The biggest problems with health insurance

The number of Aussies submitting complaints about their health insurance has rocketed, a new report by the ombudsman reveals.

There was a 29 percent jump in the number of complaints submitted to the Private Health Insurance Ombudsman (PHIO) in 2015-16, with almost 4,500 problems being reported, the largest number the ombudsman has received since it started compiling numbers in 1999-2000. The complaints were across a broad range of insurers and stemmed from issues ranging from problems with the insurer’s administrative services to slowness on refunds.

But the ombudsman said that “overall, the industry performed well in handling complaints from consumers” when the fact that insurers cover more than 13 million Australians was taken into consideration.

The numbers were laid out in the ombudsman’s annual State of the Health Funds Report 2016, which covers the financial year 2015-16.

The ombudsman singled out issues that occurred when insurers made changes to policies that reduced the benefits of the cover but failed to properly notify customers of those changes.

It found that some insurers switched their methods of communications with customers when it came to important notifications – for example, unexpectedly sending a customer an email when the insurer normally communicated by post – and some advised customers merely to “contact a call centre to discuss their needs” when a direct explanation instead that the customer could improve their cover by switching to a different policy would have been more helpful.

“From the PHIO’s experience in listening to consumer concerns about changes to benefits, it seems that there is little understanding amongst consumers that health insurance products can change over time. It would be preferable for health insurers to provide this advice clearly at the point of sale or upgrade, rather than providing it in fine print at the end of membership guides,” the report said.

Meanwhile, Medibank, HCF and Westfund were the only major insurers to see a drop in their membership numbers, with almost 46,000 customers leaving Medibank in 2015-16, equivalent to a 2.5 percent fall in the surer’s membership base. With almost 28 percent of the private health insurance market, Medibank is the biggest player in the sector in Australia, followed closely by BUPA with 27 percent of the market. BUPA’s membership was up 2.2 percent.

Medibank, meanwhile, accounted for just over 40 percent of complaints, far above its market share. It was responsible for more than half of all the service-related complaints received by the ombudsman and 35 percent of all benefits complaints. It also returned less of its premiums as benefits than the industry average. 

The insurer’s chief customer officer David Koczkar told Fairfax Media that his company was committed to doing a better job.

“Our share of Ombudsman complaints has fallen recently as a result of our investment in customer service and we remain focused on improving our customers’ experience,” Koczkar said.

Read more: Private health cover versus Medicare – What you need to know

Annual premiums are set to rise on April 1 by just under 5 percent, the lowest annual premium rise in 10 years, but the Australian Medical Association warned this week that almost two million Australians were considering downgrading or dropping their cover because of the increasing costs.

“Let’s not forget that people’s wages, if they’re lucky, are growing more like 1.5 per cent, we’re seeing a rise in unemployment. In many parts of Australia, we’ve got an economy that’s going okay, but if you don’t own a house in Sydney, then perhaps you’re not seeing some of the rises that the economists say we might be seeing,” AMA president Michael Gannon told ABC Radio Darwin.

But the health insurance sector has argued that health care costs are rising faster than its premiums, and that it returned on average 86.1 cents as benefits for every $1 it took in premiums.

“Key components of health inflation such as the cost of medical devices are beyond the control of health funds,” Private Healthcare Australia’s CEO Rachel David said in February, when the annual premium increase was announced.  “Health funds, other private sector stakeholders like hospitals and medical specialists need to work with Australian governments to keep input cost down and bend the relentless upward curve of health inflation.”

Have you had an issue with your insurer, or are you happy with the services and benefits? Would you consider going without private cover if costs continue to rise or service deteriorates?