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Shine a light on murky insurance deals: AMA

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Health insurance premiums are being inflated by commissions and many consumers are being lured into unnecessarily switching cover because of murky arrangements between health funds and insurance comparison websites, the AMA has warned.

Releasing its inaugural Private Health Insurance Report Card, the nation’s peak medical organisation has urged greater Government scrutiny of health insurance industry practices which is says may be distorting the market and undermining the value of private health insurance cover.

As consumer anger over looming premium price hikes builds, the AMA has developed the Report Card to help consumers understand how the market operates and enable them to make better informed choices regarding their health cover.

Launching the Report Card, AMA President Professor Brian Owler said it was common for patients coming to hospital for surgery shocked to discover they were not covered, forcing them to cancel or defer treatment or facing unexpected out-of-pocket costs.

“The AMA wants every person who has private health insurance to know what their policy covers them for, and to review it every year to make sure it continues to meet their needs,” Professor Owler said.

The Report Card addresses two of the biggest gripes of policyholders – gaps and shortcomings in cover, and out-of-pocket fees.

It sets out the level of cover each of the nation’s 35 insurers provides and it details differences in the benefits paid by eight funds for 22 common procedures, including birth, hip and knee replacement, cataract surgery, coronary bypass, vasectomy, haemorrhoid treatment and breast biopsy.

The AMA said there were four main levels of cover, from top private hospital through to public hospital-only policies that President Owler said were junk and should be banned.

He said often policies had misleading names that implied they would provide a much higher level of cover than they actually did, creating the risk that consumers would be caught out when they were most in need.

“There are a lot of policies on offer that provide public hospital-only cover. These are better known as ‘junk’ policies, because they do not support patient choice of doctor or timing for health services or procedures,” Professor Owler said. “It is the AMA’s view that junk policies should be banned outright.”

Even where a treatment is covered by insurance, patients may still be left with out-of-pocket expenses if the benefit paid by the insurer falls short.

For privately insured patients, Medicare pays 75 per cent of the MBS fee, and health funds 25 per cent or more. The bulk of services are provided by doctors with no gap, when Medicare and the health fund between them cover the full total cost of treatment. Sometimes, there is a ‘known gap’, where practitioners charge a fee a set amount above the benefit.

But the Report Card shows that the benefits paid by insurers vary considerably, and the AMA “strongly recommends” that patients seek an estimate from their doctor, including the cost of any implant, and then talk with their insurer prior to treatment.

The AMA has released its Report Card amid concerns that premium increases set to come into effect from 1 April will spur thousands to consider downgrading their cover.

Earlier this month, Health Minster Sussan Ley claimed a victory of sorts after convincing 20 of the nation’s 35 private health funds to lower planned premium increases, a move she said had saved consumers $125 million.

But the average 5.59 per cent increase is virtually treble the inflation rate, and is expected to feed consumer dissatisfaction with the value of private health insurance.

Professor Owler said it was important that consumers were fully informed and aware about the consequences of taking out cheaper cover, which would usually entail more restrictions and exclusions, as well as higher excess.

He said it was particularly worrying that people looking to hold their premium costs down would be duped into taking out junk policies.

“If people have one of the junk policies, the AMA urges them to consider carefully what cover they really need,” the AMA President said.

In addition to the quality of cover on offer, the AMA has raised concerns about the operations of websites that compare health insurance policies.

Professor Owler said these ‘free’ comparator sites earned often exorbitant commissions from insurers, either a fixed percentage of a premium or a fixed fee per sale, which could act as an incentive to get consumers to switch policies.

Either way, the fees could make up a sizeable proportion of the total insurance premium, he said, urging a greater level of transparency and Government scrutiny.

The Australian Competition and Consumer Commission last year issued a report highly critical of the quality and accuracy of information provided by the health funds.

Echoing AMA concerns, the watchdog warned that comparator websites often included only a selection of insurers or policies on offer, and added “they may have commercial relationships with, or receive financial inducements from, listed businesses”.

Ms Ley has launched a review into the private health insurance industry to examine regulation of the sector, including the setting of premiums, as well as other issues including the industry’s push into primary health care; a possible relaxation of community rating principles; and a proposal to replace health insurance rebates with Medicare-style payments for hospital care.

Adrian Rollins