Australians exiting private health insurance as price rises bite

Many people are either abandoning their private health insurance policies or downgrading to lower-cost, lower-benefit products as premium increases continue to outpace inflation and wage growth.

In its annual report into the private health insurance industry, the ACCC found Australians are increasingly dropping their hospital cover, instead opting for just extras cover. Many people are also choosing policies with higher excess payments in an attempt to keep policy premiums to a minimum.

“People are increasingly feeling the pinch of private health premium increases and growing gap payments. In response, many are shifting to cheaper products with reduced coverage, and some are dropping their cover altogether,” ACCC Deputy Chair Delia Rickard said.

The affordability of private health insurance has been an increasing concern for consumers in recent years.

Many insurers will be updating their policies ahead of the Australian Government’s private health insurance reforms, which aim to make private health insurance simpler and more affordable, and come into effect on 1 April 2019.

The ACCC is warning private health insurers they must provide clear, prominent and timely communication with customers regarding changes.

“Private health funds have clear obligations not to mislead their customers under the Australian Consumer Law. Failing to properly tell customers about cuts to their benefits or policies may be a breach of the law,” Ms Rickard said.

“Ahead of 1 April 2019, we will be monitoring to see how health funds are telling consumers about changes to their policies and benefits. Private health insurers need to be transparent about what is and isn’t included in their policies or risk losing their customers’ trust and ultimately, their business.”

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A copy of the ACCC’s report is available at: Private health insurance report 2017-18

Key industry developments and trends in 2017-18:

  • In 2017–18, consumers paid about $23.9 billion in private health insurance premiums, an increase of almost $834 million or 3.6 per cent from 2016–17.
  • The amount of hospital benefits paid by health insurers was $15.1 billion and the amount of extras treatment benefits paid was $5.2 billion.
  • In June 2018, 45.1 per cent of the Australian population held hospital-only or combined health insurance cover, a decrease of 0.9 percentage points from June 2017.
  • The proportion of the population holding extras-only policies increased from 8.9 per cent in June 2017 to 9.2 per cent in June 2018.
  • About 88 per cent of in-hospital treatments were delivered with no gap payments.
  • The average out-of-pocket expenses from hospital treatment increased by 3.3 per cent. Extras treatment recorded a decline of 0.7 per cent.
  • Consumers are also continuing to shift to lower cost policies with exclusions, or excess and co-payments. In June 2018, 44 per cent of hospital policies held had exclusions, compared with 40 per cent in June 2017. There was also an increase in hospital policies with an excess or co-payment from 83 per cent to 84 per cent.
  • Complaints to the Private Health Insurance Ombudsman (PHIO) have decreased by 21 per cent since June 2017. The PHIO attributes this to improved complaint handling processes of larger insurers and the smaller premium increases in 2018 compared to recent years.
  • Despite the decrease, the number of complaints received by the PHIO in 2017–18 is the second highest level recorded over the past five years.
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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 finalised action against Australian Unity. Enforcement matters involving NIB and Ramsay Health Care are ongoing, and the ACCC’s appeal in the Medibank matter is awaiting judgment.

Background

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 2017–18 period.

This is the ACCC’s 20th report to the Senate under this order.