A Media Frenzy
There are a multitude of articles being broadcast in relation to private health insurance hurtling towards its own demise, as more and more young people are dropping out of private hospital cover. It’s not just young people who are starting to feel the pinch and pressure from increasing health insurance premiums either. We spend a lot of time listening to what our customers have to say in relation to rising health insurance premium costs and the reason they might feel it’s time to drop out. It seems to us that the journalists writing the aforementioned articles may be a little off the mark. After all, none of them actually speak to health insurance consumers directly, and neither are they qualified to.
A Dominated Market
Firstly, it’s important to understand that Australia suffers from generalization when reviewing private health insurance data. You see, the market is dominated by two major health funds: Medibank and BUPA. Medibank listed on the ASX in 2014, and BUPA is an off-shore UK-based mogul that dominates the health space on a global scale. Together, Medibank and BUPA own approximately 54% of the market. This means that more than 1 in 2 insured Aussies are with either Medibank or BUPA. The other 46% of the industry is spread out across more the 40 other health funds and brands* but hold a market share of less than 1%.
*a good example of the difference between a health fund and a health brand is NIB and Qantas Assure. NIB is a health insurance fund, but Qantas Assure is a health brand underwritten by NIB. Some health funds underwrite or own smaller health brands.
Any data that represents the complete state of Australian health insurance needs to consider that 54% of the data is represented by the performance of Medibank and BUPA. Surely our Health minister ought not to make any significant health reforms based on the performance of only two health funds. There are approximately 38 other health insurance brands that, in a multitude of ways can outperform the larger health insurance funds and deliver better value for the spend.
Why People Drop out of Health Insurance
It’s all about value:
What do I get back for the cost to insure myself or my family?
Rising health insurance premiums isn’t the problem per se, it’s just an outcome. The problem is value. Not a day goes past that we don’t speak to someone who previously dropped out of private hospital cover because when it finally came time for them go in for private surgery, they received a large doctors gap fee afterwards. Another common scenario is a shocking dental gap for a Crown or Implant because the extras policy had meagre payouts. We often hear “Why pay all this money into a health fund for so many years, just to fork out $1500 bucks anyway?”. It’s a good point and fair reason to cancel out of private health insurance. However, there is another solution.
Medical Gap Cover – Knowledge is Power
When considering surgery through a private doctor and/or private hospital, it’s of paramount importance that you understand your options and rights in terms of Medical Gap Cover. Gap Cover is the term given to an arrangement between your private health fund and your private doctor which can reduce or eliminate any out-of-pocket ‘gaps’ charged by your private doctor or anaesthetist. Being that most private doctors charge above the Medicare Benefit Schedule fee by default, it’s down to you to ask your doctor if they will participate in Gap Cover with your health fund.
Some doctors simply won’t participate in Gap Cover, some doctors will participate without you having to ask, and then there are the doctors who only participate if you ask. Also, consider that most major surgeries such as joint replacements or cardiac-related surgery almost always result in a gap due to the complex nature and risk related to the surgery. These conversations might be more about reducing the gap, rather than eliminating it.
Extras and Out-of-Pocket expenses
With big-ticket extras items (Major Dental being the main offender), a smart insured Australian should check the rebates of their extras policy annually. Many health insurers tend to wow and woo customers with high annual limits. The annual limit is the total amount of money you have allocated to a service to spend each year (eg. $1000 maximum per year for Major Dental services). If you look a little closer at the policy though, you often find that the actual rebates are quite low.
The rebate is how much you get back on your actual claim when swiping your health fund card (eg. $580 back when you claim on one Crown, $400 back on a pair of Dentures, or $800 back on an Implant). Most people are disappointed to find they only get about 25-30% back on their extras claims across the board. We find this to be very common with people who have been on the same policy for a number of years.
There’s an argument to say that the rebates on your extras are more important than your limits, especially if you are a casual extras user. We help our customers factor in annual limits and rebates in relation to the policy cost. This is how we build VALUE into your new policy. If relevant, we then help our customers compare these figures to their current policy in order to prove a need to switch to our suggested health fund who is better suited to your current needs.
Lower Premiums: compare health funds.
To put all the above advice into practice, you should finish this process with an apples-with-apples comparison between your current health insurance policy against what other health funds have to offer. It’s not uncommon for you to find a result that’s like having your cake and eating it too: lower premiums, higher payouts, improved Medical Gap Cover performance in your state, all wrapped up in a new health policy.
A Better Outcome
In short, we offer our customers transparent and helpful health insurance advice, built around your specific needs. We will help empower you with knowledge in relation to your health funds Medical Gap Cover and Extras rebates. Finally, we help you compare to your current policy with clarity and ease. Our health advisers will assist you to consider a better option than cancelling health insurance completely, an option that doesn’t leave you at the mercy of the public health system and its Waiting Lists when you need support the most.