were able to through our own two dental practices.

A new claims app was launched making it fast and simple for members to submit claims and removing the need to complete forms and post paperwork.

Two new cover options were launched, responding to members’ needs and this year’s premium increase, at an average of 2.9%, was our lowest in close to two decades.

During the year, our team completed health cover checks with more than half of our members helping people make sure that their level of cover is still the right one for them and their families.

It is a testament to the strength of this organisation that we received significant interest among other funds when we invited them to discuss potential future merger opportunities.

I am comfortable and confident that in HCF we have a partner that recognises and seeks to both preserve and strengthen the organisation’s legacy and its role in the transport and energy industries. Our two organisations are strongly aligned in their commitment to members, in a commitment to not-for-profit mutuality, in being of service and in providing valuable employment and growth opportunities.

The opportunity to partner with HCF provides certainty for the future of the rt health name as part of an organisation that shares our values and is large enough to successfully navigate the challenges we face today and that will become more difficult with time.

I’d like to thank our directors for their support and guidance throughout the year and acknowledge the enormous loss to the organisation in the passing of our former Chair, Julie Pascoe.   

I’d like to thank my colleagues in the executive team and in all parts of the organisation for their unflinching commitment to the fund and its members, and I’d especially like to thank our members for your continued membership, support and great affection for this organisation. It has been a pleasure to have been of service to you.

In the year ahead we will continue to look after the transport and energy industry workers who keep Australia moving and ensure that through their membership, they never have to worry about managing their health concerns alone.

Thank you.

1. What are some of the challenges facing the private health industry?

Several significant issues have combined to create a uniquely challenging set of circumstances. Nearly all members would be aware of the growing issues facing the private health insurance industry, such as the continuing decline in policyholder numbers, ageing population, and rising healthcare costs and premiums, all of which contribute to reduced affordability for members.

What are the big risks facing rt health?

rt health, while stable in the short term, is at risk from several factors that will impact its viability over the medium to long term, including:

• Narrow margins
• High operating expenses
• Reduced participation in the fund, particularly among younger members.
• A limited capacity to invest in growth, or in products and services.

The only way to fund these initiatives is through further increasing members’ contributions in an environment where affordability is already affecting so many members’ ability to retain their private health insurance.

Over the past 18 months, rt health has been focusing on taking every measure possible to mitigate these factors. These actions have strengthened the underlying capital position of the fund such that it has been able to enter into discussions with other private health funds from a confident position, and to invest considerable efforts in seeking out and selecting an ideal partner for the fund’s future.

2. Why has rt health chosen to do a merger?

The Board and the private health insurance regulator, APRA, remain concerned over the sustainability of the fund in the medium term. The Board has therefore proactively sought to find a merger partner while rt health is still in a position of being able to be selective as to which fund can offer its members the most appropriate and secure future. Under deteriorating or stressed conditions, we would lose the ability to make that choice for the benefit of members.

In a merger with the right partner, the rt health you know can be protected and strengthened. rt health members can be better protected by an entity that is well positioned to respond to difficult market conditions and the fund can continue to maintain its presence as a strong and stable not-for-profit provider in the private health insurance industry.

You will continue to receive the same trusted and personal service you always have, with the added benefit, that within a merged group, the fund will have greater capacity to evolve and improve products and services, technology and innovation for members.

The changes proposed are all about protecting enhancing the things that really matter for rt health members and they will make it possible for us to continue to offer you the most comprehensive, affordable health cover, now and into the future.

3. Why is HCF the preferred partner?

After many months of careful due diligence and consideration, in May 2020 the Board invited a select group of health funds to submit proposals that outlined what the future of the rt health, and the benefits to members would be, in partnership with them.

Of those initial proposals, the Board selected HCF’s as being the superior. In September, the rt health Board announced that it would work exclusively with HCF through the second round of the process to develop a final proposal that would see the two funds merge for the benefit of rt health members.

Having listened to members over many years about what it is that makes rt health great, there are several reasons why HCF is the Board’s preferred partner. These include:

• HCF is a not-for-profit, mutual fund, just like rt health;
• HCF has a genuine and single-minded focus on delivering value to its members;
• HCF recognises, respects and values rt health’s 130-year history, its rail and transport industry heritage, and the vital role played within the communities it serves; and
• HCF has scale through a larger balance sheet, which enables significantly more investment in new services for the benefit of members and an enhanced ability to withstand industry challenges.

HCF is one of the most highly capitalised private health funds in the industry, taking a long-term and prudent view for the benefits of its members. This is consistently reflected in its pricing and benefit changes. Surplus capital is available for reinvestment into the business, through opportunities including increased benefits to members and lower out-of-pocket costs, lower premium increases and greater premium stability, improved member access and convenience. HCF’s recent and substantial investment in its IT transformation will also deliver significant economies of scale and broader service benefits for rt health members.

HCF believes not-for-profit health funds provide a compelling and necessary alternative to for-profit funds. As Australia’s largest not-for-profit health fund, HCF believes it has an imperative to put the health of its members first and will continue to focus on delivering the best outcomes for members, now and in the future.

The process of working with HCF to finalise a proposal for the merger is still ongoing. When we have that final proposal we will be able to give you specific information about what a merger with HCF will mean for you. We will provide you with more details on the proposed merger in the coming weeks.

4. What is happening with RTBU, and how is it detrimental to the future of rt health including the proposed merger with HCF?

The RTBU (Rail, Tram and Bus Union) has been a valued partner of rt health for more than a decade. Around 11% of our members are also members of the RTBU and we recognise the RTBU as a key stakeholder.

Regrettably however, in August, the National Secretary of the RTBU launched a campaign to call a meeting of members to propose resolutions to remove six out of seven current directors and replace them with a newly comprised Board of his choosing.

This action was intended to disrupt the process of rt health merging with a suitable partner to protect the long-term interests of members.

The rt health Board challenged the resolutions put forward by the National Secretary of the RTBU and sought a legal ruling from the Supreme Court of New South Wales on the validity of the resolutions.

In October, the NSW Supreme Court ruled in favour or rt health, deciding the RTBU’s actions were ‘invalid’.

Despite this failed attempt, the National Secretary of the RTBU has served the fund with another notice containing a new resolution. This time the resolution is simply to remove all of the existing directors with the exception of the RTBU’s own representative, Bruce Mackie. If the resolutions succeed, Bruce Mackie will have the power to appoint directors without members voting on it and without you knowing who they are.

This is yet another attempt to remove the fund’s Board to disrupt its vital process of merging with a suitable partner to protect the long-term interests of members.

The vote on the new resolution took place as part of the Annual General Meeting on 28 January 2021. Further details to come.

What is happening with rt health fund?

As set out in the letter sent by rt health’s Chairman to all members on 17 August, the Board has been exploring opportunities to guarantee a strong future for rt health, including the possibility of a merger with preferred partner HCF.

The private health insurance industry is facing a number of economic challenges. These include escalating health care costs, increasing demand from members for a wide range of health care services, and a concerning decline in the number of younger people holding health insurance. All of these issues impact members through increased premiums and lack of scale to invest in member services and facilities. Ultimately, these issues put the viability of smaller funds at risk. The Board is acting properly and in the best interests of members as a whole to seek out realistic solutions to the long-term challenges facing rt health.

Who is the RTBU?

The RTBU is the “Rail, Tram and Bus Union”. The RTBU is a trade union, which is a separate and distinct entity from rt health. The RTBU and rt health are certainly not "one and the same”.

rt health has had a long association with the RTBU, both because of our shared transport industry history, and as the preferred health cover provider for RTBU members. However, only around 11% of rt health’s current members are also currently members of the RTBU.

The RTBU’s attempt to call a meeting of members fails

In August, as a member of the fund, you received two communications from the Rail, Tram and Bus Union. The purpose of these communications from the RTBU was to ask you to sign a proxy form that had two main objectives:

1. to enable the RTBU (through its National Secretary, Mark Diamond) to call a general meeting of members, and to put resolutions to that meeting to remove six out of seven of the current directors (leaving only the RTBU’s own representative on the board) and to replace those directors with six new directors proposed by the RTBU; and
2. to give your standing proxy to the RTBU for all general meetings of the fund. This proxy can be used by the RTBU until it is revoked by the member who granted it.

In early September, the RTBU advised us that it had received the necessary number of proxies to require the meeting to be called and the resolutions to remove and replace the directors be put forward. These processes are governed by the Corporations Act 2001 and the fund’s own Constitution. The Constitution is a cornerstone document of the fund which represents an agreement between members and the organisation.

However, the resolutions proposed by Mr Diamond were not consistent with the fund’s Constitution. The Constitution requires certain processes to be followed in order for people to be nominated for election to the board and assessed as fit and proper to act as directors. Changes to the board cannot be achieved, as attempted by Mr Diamond, through simple resolutions proposing to ‘remove and replace’ directors.

NSW Supreme Court rules RTBU actions ‘invalid’

When it became apparent that we could not put Mr Diamond’s invalid resolutions forward to members, we commenced legal proceedings and sought a ruling from the Supreme Court of New South Wales on the validity of the resolutions. The court ruled that the resolutions proposed by Mr Diamond and the request to call the meeting were indeed invalid and therefore the meeting is not required to proceed.

The Supreme Court ruling was handed down on Friday 6 October 2020 and included an order for costs against Mr Diamond, which enables the fund to recover a proportion of the money spent on the proceedings.

Further attempt to remove the fund’s Board

Since that ruling, Mr Diamond has already served the fund with another notice containing a new resolution. This time the resolution is simply to remove all of the existing directors with the exception of the RTBU’s own representative, Bruce Mackie. This is yet another attempt by Mr Diamond to remove the fund’s board. The vote on the resolution will take place as part of the Annual General Meeting. You will receive more information on the date of that meeting, and how you can cast your vote in the coming weeks.

Did you recently sign a proxy form?

There are a significant number of members we are aware of who signed the RTBU’s proxy form in the mistaken belief that they were assigning their proxy to the Chair of the rt health board, or without understanding that it is a ‘standing proxy’ giving the RTBU the right to cast your vote on all matters until it is revoked.

If you wish to revoke your proxy and have not yet done so, you can do this by emailing the RTBU at rtbu@rtbu.org.au and asking for confirmation in writing that your proxy has been revoked. If you don’t have access to email, please contact our member care team on 1300 886 123 and we can assist you.