If switching health insurance funds can save money, why don't more Australians do so?

Parliament house flag post

If switching health insurance funds can save money, why don't more Australians do so?

Posted 30/06/2011 by Amanda Biggs

A path that splits into two different directions
A recent report by Choice, the publication of the Australian Consumers' Association, found that if some people switched health insurers they could make substantial savings to their health insurance costs. Reviewing some 17 000 health insurance products as part of its annual survey of health insurance, Choice found that families could save more than $1500 a year by switching to a better value fund. In some cases, the savings could be even higher.

Under Australia's health insurance arrangements, consumers are guaranteed portability. Portability means consumers can change private health insurers at any time without incurring additional waiting times, provided the new product offers similar benefits.

Despite this guarantee, very few of the 10 million Australians covered by private health insurance switch health insurers. The most recent statistics from the Private Health Insurance Administration Council (PHIAC) (see page 2 'Changes during the Quarter') show that 62 495 people, or just 0.6 per cent of the total number of people covered by health insurance, transferred to another fund in the March 2011 quarter. It is notable that during this quarter the Government announced the annual premium increases to apply from April 2011; with an average increase of 5.57 per cent across the sector.

It might be expected that the announcement of a premium increase would prompt consumers to consider their health insurance options with some then opting to switch to a better value fund.

However, although the figures fluctuate, the rate of transfer between health insurers over the last five years has hovered between 0.3 and the 0.6 per cent seen in the March 2011 quarter.

A higher proportion of people drop their cover each quarter—in the March 2011 quarter some 1.7 per cent dropped their cover (although some of these drop-outs may be people who later go on to purchase new cover). The number of those switching to a new fund in the March 2011 quarter represents the highest proportion since September 2006, but this still remains a tiny proportion of members.

Switching funds is not straightforward and there are a number of reasons why there are difficulties. Firstly, many funds offer loyalty schemes with bonuses for longer term members. If a consumer switches to a new fund, they will most probably lose all the loyalty bonuses they have accrued. Some of these bonuses are in the form of benefits for high cost extras such as for orthodontic or major dental costs, which can act as a strong disincentive to switch funds.

Secondly, although portability is mandated, there are limits and restrictions, as this brochure from the Private Health Insurance Ombudsman explains. If a member switches to a new fund that offers a product with additional benefits, their right to portability is not assured. Policies can be complex and so the consumer has to be assiduous in comparing policies to determine if they will lose their portability. Having a pre-existing medical condition can also affect portability. While new injuries or conditions will be covered, the consumer may have to wait a specified period for treatment of a pre-existing condition. If a consumer does not know they have a condition but exhibits symptoms of the condition prior to changing funds, then portability may be affected and they may have to wait an additional period for treatment or pay an excess. It is recommended that consumers who are considering switching check with their new insurer, but doing so takes time and effort.

The Government has recognised that consumers need to be able to easily compare policies in order to purchase the most suitable product so it has set up this website to enable comparisons to be made across all health funds. An industry funded website has also been established. But a complete assessment is not always available online, and consumers are still advised to contact the insurer for full details. Furthermore, consumers are warned they may face additional out-of-pocket costs, unless the insurer has a specific agreement with the consumer's choice of doctor to limit such costs.

While some consumers remain loyal to their health fund for particular reasons, such as a link with their employment conditions, it appears that many consumers still face a maze of information and uncertainty when it comes to choosing a health insurer and may decide that the risks of changing funds are too great.

(Image courtesy Pauline Eccles licensed for reuse under the Creative Commons Attribution-ShareAlike 2.0 license)

Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]

Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




asylum refugees immigration climate change Parliament elections Australian foreign policy social security health financing women Australian Defence Force taxation welfare policy welfare reform sport Medicare employment illicit drugs gambling Australian Bureau of Statistics higher education disability statistics private health insurance Middle East Australian Sports Anti-Doping Agency World Anti-Doping Agency health reform emissions trading industrial relations united states Carbon Pricing Mechanism United Nations school education steroids WADA federal budget 43rd Parliament politics labour force Australian Federal Police transport indigenous Australians aid detention criminal law child protection ASADA Afghanistan governance international relations poker machines law enforcement people trafficking Fair Work Act Australian Public Service pharmaceutical benefits scheme International Women's Day Australian Crime Commission parliamentary procedure National Disability Insurance Scheme children's health food OECD debt defence capability federal election 2013 Australian Electoral Commission aged care Asia Australia in the Asian Century environment Senate income management pensions planning skilled migration Papua New Guinea multiculturalism people smuggling social media doping HECS Higher Education Loan Program paid parental leave health High Court corruption federal state relations dental health New Zealand terrorist groups ALP election results constitution UK Parliament public service reform forced labour aviation coal seam gas crime customs ADRV Census Newstart Parenting Payment employee employer Federal Court foreign debt gross debt net debt European Union domestic violence firearms Constitutional reform food labelling Australian economy carbon tax banking political parties public policy terrorism welfare Australian Security Intelligence Organisation intelligence community Drugs research and development voting mental health health system human rights Northern Territory Emergency Response science Electoral reform regional unemployment violence against women accountability China military history Indigenous Indonesia Pacific Islands speaker health risks superannuation middle class welfare welfare systems question time animal health Department of Agriculture Fisheries and Forestry trade unions integrity same sex relationships foreign bribery Australian Secret Intelligence Service export liquefied natural gas local government referendum children mining forestry Tasmania financial sector Canada United Nations Security Council climate Intergovernmental Panel on Climate Change leadership expertise Senators and Members family assistance by-election US economy housing affordability ASIO carbon markets new psychoactive substances synthetic drugs UNODC reserved seats regulation Parliamentary remuneration Population Hung Parliament federal budget 2011-12 paternalism public health slavery Trafficking in Persons Report homelessness school chaplains ministries water federal election 2010 Medicare Locals primary care regional students Youth Allowance entitlements salary sea farers productivity Special Rapporteur transparency money laundering early childhood education national security sexual abuse bulk billing disability employment World Trade Organization Australia renewable energy US politics terrorist financing language education royal commission Italy roads international students skilled graduate visas temporary employment visas apologies standard of proof arts World Health Organisation disciplinary tribunals railways infant mortality honorary citizen suspension of standing and sessional orders live exports contracts workplace policies peace keeping disorderly conduct same-sex marriage Parliament House retirement Rent Assistance constitutional recognition of local government anti-dumping national heritage NHMRC nutrition GDP world heritage submarines Somalia United Kingdom defence budget First speech election timetable sitting days prime ministers standing orders public housing cancer gene patents genetic testing universities Ireland public interest disclosure whistleblowing Productivity Commission vocational education and training limitation period Trade; tariffs; safeguards; Anti-dumping leave loading political engagement Korean peninsula counselling pests suicide social policy alcohol computer games plebiscites therapeutic goods Therapeutic Goods Administration federalism federation preselection Iran sanctions baby bonus early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin citizen engagement policymaking biosecurity hendra environmental law COAG Ministerial Councils nuclear Work Choices republic hospitals qantas ANZUS Norway President Barack Obama Presidential visits advertising electricity energy maritime floods ADHD stimulant medication ABS Trade Age Pension Death penalty capital punishment execution Bali nine Bali bombings 44th Parliament 2015 e-voting internet voting nsw state elections Indigenous health procurement child care funding refugees immigration asylum ACT Assembly Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors social services EU fishing asylum refugees immigration political finance donations Antarctica Diplomacy Disability Support Pension by-elections state and territories China soft power education Fiji India fuel Scottish referendum Members of Parliament Middle East; national security; terrorism Racial Discrimination Act; social policy; human rights; indigenous Australians Migration; asylum seekers; regional processing China; United States; international relations fiscal policy innovation Bills NATO workers anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform standards copyright Australian Law Reform Commission industry Governor-General Animal law; food health policy employment law bullying asylum seekers Economics efficiency foreign aid human rights; Racial Discrimination Act smoking plain packaging tobacco cigarettes Work Health and Safety Asia; Japan; international relations youth Foreign policy Southeast Asia Israel Palestine political financing Australia Greens Horn of Africa peacekeeping piracy Great Barrier Reef solar hot water Financial Action Taskforce Gonski Review of Funding for Schooling Stronger futures rural and regional political parties preselection presidential nomination Racial Discrimination Act Australian Greens obesity competition policy US presidential election evidence law sacrament of confession international days codes of conduct consumer laws

Show all
Show less
Back to top