Health insurance reforms the biggest in nearly two decades

There's slashed benefits and some discounts, yet junk policies remain.

Price increases for excess payments, cuts to select benefits and discounts for young people are part of the most significant reforms to be made to the private health insurance industry in almost 20 years.

The changes, expected to be announced by Health Minister Greg Hunt today, form the basis of the government's plan to curb the rising health insurance costs that are causing families to cancel policies in alarming numbers.

Central to the plan is a discount for younger generations in an effort to encourage the uptake of health insurance. People from 18 to 29 would gradually earn a 2% discount each year, so that a 20-year-old, for instance, would build up to the maximum discount of 10% by the time they were 25.

But the discounts are not permanent; they would phase out once the policyholder reaches the age of 40. This is according to reports from the ABC, which first revealed the reforms a day before the official announcement.

The reforms aim to combat the rising cost of health insurance premiums – which have been surging by an average of 5.6% a year since 2010 – by increasing the cost of excess payments. Doing so, along with a raft of additional changes and cuts, is expected to lower premiums and slow the rate of next year's rise to approximately 3%.

Moving to a policy with higher excess payments and lower premiums will not be mandatory for existing holders when it comes into effect in April 2019. According to a report from the Sydney Morning Herald, the maximum excess for private hospital insurance is believed to rise from $500 to $750 for singles, and from $1000 to $1500 for couples and families.

Health insurance has long been considered needlessly confusing; the 37 providers offer a combined 46,500 policies. A four-tier system has been proposed in response to make coverage simpler. Hospital cover will be offered as gold, silver or bronze, with an introductory 'basic' tier excluding general treatment or extras cover.

A number of health care benefits paid by health insurers have been scrapped under the reforms, including $188 million in prostheses payments in 2018, and coverage for natural therapies, such as homeopathy, naturopathy and pilates.

Instead a focus has been placed on mental health, with patients being able to upgrade their level of cover without a waiting period, and it will regulate price reductions for various benefits and procedures, such as pacemakers, defibrillators and implants for hips and knees.

There is no indication "junk" insurance policies have been scrapped, a development that causes concern for consumer groups such as CHOICE. These policies account for approximately 13% of all hospital and combined policies on the market, and yet they cover less than one percent of private hospital treatments.


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