HomeHealthHealth insurers accused of overcharging for top-level hospital cover

Health insurers accused of overcharging for top-level hospital cover

Major health insurers are using ‘sneaky tactics’ to charge premiums for their top-tier hospital policies that far exceed the federal government’s approved price increases, according to consumer advocacy group CHOICE.

The group claims health insurers have increased their average premiums for top-level or ‘gold’ hospital policies by an average of 30 per cent during the past three years – well above the average 8.6 per cent increase to premiums capped by the government during the same period.

“Health insurers are jacking up the price of gold hospital cover by a lot more than the headline industry averages,” said Jodi Bird, the group’s insurance specialist.

“Over the last three years, CHOICE found that gold hospital cover has increased by 30 per cent on average, and that’s compared to the government-announced health insurance increase of 8.6 per cent.

“They’re misleading consumers using sneaky tactics, potentially price gouging, and they’re just not being transparent about the true cost of top level gold hospital cover for Australians.”

Top-level or ‘gold’ hospital policies offer the most comprehensive insurance, and provide coverage for all treatment categories including pregnancy and birth services, hip or knee replacement surgery, cancer surgeries, and palliative care.

Analysis by CHOICE found a family with top-level hospital cover who paid on average $5380 a year in February 2021 were now forking out $7090 for the same policy.

Over the past three years, the consumer group said HBF, Medibank, NIB, Bupa and HCF have hiked their top-tier premiums by 35 to 47 per cent – far higher than the approved average premium increase of 8.6 per cent.

A ‘medibank’ logo is seen inside a shopfront with chairs set up like a waiting room
Medibank is one of the insurers named by CHOICE for charging substantially higher premiums for top-level hospital cover than the level capped by the government. (AAP: Lukas Coch)

Price increases for top-level hospital cover at biggest funds:

  • HBF Gold cover: 46.9 per cent increase
  • Medibank Gold cover: 43 per cent increase
  • NIB’s Qantas Gold cover: 36.4 per cent increase
  • Bupa Gold cover: 35.3 per cent increase
  • HCF Gold cover: 34.4 per cent increase.

Source: CHOICE

Private health insurance is tightly regulated, and funds can only apply to increase their premiums once a year, subject to the health minister’s approval.

Despite the sector’s regulation, Mr Bird said insurers were using tactics that allowed them to get around the cap without breaking the law.

“They’re closing old policies and they’re opening new policies, but the new policies have … essentially the same level of cover as the old policy, but they’re increasing the [premium] of that new cover by significantly more,” he said.

“The insurer can add a few things on that [new policy] … but CHOICE doesn’t think these benefits justify the level of the [premium] increase of that gold hospital cover.”

In December, health minister Mark Butler rejected a proposed 6 per cent premium increase by health insurers, who said inflation had put pressure on their costs.

Mr Butler wrote to each fund requesting they “put forward a more reasonable figure” that took into account their “years of record profits” and the “declining proportion of premiums they return to customers” while household budgets were strained by the higher cost of living.

Given the full scope of services covered by private health insurance, making top level hospital cover more expensive affects those who need the access the most, Mr Bird said.

“These tactics to increase gold hospital coverage really affects the most vulnerable Australians,” Mr Bird said.

“So really, the people who need that policy the most, they’re finding those increases are hitting them the hardest.”

A female health worker shows documents to an older man who is in a wheelchair.
Rehabilitation services are included under top-tier or ‘gold’ hospital cover. (Supplied: Parliament of Victoria)

Industry defends ‘incredibly rigorous process’

Rachel David, the boss Private Healthcare Australia, the health insurance industry’s peak body, disputed CHOICE’s claim that insurers were exploiting a loophole to charge more for top-level cover.

“Health funds can’t increase their prices unless the regulators, APRA, or the Department of Health and the Minister for Health have agreed – it’s an incredibly rigorous process,” she said.

“The reason that top hospital cover increases in price more is because it covers more expensive health interventions.

“[It’s] not because of the health funds, but because the costs of health care are going up, and healthcare costs have been just as impacted by inflationary pressures as any other part of the economy.”

A woman with a light brown bob and thick square glasses wearing a navy blazer and white shirt sits in a large, empty foyer.
Rachel David says health insurers have been impacted by inflation. (ABC News: Simon Beardsell)

Health funds are currently paying out record amounts in claims, Dr David said, because those with top hospital cover are more likely to use it.

“Their claims ratio, or the amount of claims relative to their premium income is higher than any other type of insurance,” she said.

“So for every dollar that people pay in premiums, on average, 86 cents goes back to them.

“It’s not an issue of health funds trying to raise a lot of additional revenue. What they’re trying to do is ensure that the revenue is sufficient to be able to pay claims in an inflationary environment and continue to run a successful business.

“What the funds are trying to do is protect existing members from sudden price hikes, which is why they don’t keep the same products on the market in an inflationary environment and they launch new ones at different prices.”

All five of the major health funds singled out by CHOICE – HBF, Medibank, NIB, Bupa and HCF – told the ABC that their new gold hospital policies include additional benefits to justify the higher premiums, and are focused on the need to balance the impact of rising health costs while keeping premiums affordable for customers.

Professor Allan Fels, a former boss of the Australian Competition and Consumer Commission who recently published his findings into a union-backed inquiry examining price gouging, said health funds were exploiting new customers.

“The government provides a subsidy in the billions to private health insurers and naturally wants to set a limit on their prices, which they do every year. Insurers are not justified in exceeding that,” he said.

“They’re taking advantage of the lack of information for consumers and the difficulty of easily switching to other private health insurers.

“That’s a situation ripe for exploitation … and I’d urge the government to crack down on it.”

Health minister Mark Butler will announce the annual increase to health insurance premiums in the coming weeks before they take effect in April.

Do you have gold cover? Have your premiums gone up? Why not share your experience in the comments section below?

2020 Australian Broadcasting Corporation. All rights reserved.
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