Frustration with complex private health insurance policies and unexpected out-of-pocket costs is leading to increased complaints and even some people abandoning their hospital policies.
The ACCC has today released its annual report into the private health insurance industry, calling for the industry to make its products more consumer friendly by providing reliable and transparent information about product features and changes to private health insurance policies.
“Consumers rely on private health funds engaging with them honestly so they can avoid unexpected out-of-pocket costs and make informed decisions about the policies they choose,” ACCC Acting Chair Delia Rickard said.
“However, we’ve found it’s currently very difficult for consumers to properly compare and choose policies for their needs, meaning many are shocked when presented with expensive bills for medical services and products they thought they were covered for.”
The ACCC also found that rising private health insurance premiums remained a significant issue for consumers. In response to higher prices, the report showed consumers are shifting to lower-cost policies with greater exclusions or a higher excess, or simply dropping their cover.
“Consumers are increasingly questioning whether the benefits of private health insurance offset the premium increases—a trend that should concern the industry,” Ms Rickard said.
“We believe private health insurers are capable of providing consumers with significantly more detail about extent of coverage under their policies. Clear and prominent disclosures are one measure that can rebuild waning trust in an industry where complaints increased by 30 per cent last financial year.”
Private health insurance reforms
The ACCC acknowledges that its observations are made in the context of ongoing Australian Government consideration of reforms to the sector, which aim to make private health insurance simpler and more affordable.
As part of these reforms, the standard information statement—a broad summary of key policy features all health insurers are required to provide to consumers—will be replaced with a new ‘minimum data set’.
“The ACCC welcomes this significant reform and considers it crucial that the new minimum data set is effective in providing consumers with clearer information about their cover,” Ms Rickard said.
“The ACCC also supports additional funding announced for the Private Health Insurance Ombudsman to enable it to widely promote its website and comparison service.”
The ACCC will closely monitor developments relating to these and other policy processes and consider the competition and consumer aspects of any reforms.
Key industry developments and trends in 2016-17
- Australian consumers paid private health insurance premiums of around $23.1 billion in 2016-17, an increase of $1 billion from 2015-16. Premium increases have been greater than inflation and wage growth in recent years.
- In June 2017, 54.9 per cent of the Australian population held hospital or general health insurance cover. This was a decrease of 0.6 percentage points from June 2016, when 55.5 per cent of the population had some form of private health insurance.
- The amount of hospital benefits paid by health insurers per person increased by 5.2 per cent, along with a 3.4 per cent increase in general or extras benefits per person.
- Average out-of-pocket expenses incurred by consumers from hospital episodes decreased by 0.8 per cent, but increased by 2 per cent for general or extras treatments.
- Consumers are shifting towards lower-cost policies with greater exclusions or a higher excess. In June 2017, 40 per cent of hospital policies held had exclusions, compared with 38 per cent in June 2016. There was also an increase in hospital policies with an excess or co-payment from 82 percent to 83 percent over the same period.
- Complaints to the Private Health Insurance Ombudsman (PHIO) increased by 30 per cent, continuing a trend of increasing complaints, which have risen for the fourth consecutive year. The benefits paid by insurers to consumers continued to receive the highest level of complaints.
Private health funds must provide accurate disclosures about their policies including any changes to the benefits available under their policies. Funds are not exempt from regulation and can face significant penalties if they breach the Australian Consumer Law (ACL).
Private health insurers and other health industry participants have been the subject of a number of recent ACCC enforcement matters for alleged ACL breaches. The ACCC has recently taken action against:
- Ramsay Health Care
- Australian Unity
Each year, the ACCC is required by the Senate to produce a report on key competition and consumer developments and trends impacting on people’s health cover. This report covers the 2016-17 period.
This is the ACCC’s 19th report to the Senate under this order.