How to switch health insurers if you're worried about cybersecurity, costs or claims
- Written by Anam Bilgrami, Research Fellow, Macquarie University Centre for the Health Economy, Macquarie University
More than half[1] of Australians hold private health insurance. About one quarter, or almost four million people, are members of Medibank, Australia’s largest health insurer[2] and the company at the centre of the current cybersecurity breach[3].
Medibank has promised to support[4] affected customers. However, such breaches may trigger some customers to think about switching companies. People might also want to switch companies for other reasons, including wanting to get a better deal.
Here are some tips to get started.
Read more: Medibank hackers are now releasing stolen data on the dark web. If you're affected, here's what you need to know[5]
Why switch?
Ahead of this latest cybersecurity breach, the most common reason[6] for wanting to switch private health insurers was to find cheaper cover.
This was most likely driven by annual premium increases, which until recently, have been running above inflation.
Other reasons for switching include dissatisfaction with claim amounts, looking for additional policy benefits or trying to avoid exclusions (services not covered). Existing cover may also no longer suit someone’s health needs and lifestyle[7].
Read more: Explainer: why do Australians have private health insurance?[8]
The Commonwealth Ombudsman offers a guide[9] with common types of situations encountered when switching health insurers, and what to expect.
Switching can lead to better matches between what a consumer needs from their health insurance and policy inclusions. People may also get better value for money.
There’s the added bonus of promoting competition[10] between companies, prompting insurers to design better-value insurance products.
How do I compare?
Switching health insurers may feel daunting. However, several websites such as iSelect[11], comparethemarket[12] and finder[13] provide product and cost comparisons.
These sites compare less than one-third of all insurers, restricting your chance for getting a better deal.
A less-known option is using the government website privatehealth.gov.au[14]. This contains details on every policy available in Australia.
You and your family may be eligible to join a restricted insurer[16] based on your industry or profession. These may offer lower premiums[17] and policies with greater benefits, as profits are returned to members. Terms and conditions, including waiting periods, may be more flexible with restricted funds.
Government reforms[18] have introduced four product tiers (gold, silver, bronze or basic). These are based on standard clinical categories specifying what is and is not covered. All insurers are now required to classify their products into these tiers, which makes comparing across insurers easier.
Read more: Private health insurance and the illusion of choice[19]
What else do I need to know?
Waiting periods, discounts and fees
When you switch insurers, your old health fund issues a clearance certificate to your new fund, with the amounts you’ve already claimed in the year carrying across to your new policy.
If switching to a similar level of cover, any waiting periods[20] you’ve already served also carry over, provided payments with your old insurer are up to date.
However, you may have to serve waiting periods for any new benefits and inclusions applying under your new policy, a point to clarify with your new insurer.
There are no exit fees for switching and some funds offer discounts to new members, subject to a 12% per annum cap[21].
Changing insurers should not affect your Lifetime Health Cover[22] status – the government incentive to encourage people to buy and keep hospital cover to avoid an age-based loading on their premiums after the age of 30. This is provided you continuously maintain a hospital policy[23].
Insurers cannot refuse your cover or charge you more based on pre-existing health conditions. They charge customers the same price for the same policy, regardless of whether they are switchers. Although, people aged 18-29 could receive a discount of up to 10% of their premiums.
Excesses and exclusions
Insurers are allowed to increase voluntary excess levels[24] (the sum you pay out of your own pocket before health insurance coverage kicks in) in return for cheaper premiums.
People can also choose to exclude certain medical conditions from their health cover to save money.
However, you should assess whether these options suit you before switching to such policies.
Read more: Greedy doctors make private health insurance more painful – here's a way to end bill shock[25]
You’re not the only one finding this hard
Despite the potential benefits of switching insurers, only around 1.5%[26] of all insured people switch insurers each quarter.
An earlier Australian Competition and Consumer Commission report[27] found that while 48% of consumers surveyed thought about changing insurers, only 14% actually switched.
This likely reflects the complexity of health insurance policies, and the perceived difficulty of making a switch, leading to a tendency for people to “set and forget”.
It’s easy to be confused or think the process of switching is too hard.
Anna Shvets/Pexels, CC BY-SA[28][29]
Read more: Inducing choice paralysis: how retailers bury customers in an avalanche of options[30]
How could switching be easier?
Scheduled annual price increases each April may make some people reassess their insurance needs.
The government could create more “triggers” for switching, encouraging consumers to re-assess their situation. Private health insurance advertising often increases around this time.
The government could also provide information to help people compare how much they are paying relative to their peers. If people discover they’re paying more than others with similar cover, that might be a good incentive to switch. People may also think about switching if they discover their chosen level of cover doesn’t align with their peers.
However, some consumers may never be “nudged[31]” enough to switch. A large proportion of people[32] who purchase hospital cover buy private health insurance to avoid paying the Medicare levy surcharge[33]. These types of consumers may be less likely to evaluate their health cover as their health-care needs change.
Read more: Confusopoly: Why companies are motivated to deliberately confuse[34]
References
- ^ More than half (www.apra.gov.au)
- ^ largest health insurer (www.finder.com.au)
- ^ current cybersecurity breach (theconversation.com)
- ^ to support (www.medibank.com.au)
- ^ Medibank hackers are now releasing stolen data on the dark web. If you're affected, here's what you need to know (theconversation.com)
- ^ most common reason (www.accc.gov.au)
- ^ health needs and lifestyle (www.iselect.com.au)
- ^ Explainer: why do Australians have private health insurance? (theconversation.com)
- ^ offers a guide (www.ombudsman.gov.au)
- ^ promoting competition (www.accc.gov.au)
- ^ iSelect (www.iselect.com.au)
- ^ comparethemarket (www.comparethemarket.com.au)
- ^ finder (www.finder.com.au)
- ^ privatehealth.gov.au (www.privatehealth.gov.au)
- ^ Shutterstock (www.shutterstock.com)
- ^ restricted insurer (www.privatehealth.gov.au)
- ^ lower premiums (www.finder.com.au)
- ^ Government reforms (www.health.gov.au)
- ^ Private health insurance and the illusion of choice (theconversation.com)
- ^ waiting periods (www.ombudsman.gov.au)
- ^ 12% per annum cap (www.legislation.gov.au)
- ^ Lifetime Health Cover (www.privatehealth.gov.au)
- ^ maintain a hospital policy (www.ombudsman.gov.au)
- ^ increase voluntary excess levels (www.health.gov.au)
- ^ Greedy doctors make private health insurance more painful – here's a way to end bill shock (theconversation.com)
- ^ around 1.5% (www.apra.gov.au)
- ^ report (www.accc.gov.au)
- ^ Anna Shvets/Pexels (www.pexels.com)
- ^ CC BY-SA (creativecommons.org)
- ^ Inducing choice paralysis: how retailers bury customers in an avalanche of options (theconversation.com)
- ^ nudged (theconversation.com)
- ^ large proportion of people (insightplus.mja.com.au)
- ^ Medicare levy surcharge (www.ato.gov.au)
- ^ Confusopoly: Why companies are motivated to deliberately confuse (theconversation.com)
