Consumer advocacy group CHOICE has run the rule over recent reforms in the health insurance sector and has come up with the key elements it believes older Australians should know about. But it says the system is “still a mess” and that the Productivity Commission needs to get involved.
CHOICE.com.au spokesman Jonathan Brown says gold, silver and bronze were meant to make health insurance simpler, “but unfortunately at CHOICE we’ve found that this market is still a mess.”
“The changes started from 1 April, but health funds have until next year to implement them,” he says. “We’re hoping that the intention of simpler health insurance can still happen and we’re asking the Productivity Commission to look into this.
“It’s vital to make sure Australians can avoid nasty surprises and high costs when they most need their health insurance.”
Addressing the issue of the bundling of specialist services – which has upset a number of YourLifeChoices members – and the reality that older Australians need to pay for categories they are unlikely to use, Mr Brown says: “Simplifying health insurance is all about avoiding claims shock – that experience where you think you’re covered for something, but get to hospital in an emergency and realise you’re not covered.
“We’ve heard awful stories of people stuck with unexpected bills and having to choose between financial security and their health. While there might be services in silver or gold that you don’t expect to use, as a community we provide coverage for each other, so no one is left behind.
“The alternative is that people in the community who have high health needs can’t access help because they’re deemed too costly.”
So what should you be looking out for in relation to changes in your cover? CHOICE offers the following guidance.
1. The new tiers
The biggest change is that the Government has created four tiers of health insurance, and health funds must categorise their policies by these tiers:
- Basic – very little if any cover in private hospital
- Bronze – low cover
- Silver – medium cover
- Gold – full or top cover
There are also Basic Plus, Bronze Plus and Silver Plus policies, which cover at least one service in addition to normal Basic, Bronze or Silver policies.
Your insurer will have moved you from your old policy to a replacement policy, which will fall under one of these tiers.
Items that were covered under your previous policy may now be split across tiers, so the first thing you should do is check if your new policy covers you for what you need.
2. Do you need to upgrade your cover?
As you age, you’re more likely to need certain types of treatments and surgeries.
For instance, about 65 per cent of hip and knee replacements carried out in Australia are for people aged over 65.
Older people are also more likely to end up in hospital, with over-65s accounting for more than 40 per cent of day and overnight hospital admissions, even though they account for only 15 per cent of the population.
So which tier do you need for common treatments?
To be assured of cover for heart surgery, you would need silver or gold and for joint replacements, cataracts, dialysis, rehabilitation and palliative care, gold is required.
CHOICE tip 1: You might find cover for these items in lower level tiers, but it’s not guaranteed. If you go for a lower level, you’d want to check the policy over time to make sure the fund doesn’t drop the cover.
CHOICE tip 2: If you’re upgrading your cover, a 12-month waiting period applies for conditions you weren’t covered for on your old policy. So if you require surgery, make sure it’s scheduled for after you’ve served the waiting period.
3. Should you take advantage of a new higher excess and reduce your premiums?
Under the reforms, you can pay a higher excess than previously (up to $750 per person and $1500 per couple/family) which will reduce your premiums (an excess is a sum of money you pay towards a hospital visit).
But if you think you will need surgery within the next two years, you’re better off with a policy that has a lower or no excess. You might pay a bit more for the premium, but you won’t be as out of pocket from the hospital stay.
And if this does apply to you, and you don’t currently have a policy with low or no excess, you should probably switch as soon as possible, as it will take 12 months to take effect.
If you only need day surgery, such as cataract eye surgery, look for a policy that doesn’t charge you an excess for day surgery.
Note: The number of times an excess is payable per calendar year varies depending on your cover.
4. Should you drop health insurance altogether and self-fund your health needs?
If you’ve already got health insurance, CHOICE does not recommend self-funding your hospital cover. Many insured people already pay thousands of dollars in out-of-pocket costs, so paying hospital costs and the full medical gap could be a very expensive proposition.
Consider also these factors:
- Australians aged 60 to 79 use their hospital insurance more than any other age group.
- When you reach 65, you’re entitled to a higher rebate, i.e., the amount the government pays, and which helps reduce your premiums. For singles with an income of up to $90,000 and couples/families earning up to $180,000, you’ll go from a 25.1 per cent rebate to 29.2 per cent. This will increase to 33.4 per cent at 75.
- When one member of a family or a couple is 65, the government rebate applies to the whole family or couples policy.
- You could consider dropping your extras cover and funding those services (dental, optical, physio and so on). It doesn’t make sense to have extras cover unless you claim back more than you pay for it each year.
Have you called your health fund to ensure your cover is still the best fit? Did you change anything? Do you have any tips to pass on to other members?