Finance Consumer Premiums up, coverage down: ACCC flags private health insurance concerns

Premiums up, coverage down: ACCC flags private health insurance concerns

Health insurance premiums are increasing despite more policies containing exclusions than ever before.
An ACCC report has found private health insurance premiums are increasing despite more policies containing exclusions. Photo: The New Daily
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Health insurance premiums are rising at a time when the coverage provided is shrinking, the nation’s consumer watchdog has found. 

The ACCC’s latest annual report (2018-2019) into the private health insurance market found more than half of policies held by Australians (57 per cent) contain exclusions.

That’s up from 44 per cent the year before and represents the first time in the report’s 21-year history that the number of policies with exclusions exceeded the number of policies without.

ACCC deputy chair Delia Rickard said many consumers “may not be aware their policies may have exclusions” and might “not be covered at all for treatment as a private patient” for certain conditions.

“We’ve been working with private health insurers about how they can better communicate such detrimental policy changes to consumers,” Ms Rickard said.

“Insurers need to make sure these changes are communicated clearly, prominently and in a timely manner, to avoid misleading consumers.”

At the same time, premiums have continued to grow faster than wages growth and inflation (measured by CPI). 

Insurance premiums continue to grow faster than wages and inflation.
Insurance premiums continue to grow faster than wages and inflation.

ACCC data shows consumers paid a whopping $661 million on private health insurance premiums in 2018-19 alone – up 2.8 per cent on the previous year.

Data doesn’t tell the whole story

Dr Rachel David, chief executive of health fund industry association Private Healthcare Australia, told The New Daily the ACCC’s report chiefly reflects the transition to the new tiered-coverage model.

That model breaks down private health coverage into four base levels – gold, silver, bronze, and basic – which each offer different levels of coverage.

The model was introduced on April 1, 2019.

“The 44 per cent of products without exclusions are the top hospital cover options. There are a whole bunch of people that have top hospital cover, and that’s in the gold insurance category,” Dr David said.

“Now, for everybody else, these are people that would otherwise drop out of private health insurance and are looking for affordable products tailored to their needs.

These are predominately younger people who don’t want to pay for a whole lot of older people conditions like joint replacements and cataracts.’’

The introduction of these new, lower-coverage options was driven by demand from consumers.

Improving communication a ‘continuous’ process

Unexpected policy exclusions were among the most common complaints over benefits received by the Private Health Insurance Ombudsman (PHIO) in 2019.

Complaints about unexpected exclusions were common in 2019.
Unexpected exclusions were a large portion of ‘benefit’ complaints. Source: PHIO

Dr David said there is always scope to improve the way these exclusions are communicated to customers.

But she said the industry has made significant improvements in recent years.

“I’d be the first to accept [communicating these things with customers] is a continuous quality improvement exercise – particularly keeping up with the technology changes in health,” she said.

“But I would by no means suggest that health funds are behind the eight ball in terms of providing transparency.”

Dr David said the industry has already invested more than $100 million in improving the way it engages with customers.

The ACCC’s report comes just weeks after APRA warned that only three private health insurers would survive the next two years.

APRA board member Geoff Summerhayes said at the time that this was because claims costs were rising faster than premiums and young Australians were abandoning the sector in their droves.

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