Unwelcome landmark in health cover: Most hospital policies now have exclusions

For the first time ever, more than half of Australia’s private hospital treatment policies now contain exclusions – some of which most policyholders are unlikely to be aware of.

The Australian Competition and Consumer Commission’s (ACCC) annual report into the private health insurance industry, which was published on Monday, found that almost 60 per cent of policies now contain exclusions, a significant jump from the 44 percent recorded in the previous ACCC report.

ACCC Deputy Chair Delia Rickard said the regulatory body had been working with private health insurers on improving communication strategies between funds and customers regarding policy changes that reduced the protection policyholders received in return for their premiums.

“Many people may not be aware their policies may have exclusions and don’t realise they would not be covered at all for treatment as a private patient for those conditions,” she said. “Insurers need to make sure these changes are communicated clearly, prominently and in a timely manner, to avoid misleading consumers.”

According to the Commonwealth Ombudsman’s guidance on what private health insurance covers, exclusions and restrictions can be added to policies in return for a lower premium. If your policy has exclusions on particular conditions, you will not be covered for treatment as a private patient in either a public or private hospital.

Restrictions, meanwhile, mean that a policy offers limited cover for treatment on certain conditions. For instance, a health fund might cover you as a private patient in a public hospital for certain restricted conditions but no cover treatment for the same condition in a private hospital.

Exclusions and restrictions can vary greatly between different health funds but common services that are either fully or partially left off policy lists can include surgeries on the heart, eyes or joints, pregnancy or infertility surgeries, rehabilitation or psychiatric services and plastic or reconstructive surgery.

Despite an increasing number of policies offering a lower level of cover, the ACCC report found that average premiums had increased in cost by more than that of inflation and wage growth over the past year, even though overall growth of premiums slowed down over the past five years.

In April 2019 the federal government brought in reforms designed to make private health insurance policies easier to understand, more transparent and more affordable for young people. The changes included youth discounts, higher excesses in exchange for lower premiums, travel and accomodation benefits for people who have to travel for treatment, improved access to mental health treatment and removing benefits for some natural therapies such as naturopathy and yoga as a part of ‘extras’ policies.

But the ACCC report found that the gradual rise in premium prices had only encouraged more younger Australians to drop private health cover, while the number of policyholders aged over 60 had increased despite the rise in exclusions and cost. Data released by the Australian Prudential Regulation Authority in February showed that about 9,400 people ditched their private health cover in the final three months of 2019, leaving just 44 percent of Aussies with basic hospital cover.

Australians paid more than $24.5 billion in private health insurance premiums in the 2018-19 financial year, which was an increase of more than $661 million or 2.8 per cent on the previous year. In return, insurers paid $15.4 billion worth of hospital benefits and $5.3 billion in extras treatment benefits.

The ACCC report also mentioned that complaints lodged to the Private Health Insurance Ombudsman were the lowest they had been in five years, with just 4,042 complaints, down y 11.2 per cent on the previous year.

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