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Time to target premium pain

CHOICE says it's time to junk poor policies and simplify information.

10 February 2017

With private health insurance premiums set to increase by an average of 4.84% on 1 April, CHOICE says it's time for the Federal Government to act, removing tax benefits on junk policies and forcing insurers to give consumers clearer information.

"This latest increase means private health insurance customers have been hit with a 54.6% cumulative price hike since 2009, forcing many to downgrade or drop their private health insurance," [1] says CHOICE head of media Tom Godfrey.

"Worryingly, this latest price increase will see many consumers downgrade to poor-value 'junk' policies so we think it's time for the Federal Government to take action and make junk policies [2] ineligible for any tax rebate.

Last month CHOICE launched a free website called DoINeedHealthInsurance.com.au to help consumers navigate the complex health insurance market. The site asks a few simple questions to help you decide if you actually need private hospital cover.

"Notwithstanding the barrage of fear-laden advertising from health insurers and for-profit switching sites, private cover is unaffordable and often unnecessary for many consumers," Mr Godfrey says.

"With low payout rates on extras [3] and an increase in complaints to the ombudsman this year [4], it's hard to see how insurers could reasonably expect consumers to pay another 4.84% premium price hike or why many younger consumers would take out cover at all." 

CHOICE analysis shows the latest 4.84% average increase will see consumers paying $93 more a year on average for a standard hospital policy, with premiums for singles likely to jump from $1919 to $2012. [5]

"It's important to factor in that a premium price hike might increase well above the average, so it's vital you get your insurer on the phone and find out exactly how much you are being slugged," Mr Godfrey says.

"As we approach April 1 insurers and for-profit switching sites will try to make you believe taking out private cover is a matter of life and death. But it's important to realise that every Australian already has health cover through Medicare.

"Critically, if you're deciding to go private, it pays to be aware of exactly what you're getting in terms of cost, coverage and value for money. 

"That's why we are also calling on the Federal Government to simplify policy information, making it easier for consumers to find a better value policy that meets their needs."

Health insurance saving tips: 

• Take the Do I need health insurance? health check to see if you're actually financially better off taking out a policy.
• If you're keen to switch policies, top-level hospital cover with an increased excess is often better value than reducing your cover.
• Pay your annual premium as a lump sum in March to avoid the 1 April price rise.
• Check to see if you can join a restricted membership health fund for your industry.
• Think of extras cover as a budgeting tool. If you're getting back less in benefits than you're paying in premiums, it may not be worth the money.

Media contacts: Tom Godfrey, CHOICE, Head of Media and Spokesperson: 0430 172 669

About CHOICE
Set up by consumers for consumers, CHOICE is the consumer advocate that provides Australians with information and advice, free from commercial bias. As vital today as when we were founded in 1959, CHOICE continues to fight for consumers and uncover the truth. By mobilising Australia's largest and loudest consumer movement, CHOICE fights to hold industry and government accountable and achieve real change on the issues that matter most.

[1] CHOICE analysis

[2] https://www.choice.com.au/money/insurance/health/articles/junk-health-insurance

[3] http://www.apra.gov.au/PHI/PHIAC-Archive/Documents/Operations-of-PHI-Annual-Report-2013-141.pdf

[4] https://www.choice.com.au/money/insurance/health/articles/accc-takes-medibank-to-court-over-gap-costs

[5] CHOICE analysis