Olga’s analysis: health insurance watchdog lacks bite

ACCC report: health insurance umpire is a toothless tiger.

The body that mediates disputes over health insurance is a toothless tiger, the competition watchdog’s recently tabled report has revealed.

The Australian Competition and Consumer Commission (ACCC) noted in its latest inquiry into the sector that “there has been a substantial increase in complaints over the past three years” against health insurers.

The report emerged in the same week that consumer group CHOICE released findings from an investigation which concluded that Australians were being short-changed by private health insurers.

After scrutinising the extras cover policies of 23 funds, CHOICE found more than 70 per cent of benefits paid “stagnated in value in the three years from 2013, despite Australians paying 19 per cent more”.

In a submission to the ACCC inquiry, the Private Health Insurance Ombudsman (PHIO) said most of the gripes it handled in the period probed July 2015 to June 2016 were over the level of benefits that insurers failed to provide.

However, while the PHIO can investigate disputes over health insurance, it has no enforceable powers. Because it does not have legislated  authority to penalise companies which misbehave, the PHIO can only make recommendations.

On the other hand, non-government, industry-funded ombudsmen can impose fines and penalties against companies which breach best-practice codes.

It seems the PHIO appears content with its role as a wrist-slapper, as it told the ACCC it considers its job “is focused more on negotiating outcomes … rather than assigning fault and applying a penalty or fine to one party”.

The body claimed it would be counterproductive to its role of protecting consumers if it were able to issue penalties.

Curiously, a call for the PHIO to behave more like an industry-funded ombudsman came from the unlikely corner of health fund HCF – a business which could potentially find itself on the receiving end of a penalty if a case went against it.

HCF told the inquiry it was unfair that the PHIO’s reporting methodology did not reveal the outcomes of its investigations.

“This means consumers are not given the opportunity to fairly appraise the complaints handling of a health insurer,” said HCF.

The insurer suggested PHIO consider a reporting approach similar to the industry-funded Financial Ombudsman Service (FOS), which lists dispute outcomes.

From July next year, the FOS will be folded into a new body that will also take in the functions of the industry-funded Credit and Investments Ombudsman and statutory body Superannuation Complaints Tribunal, which is not industry-funded, but has the clout of the Australian Securities and Investments Commission (ASIC) to enforce its determinations.

It is proposed that the new body, the Australian Financial Complaints Authority, should have the power to increase compensation amounts.

Ironically, the submission from peak body for insurance companies Private Healthcare Australia (PHA) has not called for the establishment of an industry-funded ombudsman for the sector, even though it told the ACCC that PHIO “complaints are not a valid measure of consumer satisfaction with private health insurance”.

However, the association goes on to say it supports the PHIO as “an important resource”.

It then backflips again and concludes that the complaints sent to the PHIO “should not be viewed as a quantitative authority on the industry’s performance”.

YourLifeChoices has asked PHA if would support any calls for a non-statutory umpire for the health insurance sector.

The peak group’s slapdown of PHIO complaints is curious, because if anything, the ombudsman regularly downplays the significance of policyholder dissatisfaction with the ‘nothing-to-see-here’ line: “the number of complaints received is very small compared to fund membership”.

Even its parent statutory authority, the Commonwealth Ombudsman, pronounced in its last annual report that 85 per cent of people who complained to the PHIO “were satisfied or very satisfied with the handling of their complaints”.

Presumably, some of the 15 per cent who weren’t satisfied made up the 169 health insurance cases the ACCC ended up “seemingly grudgingly” dealing with. As it stated in its report: “The ACCC is not a dispute resolution body and does not generally receive a large number of complaints in relation to private health insurance.”

Yet complaints are increasing rapidly. In the year to the end of June 2016, there were 4416 complaints, up 50 per cent from the 2955 lodged three years prior.

And judging by the observations of the Australian Medical Association (AMA), this trend may continue.

In a stark and topical warning – given the Republican Party’s attack on Obamacare – the AMA told the ACCC inquiry that insurers were “moving private health care in Australia towards a system similar to that of the US – managed care”.

“Market power is slowly shifting in favour of the private health insurers; they are deciding who can provide what treatment and where they can provide it. Health insurers should not interfere with the clinical judgement of medical practitioners. Private health insurance should serve the needs of health consumers, who have paid for it, not industry shareholders,” the AMA asserted.

In April, the AMA released a ‘report card’ on the health insurance sector, urging policyholders to do their homework and “know exactly what they are covered for in the event of accident, illness, or injury”.

Have you ever been treated unfairly by a private health insurer? How was your complaint handled? Should Australians demand an industry-funded ombudsman with powers to penalise badly behaved health insurers?



    To make a comment, please register or login
    25th Jul 2017
    I researched thoroughly to choose my private health cover and change to meet present needs and budget. The recent one I chose has no excess payable on day surgery and many things are day surgery which I have had several in recent years like skin cancer and endoscopy or similar kinds of things.
    I consider private health cover as important as food as waiting lists can be very long.
    Also, I like to choose my doctor and hospital. It is not a luxury and can be easily covered with good budgeting.
    People who say they cannot afford it do not choose to want it and that is okay. Everyone should be allowed to choose.
    However, very wealthy people using the public hospital system clog up the system and prevent poorer people getting care sooner. Means testing the hospital would make it fairer.
    When I spent the day in the emergency section recently I was asked if I would be prepared to swipe my private health card as it helped them. Of course I was happy to do that.
    That made me realise that millionaires without private health coverage using the public hospital system should pay something.
    It is about priorities. I prioritise this in my budget and values.
    Old Geezer
    25th Jul 2017
    Check your fund as one fund has just added an excess on day surgery.
    25th Jul 2017
    OG, only one that I know of offers this and it is Health Care based in Tasmania.
    25th Jul 2017
    GK22 private health cover won't guarantee your doctor, hospital or private room.
    I am not sure how often you have had to use the system but very often a family member ends up in a 4 bed ward with a lovely excess and a huge gap. An overnight stay at $600 p.n. excess for wisdom teeth - just for the patient to be there first thing in the morning - its a rort.
    What is does do is put you up the queue - and that may save a family members life one day.
    25th Jul 2017
    Rosret, I have never had any trouble. My specialist has his hospital which is my choice as well. I don't live in a big city but 60 km away but a population that warrants the services.
    Your GP has access to a range of specialists and mine would listen to my views and needs and I would have a say.
    You talk to the specialist to find out their charges or if they bulk bill. You can find out beforehand.
    Lucky for me, my specialist bulk bills all the way, in and out of hoapital. He is very concerned to keep people's costs down.
    He once apologised for having me wait and the reason the patient in front of me needed a lot of reassuring and support.
    Decent doctors are around thankfully.
    The best doctors are the ones without the big egos.
    25th Jul 2017
    Yes, very much so treated abominably. Had a knee problem which came on
    quite suddenly - after seeing my personal Dr. and having X-rays and scans referred me to a Ortho. Specialist further tests showed I needed a knee replacement. I have had private health cover for many, many, years and no problems, but this time was told this was a 'pre-existing condition' - now I had never had or gone to the Drs. with any knee problems before - both my own Drt. and the Orthopaedic Specialist confirmed this and wrote letters stating that I had never seen them for or been treated previously for any knee problems. Yet this non medical person at my Health Fund (it was referred to a 'higher' claims officer) determined that they were wrong and denied my claim. Needless to say we changed Health Funds,
    25th Jul 2017
    So you weren't covered by them even when they received the letters? Did you write to the ombudsman? I think I would lawyer up for that one if it was worth it.

    I am interest to know - once you had the knee replacement and went to another fund does this now become a pre-existing condition and will not be covered if the other knee goes or you need further treatment on that knee?
    25th Jul 2017
    Latrobe Health has an excess on day surgery.
    25th Jul 2017
    Health Care based in Tasmania does not. We have saved $100 per month as well on premiums.

    25th Jul 2017
    Of course the health ombudsman lacks bite - what's the point of having an ombudsman who can actually tell the government to tighten up its act?? Like Royal Commission - you never call fr an ombudsperson unless you already know the result you want...

    Now let me read the other comments...
    25th Jul 2017
    Sorry - or a health cover ombudsman who can tell a private fund what they can and can't do... the nerve... can't have that...

    Story above reminds me of that movie The Rainmaker.... deny all claims...
    25th Jul 2017
    I didn't complain to the ombudsman however this is what happened to me.
    I had an 8:30 a.m. dental appointment I swiped my card to get a rebate and I was told I had no cover.
    I went home and made a few phone calls to the insurer and the excuse they made up was it had something to do with clients who had perpetual monthly payments and it would be rectified by resubmitting the claim. So rather annoyed but the issue fixed I left it at that.
    Two weeks later I returned to the dentist and the lady in front of me was having her claim denied. "Medibank Private?" I asked. Yes, sure enough - make a claim too early in the morning and the claim was being denied.
    I wondered how many other people across Australia were fleeced as so often there is a limit on payouts per year and some people may have never realised they were entitled and just thought it was bad luck.
    25th Jul 2017
    Rosret there are terrible stories about the business behaviours of the new private owners of this for profit insurer.
    25th Jul 2017
    Rae, Rosret and Troubador ... what awful experiences to have had. Im so sorry. Do email me if you would like to be included in a follow up story on private health insurance I am planning. That goes for anyone who has had a bad experience with an insurer at your most vulnerable time, when you would expect them to provide the service You have paid for.


    25th Jul 2017
    Rae, Rosret and Troubador ... what awful experiences to have had. Im so sorry. Do email me if you would like to be included in a follow up story on private health insurance I am planning. That goes for anyone who has had a bad experience with an insurer at your most vulnerable time, when you would expect them to provide the service You have paid for.


    Joy Anne
    25th Jul 2017
    Grandma Kathleen, I cannot afford private health insurance does not matter you work it out. I suppose you own your home well I don't and pay $600 a fortnight for rent and that just leaves me enough for Phone, Internet, Saving for Rego etc, Insurance and $50 for food a fortnight.
    25th Jul 2017
    We do own our home. $300 is a lot for rent.
    Then the public system is for you and people like you.
    Everyone else should be contributing.
    If the wealthy did not use the public system or paid when they do there would not be the lengthy waits for so called elective surgery.
    I think most people can afford something whether it be by private health insurance or paying something when they use the public system, thereby freeing it up for the most needy.
    We come into the category of pensioner homeowners so we pay rates and insurances on our modest homes. We have to maintain our own homes too.
    We budget very carefully and frugally so don't think for one moment we are swimming in cash. We manage but know we are lucky to an extent. We raised a big family and now having a quiet life.
    27th Jul 2017
    We have been in private health for almost 50 years and I recently needed an abdominal operation which was deemed a 'pre-existing condition' by a doctor in another Australian state who had never seen or examined me. My GP and 2 Specialists said it was NOT 'pre-existing' but their reports fell on deaf ears. I desperately needed the operation so we had to self fund it.
    My huz and I are now on one of the lower hospital covers with this same health fund but we are paying the same as we were a few years ago for one of their top covers.
    We are both seniors and dread the inevitable fee rises on the 1st April every year.
    These yearly increases have to stop!
    I did approach the Health Ombudsman and was told there was no use pursuing my claim because the Ombudsman ALWAYS finds in favour of the health fund. A 'Toothless Tiger' indeed.
    27th Jul 2017
    That is outrageous. A pre-existing condition 50 years old.

    Makes you wonder.

    I've also had private health all my life and the only time I tried to use it couldn't.

    Once was for tests for a son showing blood in the urine and it wasn't covered costing me $1800. The second time was in a specialist's rooms and again not covered.

    Obviously either some people are able to avoid the discrimination going on or the health insurance industry is corrupted dreadfully.

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