When you are discussing treatment options with a patient and they tell you they have private health insurance, do either of you know what the policy actually covers them for? The rise in low-cost “junk policies” makes for a complex and confusing health landscape. (1)
How did we get here?
These policies may appear attractive because of lower premiums and as a way of avoiding having to pay the Medicare Levy Surcharge; in the 2014-15 financial year, APRA data indicates that 500,000 new exclusion policies were purchased.(2) However they may have many services excluded or restricted and often leave the policyholder with large, unexpected out-of-pocket expenses.
Healthcare consumers are now being forced to navigate some 20,000 health cover products on the market, and more than half of the hospital policies held by Australians include some level of exclusion or restriction.(3) Each will generally have a different mix of exclusions and restrictions, as well as benefit limitation periods. Definitions of procedures are ambiguous and differ for each fund. For example, an exclusion related to “hip and knee procedures” can be about reconstructions, revisions, replacements, exploratory surgery or any procedure or observation where the area is involved.
Beyond such restrictions and exclusions, many policyholders do not realise their health fund may not have a contract with their chosen hospital, pathology or radiology provider. With some policies, certain services only attract the MBS fee, rather than higher benefits available under the funds’ medical gap scheme. Consumers are surprised to learn that being “covered” for a service does not necessarily mean that they will have no out-of-pockets, and consumer complaints about “bill shock” are increasing. (4)
The wider impact
In the longer term, not just holders of junk policies will be affected. We are concerned this race to the bottom is undermining both the public and private system. Private health insurance in Australia is built on the community rating principle, where cover is provided irrespective of health status or risk. The system relies on cross-subsidisation, where premiums paid by the healthy help cover the costs of those who need more healthcare. This is being eroded by the rise of cheap policies with limited cover and ultimately we run the risk of comprehensive policies becoming unaffordable.
A necessary evil?
Doctors’ Health Fund argues it is possible to offer broad-based, quality cover and remain competitive without the need for junk. We believe in simplicity and transparency. There is a place for judicious use of exclusionary products relevant to life-stage, provided there is full disclosure of the member’s potential costs and access to providers. With increasing pressure from doctors, consumers and some health funds, we see regulatory reform in this area as almost certain. That said, the impact of reform is still some way off, and in the meantime doctors are still in the position of having to help patients navigate this confusion.
We have prepared a checklist to help doctors and their patients understand the questions to ask and what the answers actually mean, in the hope of providing a clearer map – a small step while we wait for wider reform.
- by Peter Aroney, CEO, Doctors’ Health Fund
(1) Australian Competition and Consumer Commission. Information and informed decision-making, 2015: accessed www.accc.gov.au/system/files/981_Private%20Health%20Report_2013-14_web%20FA.pdf
(2) Ley, S. ‘Half-a-million Australians downgrade private health cover’: accessed www.health.gov.au/internet/ministers/publishing.nsf/Content/health-mediarel-yr2015-ley134.htm
(3) Private Health Insurance Ombudsman. Annual Report 2013-14; 43: accessed http://www.ombudsman.gov.au/__data/assets/pdf_file/0027/29295/PHIO-Annual-Report-2014.pdf
(4) Australian Competition and Consumer Commission. Information and informed decision-making, 2015: accessed www.accc.gov.au/system/files/981_Private%20Health%20Report_2013-14_web%20FA.pdf