Which plans are most baffling?

YourLifeChoices asked you, our members, whether provider plans for health insurance, superannuation, mobile phone services and energy plans were unnecessarily complicated. Your clear response was that they most definitely were. In our latest Retirement Income and Financial Literacy 2018 survey, half our members told us that health insurance policies were too complex for them to understand. In fact, of all provider plans, health insurance was seen as the most difficult to navigate.

Just 27.5 per cent of members felt comfortable with their level of understanding of their health insurer’s policy.

Given that 72 per cent of our members say they have private health insurance, the number who consider their policies unnecessarily complicated is significant.

While some policyholders resign themselves to ‘trusting’ their insurance companies – in part because of the challenges of shopping around for a better deal – the fact remains that many are very unsure if the product they have purchased is fit for their purpose.

A YourLifeChoices investigation late last year into the various comparison sites that claim to give consumers the ability to assess plans and policies found that many are fronts for a select group of providers. Read the small print and you will find they are not impartial and thus cannot offer consumers unbiased comparisons across all products.

Governments keep telling Australians to shop around for better deals on their plans, but sadly, shopping around doesn’t always give you the best consumer choices. Worse, many comparison sites are set up as business models to create revenue from consumers’ interactions with them. Apart from government-sponsored sites, comparison companies are not providing a community service without strings attached.

The sites are often paid for sharing market research data with third parties, for hosting financial calculators and other tools, and they collect commissions per click and licensing fees for displaying badges ‘awarded’ to top providers. At each step as you click on an option for more information about products, the sites may be charging the providers a commission.

From the responses to our survey, YourLifeChoices has identified that health insurance is a pain point for retirees. They consider it a matter of ‘damned if you do buy a policy and damned if you don’t’.

So, what can you do about getting impartial information on better health insurance that doesn’t catapult you towards a narrow selection? The best place to start is with the Federal Government’s website: PrivateHealth.gov.au. It explains why health insurance policies could benefit you and allows you to compare policies from different providers in what is, at the moment, the most transparent tool available to consumers.

However, before switching health insurance companies to reduce your premium, understand what you are currently covered for. Closely examine what other insurers cover before you jump ship because it is likely that not all services will be eligible for rebates with an alternative provider.

Respected industry sources told YourLifeChoices that several years ago, many policies had fewer restrictions and exclusions than they have today. Those legacy policies may have covered heart surgery, cataract operations, joint and hip replacements and dialysis.

Newer, entry-level policies that are less expensive are unlikely to cover many treatments that older Australians may need in the future. The sources said that a person with a legacy policy might be best advised not to switch, in case he or she finds down the track that certain conditions and treatments are excluded.

However, consumers should not assume that they will continue to be covered by a legacy policy indefinitely. Insurers can decide to drop cover that you previously enjoyed at any time, and more of them are doing this.

Fortunately, the Federal Government is onto this and has asked the Ombudsman to look into why major providers are making changes to their ‘contracts’ with policyholders.

Health cover changes YourLifeChoices members would like:

  • easier access to private hospital and shorter waiting periods
  • no gap, reduced premiums especially for long-term customers
  • cost should be reduced in proportion to length of membership
  • large discounts when you have had cover (and few claims) over many years
  • cheaper rates for over-60s if they have been in private cover for a long time
  • link annual rises to CPI
  • reduce premiums for proactive healthy people
  • limit medical fees to the scheduled fee
  • no more rate increases or discounts if you don’t claim
  • no out-of-pocket gaps
  • let us choose what services we need.

Another potential pitfall for members trying to get a reduced premium by requesting that obstetrics be dropped from their policy is the loss of cover for unrelated conditions. For instance, a request by an older health fund member to drop obstetrics cover received a surprising response. The woman was told that if obstetrics was removed she would also have to forfeit benefits for other therapies not linked to childbirth. Those therapies included osteopathy, physiotherapy and several treatments that would have benefitted her as she aged.

In the latest move to try to put a ceiling on huge spikes in premiums, the Turnbull Government allowed a raft of concessions that will help insurers dodge rebates for many therapies that could potentially benefit elderly policyholders. Some of the therapies may have helped keep retirees out of doctors’ waiting rooms and hospitals.

This green light from the Government will not reduce the cost of health insurance for the consumer. It will reduce the cost of providing a comprehensive insurance for the insurer. Our premiums increased by an average 3.95 per cent on 1 April. A little less than the increase last year and the year before, but still a considerable extra cost for policyholders.

However, some policies will increase by as much as 50 per cent, according to consumer organisation CHOICE. The group has taken a keen interest in the private health insurance sector and regularly warns about providers’ intended changes.

It also has a comparison site for health insurance, but that can be accessed only if you pay to become a subscriber.

“People need equitable, affordable access to quality healthcare. Health insurance products that provide very low value for customers, whether they are restricted or excluded cover policies, are undermining this,” according to Sarah Agar, CHOICE head of campaigns and policy.

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All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.