Australian consumer advocacy group CHOICE has launched a campaign to improve the private health insurance system. It is also seeking an inquiry into the sector.
In a forceful statement yesterday, CHOICE outlined the factors it considers are hindering Australians from getting better-value private health insurance. The factors are:
1. It’s very expensive
CHOICE says the average Australian with health insurance spends A$1,806 ($1,235) on it a year, and with yearly increases in premiums a near-certainty, it’s only set to get more costly.
“Increases in premiums mean Australians with private health cover have been hit by a 66% cumulative price hike since 2009, forcing many to downgrade or drop their private health insurance,” said CHOICE health insurance expert, Ms Uta Mihm. “In reality, it’s just unaffordable for many people.”
CHOICE said, “With the large amount of cash Australians are dropping on private health, you’d hope we’d receive cover we can rely on without unexpected added costs. But this just isn’t the case, especially for pensioners who have paid for it all their lives and now can’t afford it when they most need it.”
2. It’s confusing and difficult to compare policies
In April this year, the government introduced an overhaul of health insurance policies that was supposed to make the system fairer, easier to understand and more affordable for Australians. But it didn’t.
The new system introduced tiers for hospital cover – Gold, Silver, Bronze and Basic – with each product tier covering a specific number of treatment categories in a private hospital. “In theory, this should make the system simpler and easier for Australians to compare policies,” said Ms Mihm.
“However, insurers were then permitted to label their products as ‘Plus’, which created seven categories instead of four. There are thousands of versions of potential policies. The set-up of these categories means people’s confusion remains unaddressed.”
CHOICE says that the system is so broken that, recently, its expert health insurance analysts discovered that many Australians were paying higher premiums for “Silver Plus” policies with restrictions that actually covered less than many cheaper Gold policies on the market.
CHOICE health insurance campaigner, Dean Price, says that another problem is commercial comparison sites that don’t show customers all available options.
“Unfortunately, price isn’t an indicator of quality, and different providers charge vastly different rates for similar coverage, so that’s why it’s really important to shop around to ensure you get the right cover for you.
“You shouldn’t have to spend hours combing through policies and analysing exclusions: the system should be fair and transparent, and easy for everyday people to find the best cover, but it just isn’t.”
3. You might not even need it
CHOICE says that despite what the insurers may be saying, private health insurance isn’t necessarily for everyone.
Young people in particular face a barrage of fear-laden advertising from health insurers and for-profit switching sites designed to pressure them into increasingly pricier policies. CHOICE says that such campaigns are designed to confuse consumers into thinking that taking out private health insurance is a matter of life and death – but nothing could be further from the truth. CHOICE’s expert analysts have crunched the numbers and worked out that some may be better off not taking cover out at all.
4. Consumers could be paying for extras they don’t use or need
There are two types of health insurance policies: ones that offer hospital cover; and extras cover, which will usually pay a portion of the fee on services such as dental, optical or physio.
CHOICE health insurance expert, Daniel Graham, said, “A lot of people waste good money on health insurance they don’t use. Extras insurance (sometimes called ‘ancillary care’ or ‘general treatment’) is often misunderstood. It doesn’t affect your tax, and you don’t need to even purchase extras from the same provider you have hospital cover with.”
5. Consumers can easily be hit with unexpected extra costs
Even after paying thousands for private health insurance, consumers can still be slugged with large costs if they go to hospital – otherwise known as ‘bill shock’. This sometimes means that private patients can pay a premium for the same treatment a public patient receives.
First, consumers have to be aware that whatever excess they have opted for is the amount they will pay up to twice a year when they’re admitted to hospital and there could also be a daily charge such as A$70 per night. On top of that, there could be certain procedures or tests the insurance policy does not cover the insured for, or other restrictions on treatments that can be buried in contracts between health insurers and hospitals that policyholders don’t have access to.
Unexpected gap fees
One of the things that is touted as an advantage of private health cover is that policyholders are able to choose their own doctor and a private hospital. In practice, there are many things that limit the choice and availability of the preferred doctor, says CHOICE.
There could also be a ‘hospital gap fee’, which is the difference between what the hospital charges for an overnight stay versus what the health insurer has agreed to pay – for example, for a private room. The choice of hospital is limited to the ones the health fund has an agreement with, otherwise the insured have to pay the gap fees.