Frustration with complex private health insurance policies and unexpected out-of-pocket costs is leading to increased complaints and even some people abandoning their hospital policies, said the Australian Competition and Consumer Commission (ACCC) as it released its annual report into the private health insurance industry yesterday.
The competition regulator called on the industry to make its products more consumer friendly by providing reliable and transparent information about product features and changes to private health insurance policies.
“Consumers rely on private health funds engaging with them honestly so they can avoid unexpected out-of-pocket costs and make informed decisions about the policies they choose,” ACCC Acting Chair Delia Rickard said. “However, we’ve found it’s currently very difficult for consumers to properly compare and choose policies for their needs, meaning many are shocked when presented with expensive bills for medical services and products they thought they were covered for.”
The ACCC also found that rising private health insurance premiums remained a significant issue for consumers. In response to higher prices, the report showed consumers are shiing to lower cost policies with greater exclusions or a higher excess, or simply dropping their cover.
“Consumers are increasingly questioning whether the benefits of private health insurance offset the premium increases—a trend that should concern the industry,” Ms Rickard said.
“Clear and prominent disclosures are one measure that can rebuild waning trust in an industry where complaints increased by 30% last financial year.”
Private health insurance reforms
The ACCC acknowledges that its observations are made in the context of ongoing Australian government consideration of reforms to the sector, which aim to make private health insurance simpler and more affordable. As part of these reforms, the standard information statement—a broad summary of key policy features all health insurers are required to provide to consumers—will be replaced with a new ‘minimum data set’.
“The ACCC welcomes this significant reform and considers it crucial that the new minimum data set is effective in providing consumers with clearer information about their cover,” Ms Rickard said. “The ACCC also supports additional funding announced for the Private Health Insurance Ombudsman to enable it to widely promote its website and comparison service.”
The ACCC will closely monitor developments relating to these and other policy processes and consider the competition and consumer aspects of any reforms.
Key industry trends in 2016-17
Australian consumers paid private health insurance premiums of around A$23.1 billion ($17.2 billion) in the fiscal year ended 30 June 2017 (FY2017), an increase of A$1 billion from FY2016. Premium increases have been greater than inflation and wage growth in recent years.
In June 2017, 54.9% of the Australian population held hospital or general health insurance cover. This was a decrease of 0.6 percentage points from June 2016, when 55.5% of the population had some form of private health insurance.
The amount of hospital benefits paid by health insurers per person increased by 5.2%, along with a 3.4% increase in general or extras benefits per person. Average out-of-pocket expenses incurred by consumers from hospital episodes decreased by 0.8% but increased by 2% for general or extras treatments.
Consumers are shifting to lower cost policies with greater exclusions or a higher excess. In June 2017, 40% of hospital policies held had exclusions, compared with 38% in June 2016. There was also an increase in hospital policies with an excess or co-payment from 82% to 83% over the same period.