Many people are either abandoning their private health insurance policies or downgrading to lower cost, lower benefit products as premium increases continue to outpace inflation and wage growth.
In its annual report into the private health insurance industry, the Australian Competition and Consumer Commission (ACCC) found Australians are increasingly dropping their hospital cover, and instead opting for just extras cover. Many people are also choosing policies with higher excess payments in an attempt to keep policy premiums to a minimum.
“People are increasingly feeling the pinch of private health premium increases and growing gap payments. In response, many are shifting to cheaper products with reduced coverage, and some are dropping their cover altogether,” ACCC deputy chair Delia Rickard said.
The affordability of private health insurance has been an increasing concern for consumers in recent years.
Many insurers will be updating their policies ahead of the Australian government’s private health insurance reforms, which aim to make private health insurance simpler and more affordable, and come into effect on 1 April 2019.
The ACCC is warning private health insurers they must provide clear, prominent and timely communication with customers regarding changes.
“Private health funds have clear obligations not to mislead their customers under the Australian Consumer Law. Failing to properly tell customers about cuts to their benefits or policies may be a breach of the law,” Ms Rickard said.
“Ahead of 1 April 2019, we will be monitoring to see how health funds are telling consumers about changes to their policies and benefits. Private health insurers need to be transparent about what is and isn’t included in their policies or risk losing their customers’ trust and ultimately, their business.”
ACCC highlights the following key industry developments and trends in the year ended 30 June 2018 (FY2018):
- In FY2018, consumers paid about A$23.9bn ($17.3bn) in private health insurance premiums, an increase of almost A$834m or 3.6% from FY2017.
- The amount of hospital benefits paid by health insurers was A$15.1bn and the amount of extras treatment benefits paid was $5.2bn.
- In June 2018, 45.1% of the Australian population held hospital-only or combined health insurance cover, a decrease of 0.9 percentage points from June 2017.
- The proportion of the population holding extras-only policies increased from 8.9% in June 2017 to 9.2% in June 2018.
- About 88% of in-hospital treatments were delivered with no gap payments.
- The average out-of-pocket expenses from hospital treatment increased by 3.3%. Extras treatment recorded a decline of 0.7%.
- Consumers are also continuing to shift to lower cost policies with exclusions, or excess and co-payments. In June 2018, 44% of hospital policies held had exclusions, compared with 40% in June 2017. There was also an increase in hospital policies with an excess or co-payment from 83% to 84%.