Australians are abandoning their private health insurance policies or downgrading to lower-cost, lower-benefit products as premiums continue to grow.
The ACCC’s annual report into the private health insurance policies found an increasing number of Australians are dropping their hospital cover in favour of just extras cover. Many are also opting for policies with higher excess payments as a way of keeping policy premiums to a minimum.
“People are increasingly feeling the pinch of private health premium increases and growing gap payments,” ACCC Deputy Chair Delia Rickard said in a statement. “In response, many are shifting to cheaper products with reduced coverage, and some are dropping their cover altogether.”
The Federal Government previously announced reforms to private health insurance, with all private health insurance products moving to Gold, Silver, Bronze and Basic product categories by 2020, with the transition period to be implemented from April, 2019. The aim is to make private health insurance easier to understand and more affordable for consumers.
The new tiered health insurance system will separate 70,000 private health policies to make it easier for Australians to understand what they’re getting from their health cover, and help them figure out how to get more bang for their buck.
Consumers paid an estimated $23.9 billion in private health insurance premiums between 2017-18, an increase of almost $834 million from the 2016-17 period. Meanwhile, $15.1 billion worth of hospital benefits was paid by health insurers, while $5.2 billion in extras treatment benefits was paid.
Figures in June showed that 45.1 per cent of the population held hospital-only or combined health insurance cover and the proportion of Australians holding extras-only policies increased to 9.2 per cent from 8.9 per cent the previous year.
It also showed people are continuing to shift to lower cost policies with exclusions or excess and co-payments. In fact, 44 per cent of hospital policies held had exclusions, up 4 per cent from the previous year.
Further data released by the Australian Prudential Regulation Authority (APRA) showed people in the Northern Territory were the most likely not to be insured at 60.3 per cent, followed by Victorians at 58.6 per cent, Queenslanders at 58.1 per cent and Tasmanians at 56.9 per cent. Meanwhile, Western Australia and the ACT are the only states or territories where the majority of people are insured, sitting at 54.6 per cent and 54.4 per cent respectively.
Both the government and industry hopes the new tiered system will encourage more Aussies to make the switch to private health cover to ease the burden on the public system.
The Basic and Bronze covers are the more affordable options and will allow consumers to access key health services, while Silver and Gold policies provide more comprehensive cover. Insurers can also offer additional cover to minimum requirements. In these cases, cover would be named Basic Plus, Bronze Plus or Gold Plus.
The ACCC warned private health insurers they must provide clear, prominent and timely communication with customers about the changes.
“Private health funds have clear obligations not to mislead their customers under the Australian Consumer Law,” Rickard said. “Failing to properly tell customers about cuts to their benefits or policies may be a breach of the law.”
As such, the ACCC will be monitoring to see how health funds are telling consumers about changes to their policies and benefits.
“Private health insurers need to be transparent about what is and isn’t included in their policies or risk losing their customers’ trust and ultimately, their business,” Rickard added.
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