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Calls to end health cover confusion

CHOICE calls for reform as survey finds 57% of consumers purchase health insurance for poor value extras cover

14 July 2017

CHOICE has found a key reason consumers purchase private health insurance is for ‘extras’ cover, even though the value of these benefits is declining. 

The consumer group has released a new report and research looking at people’s understanding of private health insurance, the pressures they feel and the value on offer. CHOICE found: 

• One-in-five policyholders are considering dropping or downgrading their cover 
• 44% of policyholders find it difficult to compare health insurance policies. Of these, the biggest problems are: 
o Comparing policies side by side (69%) 
o Difficulty comparing out-of-pocket costs in the event of going to hospital (54%) 
o Information from insurers not being presented consistently (53%) 
o Difficulty comparing rebates for extras (53%)

“With premiums surging an average of 55% since 2009 and more than 40,000 products in the market, private health insurance has become a quagmire of cost and confusion for Australian households,” says Matt Levey, CHOICE Director of Campaigns and Communications.

“This confusion seems to be reflected in the reasons people give for buying private health cover, with 57% identifying extras coverage as key, slightly ahead of peace of mind (56%) and avoiding public waiting lists (43%).

“Despite insurers bundling extras and hospital cover together, extras is a completely different sort of product. 

“With the Federal Government wanting to make private health insurance better value, a good start would be helping consumers better understand the difference between extras, which is mainly a budgeting tool, and hospital cover, which some people take out to avoid paying extra tax,” Mr Levey says.

CHOICE’s latest analysis of thousands of extras policies from 23 funds has also found that while premiums continue to increase, the amount members can claim for individual items has failed to keep up – and in many cases has remained stagnant.

“We found set dollar benefits for extras cover have largely stayed the same between 2013 and 2016, with consumers who stay in the same policy being slugged a ‘lazy tax’ by paying more and getting the same benefit,” [1]  says Mr Levey.

“For example, in 2016 a typical benefit for an initial physio consult was $36, the same as it was in 2013. Meanwhile, average physio fees increased from $64 to $71.”[2]  

CHOICE’s research on extras appears in its new independent report into the industry, titled Making Private Health Insurance Simpler, along with several recommendations for reform.

“We are calling on the Federal Government to make private health insurance easier to understand and better value for the whole community,” Mr Levey says.

The full report can be viewed at: Australians are being short-changed on health insurance extras

Media Inquiries Tom Godfrey, Head of Media and Spokesperson - 0430 172 669 - @choice_news

Key findings from CHOICE’s research:

• Most policyholders identify extras coverage as a key reason for buying health cover at 57%, ahead of peace of mind (56%) and avoiding public waiting lists (43%).

• One in five policyholders are considering dropping or downgrading their health cover in the coming 12 months, with the vast majority of these, 66%, saying it is too expensive.

• Policyholders who recall receiving their policy’s Standard Information Statement (a policy factsheet normally send out by health funds with your annual tax statement) are much more likely to find it easy to understand their coverage (42% compared to 30%).

• 44% of policyholders find it difficult to compare health insurance policies, while 28% find it easy.

• Of those who find it difficult, the biggest problem is comparing policies side by side (69%), followed by difficulty comparing out-of-pocket costs in the event of going to hospital (54%), information from insurers not being presented consistently (53%) and difficulty comparing rebates for extras (53%).

CHOICE’s recommendations to make private health insurance simpler:

1. Give consumers better information about the difference between extras and hospital cover, and whether their extras cover is value for money.

2. Raise the bar for commercial comparison websites, making them more comprehensive and transparent.

3. Encourage consumers to regularly test their products against the market, re-evaluate their needs and make it easier to switch.

4. Improve the government-regulated Standard Information Sheet, keep it consistent and send it regularly to all policyholders.

5. Remove very-low value policies (i.e. junk health insurance) from the market entirely.

Health insurance tips

● Take the Do I need health insurance? health check.
● If you need cover, a top level hospital cover with an increased excess is often better value than reducing your cover.
● Check to see if you can join a restricted membership health fund for your industry.
● If you have hospital cover ask for a copy of the Standard Information Statement to check what you’re not covered for.
● Think of extras cover as a budgeting tool. Ask for an Annual Claims Statement and if your annual payouts are less than the cost of your policy, it may not be worth the money.

[1] Graham, D. 2017. Added Extras, CHOICE Magazine (July), pp. 32-35

[2] APRA, Private Health Insurance Membership and Benefits,