Is your health fund giving you enough of a COVID refund?

The Australian Competition and Consumer Commission (ACCC) is concerned that many private health insurers are being too conservative when calculating the refunds to customers due to COVID restrictions.

Most insurers have been returning profits gained from a reduction in claims during the COVID-19 pandemic.

The measure was required as government-imposed restrictions limited policyholders’ access to non-urgent elective surgery and non-urgent extras (including most dental, optical and other health services).

Read: How to pay less on your health insurance

ACCC deputy chair Delia Rickard said she was pleased to see these refunds being made but that there were some concerning statements regarding how the refund amounts were being calculated.

“The ACCC is aware that many insurers have been implementing their commitments to return profits from COVID-19 restrictions to policyholders, primarily through premium credits or direct payments to policyholders, and we support these efforts,” Ms Rickard said.

She said that some of the statements suggested that some insurers were calculating their total profitability from COVID restrictions too conservatively, by reference only to the value of their ‘deferred claims liability’.

Read: Higher rebates offset medical expenses

The deferred claims liability refers to money that financial regulators directed insurers to set aside to ensure they would have adequate capital to meet the cost of procedures that were deferred as a result of COVID-19 restrictions.

“The deferred claims liability is not a proxy for total profitability from COVID restrictions, and nor was this ever the intention when financial regulators directed insurers to create a deferred claims liability,” Ms Rickard said.

As an example of the problems with funds using deferred claims liability as a measure of the profits they made as a result of the pandemic, they are allowed to exclude certain services from this consideration if they are not expected to be needed at a future date.

Read: Afraid of the dentist because of high gap fees? There is a solution.

This means that dental ‘clean and scale’ services, for example, would not be included in the deferred claims liability as they were missed due to COVID restrictions and are not expected to be used twice in the same year.

However, for the purpose of fulfilling their broader commitments made in 2020 not to financially benefit from the pandemic, the ACCC expects insurers to include the value of these claims when calculating their policyholder relief.

“We expect insurers to return all benefits from procedures that were not performed and are not expected to be performed later,” Ms Rickard said.

“This may be particularly applicable to extras treatment and geographic areas that were subject to extended lockdowns.

“We will continue to monitor the actions of insurers to return all profits made due to COVID‑19 to policy holders as they promised and report on it in our next annual report on the private health insurance industry.”

In other news, the ACCC’s latest Private Health Industry Report noted that the proportion of Australians with health insurance had increased for the first time since 2015, which was attributed to increased community focus on health due to COVID-19.

In June 2021, nearly 14 million Australians, or approximately 54.3 per cent of the population, had some form of private health insurance, an increase of 1.4 per cent since June 2020.

People holding hospital policies increased across most age groups, but the rate of increase was fastest among those aged 75 and older.

In fact, 2020-21 is the first year in which people in their mid to late 70s holding hospital cover outnumbered people in their mid to late 20s with such cover.

This year’s private health insurance average premium increase was the lowest since 2001 at 2.74 per cent.

Cumulative premium increases over the past five years to June 2021 continue to outpace wage growth, with average premium increases being more than double inflation (CPI) during the same period. 

Have you received a refund from your health insurer yet? Did they explain how they had calculated the refund amount? Why not share your thoughts in the comments section below?

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Written by Ben

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