Need to know
- Health funds are offering varying degrees of financial relief during the COVID-19 crisis, but most aren’t open about the specifics – we had to push them for details
- The funds say they will return any extra profits they make from restrictions placed on health services to their members, but details of when and how are unclear
- Although the relief is welcome, the industry has knocked back a number of CHOICE recommendations that would give policyholders a better deal
In a sign that Australia's five largest private health funds sense some urgency in the economic moment, none raised their premiums on 1 April, as they normally would. The move is meant to give financial relief to the millions of people who have private health insurance in this country, as the economic impact of coronavirus (COVID-19) sets in.
In its latest statement of monetary policy, released in May, the Reserve Bank of Australia (RBA) predicted that virus-containment measures could cause the country's GDP to contract by 10% over the first half of 2020 and raise unemployment to 10% in the June quarter. Insurers Medibank, Bupa, HCF, NIB and HBF have all agreed that serious and substantial action is needed to help people through the downturn.
People deserve to know what they are entitled to at this stressful timeDean Price, CHOICE health campaigner
HBF scrapped its premium increase for the year – the first time a health fund hasn't raised premiums since 2002. The other major funds have merely delayed the rise until later this year. We're calling on them to follow HBF's lead and provide relief from the increase for the whole year.
Our five key asks
It's one of the five key steps we've asked private health insurers to take to support their customers, along with: introducing further premium discounts to reflect the fact that people haven't had access to the full range of health services they would in a normal year; rolling over unused extras benefits to the new year; letting more people suspend their cover; and making hardship policies publicly available, with details of how people who have lost income will be supported.
Here's a breakdown of the responses from Australia's five biggest health funds.
The good parts of the funds' responses
A central element of the funds' responses is their expansion of financial hardship support. This will let many people who have lost their jobs or income to get their premiums waived for up to one (Medibank) to nine (HBF) months while remaining covered by their insurance policy. People with Medibank can get 50% off their premiums for up to six months. The option of suspending cover for up to six (NIB and HBF) to 24 (Medibank and HCF) months will also help people affected by the virus.
The pre-pandemic picture
Before COVID-19, Medibank's financial hardship policy was available only to people with hospital cover; Bupa was offering premium waivers only to holders of high-end policies who lose their job and people affected by bushfires; HCF gave premium waivers only to members made redundant from full-time jobs; Bupa let people suspend their cover due to hardship only once; and NIB permitted suspensions only after 12 months of active membership.
These conditions have been relaxed to help people through the current crisis. Medibank is giving more of its customers access to hardship support (people with visitor, working visa and student cover are still excluded); Bupa has expanded access to premium waivers to people affected by COVID-19; HCF is now offering premium waivers to part-time, casual and self-employed workers who've lost their income; Bupa now lets members suspend their cover more than once, and NIB has waived its 12-month rule for suspensions.
'Basic level of decency'
CHOICE health campaigner Dean Price has welcomed the changes, which he says elevate the funds' responses to people experiencing hardship to a "basic level of decency". He says they're now "doing what they should always do", and points out that the health insurance sector's hardship policies aren't as developed as those of other industries, such as banks and utilities.
But there's a troubling aspect to this part of the funds' responses. To get hardship support, you have to ask for it. That means it's the responsibility of the millions of people who lose their jobs or income to seek help from their health funds. Before they can get their premiums waived or their cover suspended, policyholders have to 1) know these options exist and 2) be in a position to ask for them. In most cases, you can ask over the phone or online, but the process still takes time and effort during what is already a challenging period in people's lives.
The bad news
Other disappointments in the insurers' responses are their unwillingness to roll over unused extras benefits to the new year – despite having regulatory approval to do so – or give broad premium discounts, which means people who skip services they would use if not for the restrictions have to live with the loss. One exception is Medibank's AHM brand, which is rolling over unused extras (excluding optical and services with non-annual limits) because the business resets extras limits on 1 July, unlike most other funds, which reset on 1 January.
Still providing value?
In their responses, the funds assured us they wouldn't keep any extra profits made during the crisis. But they also insisted they've been providing continued value in the form of urgent treatments and telehealth consultations, online resources such as fitness programs and guided meditations, and donations to health organisations.
Medibank spruiks telehealth services on its webpage about member support: "Members with eligible extras can now access telehealth services – including psychology, physiotherapy, dietetics, occupational therapy, podiatry, exercise physiology, and speech therapy – and claim for services undertaken between 14 April and 30 September 2020".
Beside this memo, however, is a notably shorter one, which lacks the same specificity: "A coronavirus hardship policy that allows members to suspend their cover for a duration of time."
'Lack of transparency'
"A few of [the funds] missed one key part of our ask around the hardship policies, and that is the bit about them being public," Dean says. "People who have lost their job or lost income are going to be contacting a large number of organisations trying to sort out their finances and the lack of transparency makes it more difficult… People deserve to know what they are entitled to at this stressful time."
In their responses to us, all five insurers wrote that people adversely affected by COVID-19 can apply for premium relief. But only HCF's website hones in on the details, specifying that the fund will pay customers' premiums for up to six months. HBF mentions premium relief on its website, but is unclear about what exactly this entails. Medibank and NIB only mention suspension of cover on their websites, and Bupa merely refers to "relief/financial assistance". To get more specific information, we had to engage in many back-and-forth emails.
The unclear points
After premium waivers for people experiencing hardship, the next best aspect of insurers' responses was their decision not to raise premiums on 1 April. However, Medibank, Bupa, HCF and NIB plan to go ahead with their premium rises on 1 October.
Our call for them to ditch the 2020 increase altogether reflects the shutdowns and restrictions we've seen for many healthcare services, which we think have substantially cut into benefits for the insured and created windfalls for the insurers.
An essential part of the industry's response is its explicit commitment not to benefit from the COVID-19 lockdowns. That sounds reassuring. But the funds are claiming many of the services that have been unavailable can be provided later in the year, so they won't be able to calculate whether they've made extra money for quite some time.
Bupa says ancillary claims are “now tracking at a level consistent with 2019 and surgery is at levels consistent with 2019 with procedures such as hip and knee replacements at higher levels than pre-COVID”.
Some elective surgeries have resumed – but we still don't know how long hospitals will take to clear the backlog, so there's a big question mark over whether people will get full value from their insurance this year. A key reason for the takeup of private health insurance is to avoid waiting times, and long waits are likely as hospitals and other healthcare providers manage a staged approach to resuming treatments.
Insurers say that if they make extra profits, they will return the money to members. But it's far from clear exactly when they intend to make this evaluation.
Kicking the can down the road
Dean is concerned the funds might keep kicking this commitment down the road, hoping people will forget about it. "The private health insurers that are listed on the stock exchange, Medibank and NIB, have been quick to reassure the market that they are going to be doing well financially this year, but they haven't extended the same clarity to their policyholders," he says.
In April, a former private health insurance regulator publicly called for the appointment of a body, independent from industry, to ensure extra profits are handed back to policyholders. We think this should happen quickly so insurers can get money back to their members as soon as possible.
Is it enough?
A final question relates to the overall value of private health insurance. In our latest Consumer Pulse survey, which ran in late March, four in five people with private health insurance said it was a key cost-of-living concern. Even if the health funds' support packages help people hold on to their cover, will it be enough to get them to keep it into the future? In the wake of successive drops in the number of people with hospital cover, some health experts are sceptical.
'A lot of talk'
Dean describes the industry's response so far as "a lot of talk and not enough follow-through". He says they'll need to do more to address people's concerns about the cost and value of their insurance. “We've reached out to health insurers and we are going to publish a scorecard based on their responses in the next fortnight," he says.
The RBA predicts it will take at least until 2022 for the economy to recover from the effects of the shutdown, which suggests more broad support will be needed beyond 1 October, when most people's premiums are set to go up.
In our recent submission to the senate committee inquiry on COVID-19, we wrote that health funds' expanded hardship provisions show a new flexibility and compassion, and urged insurers to keep these changes in place. We also said we would welcome government support to ensure there are minimum standards across all private health insurers, to bring their hardship policies into line with other industries. This would add safety nets for people whenever they find themselves in financial trouble – regardless of whether it relates to coronavirus.