Costly Cure
Sydney Morning Herald
Wednesday April 9, 2003
After being locked into private health insurance, members are getting sick of the premium increases, reports Leeanne Bland.
Health fund members could be forgiven for thinking they had been given a bum steer. Herded into funds - initially with a 30 per cent rebate carrot, but finally with the Lifetime Health Cover stick - they are now having to wear a round of premium rises averaging 7.4 per cent.
The increases are on top of the 6.9 per cent average increase last year.
For many, leaving a health fund is out of the question. If they earn more than $50,000 they will be hit by an an additional 1 per cent Medicare levy. Even if they are happy to wear that, those over the age of 30 who leave a fund - only to rejoin later - will be slugged by Lifetime Health Cover premium loadings.
These increase the base premium by 2 per cent for every year over the age of 30 they haven't been in a fund. The loadings peak at age 65 at 70 per cent of the base rate.
Martyn Goddard, the Australian Consumers Association's senior health policy officer, believes the Federal Government's stick approach is locking people into private insurance even though they are angry about the rise in premiums.
The reason for the increase in premiums? According to the annual report of the Private Health Insurance Administration Council (PHIAC), the private health insurance industry regulator, there have been considerable increases in the benefits the funds are paying out to their members.
Its annual report says that total benefits increased by 15.8 per cent last year, but that some components were significantly higher.
For example, prostheses increased by 41 per cent and the gap cover payments increased by 18.3 per cent.
The industry lost $60 million last year in meeting these increased claims, says PHIAC.
Phil Soden, marketing general manager of HCF, says his fund, like many of the other health funds, is not for profit, and returns nearly all its members' fees in benefits. "We expect the return to our members to be 97 cents in the dollar in the coming year," he says.
So what can you do to minimise the costs?
First, be sure your health fund offers the best deal for your needs.
As the table shows, there can be differences in premiums for the same levels of cover. But don't be fooled into thinking a cheap policy will meet all your needs.
John Powlay, the Private Health Insurance Ombudsman, says never choose a fund on price alone. "Cheap doesn't necessarily mean nasty - but often does," he says.
What if you decide another fund is a better option?
Changing funds can be problematic. The good news is that on the hospital side at least, there are provisions in the law that let you move between funds without waiting periods, providing it's an equivalent level of cover.
But Powley says problems can occur on the ancillary side.
"With most funds the benefits that you get increase the longer you are in the fund," he says. "So you might be in a fund with good dental coverage but find you are not able to get the same high level if you change."
Essentially, health insurance is no different from other insurance.
Your policy is not open-ended. You need to read the fine print to see what you are and are not covered for. Often it is what you are not covered for that you need to take special note of to avoid future disappointment.
In its consumer guide to choosing health insurance, the Health Insurance Complaints Commission says: "Like any legal contract, policies offered by private health funds include conditions, exclusions and explanations in the fine print attached to their brochures and application forms. Please read the fine print before signing."
It cites the example of a health insurance product that excludes heart surgery or hip replacement. If you don't read the fine print, you might not realise the exclusions until it is too late. "All health insurance products are not the same," the guide says.
While still keeping a comprehensive level of cover, one of the best ways of making savings is to pay a higher level of excess. By agreeing to pay the first part of your bill - be it $100 or $1000 - you can reduce the regular premiums that you pay. Remember, this impost applies only if you have a claim, unlike premiums that have to be paid regularly.
If you do decide on an excess be sure to know how it works. Some funds require you to pay it for every hospital admission during a year. Others only require it to be paid once, while others require it to be paid until it reaches a certain amount.
Equally, some funds require you shell out an accommodation co-payment during your hospital stay. This is on top of the excess, so it is important not to confuse the two.
Another option for cash-strapped consumers is to move to a lower level of cover. Some funds offer private insurance for treatment in a public hospital only.
Basic products invariably have restricted benefits, says Powlay: "For example you might not be covered for psychiatric, hip replacement or cardiac conditions."
This can be a popular choice for people who are young and fit. Nevertheless, Powlay says: "You need to be aware that you are exposing yourself to some risk."
CHECK
Waiting periods.
Policy limits and excesses.
Whether co-payments apply.
Treatments the policy excludes.
List of participating hospitals.
That payments are up to date.
JUST DO IT
It's not only that premiums are rising but that some ancillary benefits, such as those infamous joggers, are being withdrawn to keep premiums down.
It's as well to remember that to qualify for Lifetime Cover and avoid the surcharge, you need only have hospital cover - ancillary benefits are not obligatory.
Martyn Goddard, the Australian Consumers Association's senior health policy officer, sees the removal of fitness benefits as a cynical move.
But Medibank Private's managing director, George Savvides, says lifestyle extras comprise only a small proportion of ancillary benefits. No changes are planned for core cover such as dental, optical, physiotherapy and chiropractic items.
ON SATURDAY
IN BUSINESS & MONEY
Insurance stock: where the Promina float fits in
Annual premiums for singles (double for couples and families)
Basic cover Top cover Top cover with
Not-for-profit health funds (products vary) no excess
ancillary no exc.
HCF Effective April 7 $484.10 $924.55 $1386.82
MBF Effective April 1 $512.95 $1024.45 $1428.40
Medibank Private Eff. March 31 $385.10 $787.05 $1353.20
NIB Effective April 1 $412.05 $784.20 $107.95
SOURCE: HEALTH FUNDS
© 2003 Sydney Morning Herald