The Australian Government has implemented reforms to private health insurance, aimed at simplifying the different policies, and entitlements with each policy. Around 13.6 million Australians have private health insurance, and these reforms are designed to make it easier for all Australians to choose the best cover for their needs.
Five Key Changes in Private Health Insurance
The changes in private health insurance address five key areas:
Private hospital cover tiers
Private health insurance in Australia is now classified by four (4) tiers of cover. Each category of cover has been simplified, with classifications known as Gold, Silver, Bronze and Basic. Each tier determines what services – for example rehabilitation, psychiatric services or diabetes management – are covered in a particular in-patient hospital treatment.
Higher excesses for lower premiums
Did you know you can lower your annual premium payments by electing to have a higher private health insurance excess? Around 80% of consumers with hospital cover already select products with excesses attached, however, there has been a maximum amount set for the excess of private health insurance for close to 20 years. Now Australians have greater choice with how they manage their insurance premiums. Depending on circumstances, discussing your product excess with your private health insurer may be of financial benefit. It’s important to note there is no obligation to take a higher private health insurance excess, but the flexibility is available if suitable.
Discount for young people and increase of age of dependants
Young Australians between the ages of 18 – 29 could be offered discounts of up to 10% off their private health insurance premiums. This discount helps to improve affordability for this age bracket with an important initiative to encourage retention of membership. If a policy holder with an age-based private health insurance product remains on the policy, retention of the discounted rate could be applied until the age of 41. Prior to these reforms, the maximum age of a dependent was capped at 24 years. The reforms recommend the increase in age to 31 years, with the age limit for dependents with a disability removed. It is important to be aware that this reform is not compulsory for private health insurers to implement, it is a voluntary change that more than 30 private health insurers in Australia have indicated their intention to apply.
Transparency of out-of-pocket costs
Thanks to an on-line tool called the Medical Cost Finder out-of-pocket costs incurred by private health insurance customers has been improved. There is now transparency of the dollar amount difference in specialist’s costs by using the on-line cost finder.
Medicare Levy Surcharge and Private Health Insurance Rebate
With the aim of improving affordability and sustainability of Private Health Insurance, the Medicare Levy Surcharge and the Private Health Insurance Rebate income tiers have been extended. This means all Australians with Private Health Insurance will have greater confidence they are being treated in the most appropriate care setting and have greater certainty of cover. Incentivising contributions from higher income earners aids the sustainability of a strong, hybrid public and private health care system in Australia.
The Impact on Not-for-Profit Private Health Insurers
Not-for-Profit Private Health Insurance funds are accountable to their members, as opposed to shareholders/investors. A key responsibility of Not-for-Profit Health Insurance funds is to pass on their profits directly to members. This means members are prioritised, and can lead to more benefits and lower premiums. The Private Health Insurance reforms aim to support Not-for-Profit Private Health Insurance companies negotiate strong and affordable access for members to the private hospital sector. They can also provide access to appropriate care, expansion and accessibility to maternity care and an expansion of appropriate and safe in-home medical care rather than hospital. In addition to lower premiums and higher benefits for their members, Not-for-Profit Private Health Insurance can offer additional flexibility of choice and the type of coverage they supply because they flow funds directly to improving services to members.
Out of pocket expenses
There will be occasions when the term ‘out of pocket expenses’ will be used when you’re seeking advice from your medical professional. This refers to the difference between the rebate Medicare pay and the rebate your Private Health Insurance pays, versus the costs of the procedure. For example, If a specialist charges $500 for a procedure, and Medicare pays $120, your Private Health Fund pays $147, your ‘out of pocket’ cost is $233. The rebates from Medicare and your Private Health Fund are aligned to assigned procedure codes.
When choosing or comparing your Private Health Insurance, it is important to be aware of the key changes brought on by the reform. As with any membership, it’s a good idea to review your Private Health Insurance occasionally to compare your fund with others in the market, such as not-for-profit funds. There may be savings or added member benefits by comparing that will give your and your family greater support, flexibility and cost saving.