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Time to trash 'junk' health insurance policies

CHOICE calls for action on pointless ‘junk’ private health insurance policies

22 March 2016

Consumer advocacy group CHOICE has identified seven popular 'junk' private health insurance policies that it says are a waste of money for consumers and tax payers, and is calling on the Federal Government to act.
These policies from Medibank, NIB, HCF and others come with restrictions and exclusions for the vast majority of treatments with little benefit above what is already provided through Medicare.
"Our analysis shows that in many cases, junk policies cover less than 1% of the services available in hospital, and exclude treatment for the most common serious illnesses such as cancer, stroke and heart disease," says CHOICE Head of Media Tom Godfrey.
"It's particularly concerning that some health funds boast about the popularity of these 'junk' policies, knowing full well they offer inadequate coverage. 
"It's worth remembering that every Australian already has health insurance via Medicare; so the question consumers should ask in assessing private cover is not 'what are the tax benefits' but 'what does it mean for my healthcare'.
"Not all consumers can afford top-level health insurance, but at the same time they shouldn't fork out money for health insurance with no net value.
"It's ludicrous that consumers pay thousands for these poor value policies to avoid Government surcharges but have to turn to the public system when they get sick as their insurance is effectively useless," Mr Godfrey says.  
CHOICE has identified 'junk' policies that only provide cover for a very small number of procedures such as accidents, wisdom teeth, appendix surgery, knee investigations and reconstructions, but exclude all other services and illnesses. For example (annual couple premiums before rebate, valid until March 31, 2016): 
  • Australian Unity Basic Hospital, from $1500 to $2260
  • Defence Health Essentials Hospital, from $1475 to $2210
  • HIF Gold Vital, from $1090 to $1700
  • Medibank Young Hospital, from $1235 to $2410
  • NIB Basic Hospital, from $1540 to $2060
Accident policies are another type of 'junk insurance' that only cover accident and ambulance services, with all other services and illnesses excluded. For example:
  • HCF Accident Hospital only Cover, from $770 to $2140
  • Medibank Accident Cover, from $1190 to $2315
"The benefits these 'junk' policies provide are questionable at best even though you fork out up to $2410," says Mr Godfrey.
"In many cases, these policies are not even the cheapest available, and are marketed in ways that would lead consumers to expect they have greater coverage than is the case," Mr Godfrey says.
CHOICE is calling for the Federal Government to reconsider the eligibility of 'junk' insurance policies for the Private Health Insurance Rebate or exemption from the Medicare Levy Surcharge and the Lifetime Health Cover Surcharge.
"We'd like to see the Government model the impacts of trashing 'junk' policies on the consumer and health insurance market," says Mr Godfrey.
"This should not be approached as simply a savings measure, but as a means of increasing the value of private health insurance, and making quality health care more accessible and affordable for all Australians."
For further information on junk health insurance policies, visit:
How to switch funds
  1. Get a detailed quote
  2. Ask for the cover to start only when the old cover is cancelled
  3. Request a clearance certificate
  4. Request an itemised claims statement (make a copy and send it to your new fund)
  5. Cancel your direct debit with your old fund and your bank 
Government rebates and surcharges

There are a range of financial incentives to coax us into the private hospital system. These are:
  • The extra Medicare Levy of at least 1% that you pay if earning more than $90,000/year (single) or $180,000/year (family)
  • The Lifetime Health Cover surcharge of an extra 2% per year that you don't have hospital insurance on your premium once you turn 31.
  • The private health insurance rebate (or the money you receive back from the Australian Government for having private health insurance). The rebate is income tested.

Junk health insurance policies

Health insurance cover

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