More than half of Australians have private health insurance.
Around a quarter, or almost four million people, are members of Medibank – Australia’s largest health insurer and the company at the center of an ongoing cybersecurity breach.
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Medibank promised to support affected customers.
However, such violations may cause some customers to consider switching companies.
People may also want to switch companies for other reasons, including to get a better deal.
Here are some tips to get started.
Prior to this latest cybersecurity breach, the most common reason for wanting to switch private health insurers was to find cheaper coverage.
This was most likely due to annual premium increases which, until recently, exceeded inflation.
Other reasons for changing include dissatisfaction with claim amounts, seeking additional benefits, or trying to avoid exclusions (services not covered).
Existing coverage may also no longer suit a person’s health needs and lifestyle.
The Commonwealth Ombudsman offers a guide with the types of common situations encountered when changing health insurers and what to expect.
The change can lead to better matches between what a consumer needs from their health insurance and their policy inclusions.
People can also get better value for money.
There is the added benefit of fostering competition among firms, inducing insurers to design better value insurance products.
How to compare?
Changing health insurers can seem daunting.
However, several websites, such as iSelect and finder, compare the market and provide product and cost comparisons.
These sites compare less than a third of all insurers, limiting your chances of getting a better deal.
A lesser known option is to use the government website privatehealth.gov.au.
This contains details of all the policies available in Australia.
You and your family may be eligible to join a restricted insurer depending on your industry or profession.
These can offer lower premiums 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 introduced four product categories (gold, silver, bronze or base).
These are based on standard clinical categories specifying what is and is not covered.
All insurers are now required to classify their products in these levels, which facilitates comparison between insurers.
What else should I know?
Wait times, discounts and fees
When you change insurer, your old health fund issues a discharge certificate to your new fund, with the amounts you have already claimed during the year being transferred to your new policy.
If you switch to a similar level of coverage, any waiting periods you’ve already served are also carried over, provided your previous insurer’s payments are up to date.
However, you may have waiting periods for any new benefits and inclusions that apply under your new policy – something to clarify with your new insurer.
There is no exit charge for conversion and some funds offer rebates to new members, subject to a cap of 12% per year.
Switching insurers shouldn’t affect your lifetime health coverage status – the government incentive to encourage people to buy and keep hospital coverage to avoid an age-based charge on their premiums after age 30 year.
This is on the condition that you maintain a hospital policy at all times.
Insurers cannot deny your coverage or charge you more based on pre-existing health conditions.
They charge customers the same price for the same policy whether they change or not.
However, people between the ages of 18 and 29 could benefit from a reduction of up to 10% in their premiums.
Deductibles and exclusions
Insurers are allowed to increase voluntary deductible levels (the amount you pay out of pocket before health insurance coverage kicks in) in exchange for cheaper premiums.
People can also choose to exclude certain medical conditions from their health coverage to save money.
However, you should assess whether these options are right for you before moving on to such policies.
You’re not the only one who finds it hard
Despite the potential benefits of switching insurers, only about 1.5% of all policyholders switch insurers each quarter.
An earlier report by the Australian Competition and Consumer Commission found that while 48% of consumers surveyed were considering switching insurers, only 14% actually switched.
This likely reflects the complexity of health insurance policies and the perceived difficulty of making a change, resulting in a tendency for people to “set it and forget it”.
How could change be easier?
Annual price increases expected each April may cause some people to re-evaluate their insurance needs.
The government could create more “triggers” to switch providers, encouraging consumers to reassess their situation.
Advertising of private health insurance often increases at this time.
The government could also provide information to help people compare how much they are paying against their peers.
If people find they are paying more than others with similar coverage, that could be a good incentive to switch.
People may also think about switching if they discover that the level of coverage they have chosen does not match that of their peers.
However, some consumers may never be “pushed” enough to change.
A large portion of people who purchase hospital coverage purchase private health insurance to avoid paying the Medicare surcharge.
These types of consumers may be less likely to assess their health coverage as their health care needs change.
This article first appeared in The Conversation.
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