So you've decided to buy private health insurance. Now comes the really
critical decision: which fund do you go with? Health insurance is not only
expensive, it's your health. You might be tempted to go with the
big fund, just because you've heard of them. But is it the right move to go
with a company just because they've got advertising money to burn?
The health insurance market is dominated by the big two funds, Bupa and
Medibank. Most people have heard of these, and maybe also a couple of other
medium-sized funds. But did you know there are 24 health insurers to choose
from? There's even more if you count restricted membership funds, which
actually aren't that restricted.
But some people might be worried about going with a health fund they've
never heard of. You might wonder if they're up to the job, or if they'll be
able to provide competitive cover, or even if the health fund will still
be around tomorrow. We bust a few myths that you might have heard about
smaller health funds.
Myth #1: Small health funds aren't run to the same standard as large
All health funds, big and small, have to adhere to a set of rules that
ensure they can continue operating. These rules are set down in
legislation, and regulated by the Australian Prudential Regulation
keep the money for running their health insurance business in a separate
fund to any other assets
keep enough cash on hand to pay any claims for the next month
have enough assets to be able to pay out any liabilities for the next year.
All health funds are also answerable to the Private Health Insurance
Ombudsman, the independent government body which adjudicates complaints
from fund members. The Ombudsman regularly publishes complaints figures for
each fund and compares them against the insurer's market share.
If a health
fund has a higher share of complaints than it does members, that's a good
indication its internal customer service processes might not be the best.
Consider Medibank, which insures more than one quarter of the market, and
was the target of almost half of all Ombudsman complaints in the last
quarter of 2016.
Myth #2: It's cheaper to go with a big fund
Not always. When we review hospital cover we look at policy prices. When
we've looked at top hospital policies – where it's easiest to compare
products because cover is almost identical between funds – small funds can
sometimes be the cheaper option.
Of course, you need to consider potential out-of-pocket expenses too. Funds
sign agreements with hospitals and doctors about how much you'll have to
pay for treatment and accommodation. The more agreements a fund has, the
better chance your insurer will pick up more of the bill.
Many small- and medium-sized funds are part of a group called the
Australian Health Service Alliance (AHSA). Insurers pool their resources
into the AHSA, which negotiates agreements with hospitals and doctors that
cover members of all funds. Called Access Gap Cover, this scheme provides
as good (in some cases better) protection against out-of-pocket costs as
the large funds.
Myth #3: Big funds will give you more choice of health care
When it comes to extras, large funds like to spruik the extra benefits
their members get by going to practitioners in their agreement networks – higher rebates on glasses, no gap dental care, and so on. Some funds even
operate their own dental clinics, although professional bodies like the
Australian Dental Association have pretty strong views against the merits
of "preferred provider" schemes.
These networks aren't restricted to the big funds: some smaller funds also
do deals with individual dental clinics and some optometry chains. And even
if they don't, every fund will still pay normal benefits for services
provided by qualified professionals – you can still go to your
preferred provider and be sure your extras will give you cover.
We aren't saying you shouldn't consider the big funds. CHOICE recommends
some of their policies, and a lot of people see them in the results when
they use our health insurance comparison tool. All we're saying is you
shouldn't consider just the big funds. The range of policies out
there is bigger than most people realise, and it definitely pays to shop