Complex system takes advantage of consumers

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Private health insurance is too complex and consumers don’t understand it, according to the Australian Competition and Consumer Commission (ACCC).

In a scathing report delivered to the Senate, the ACCC said the complexity of Australia’s private health industry was failing consumers by driving them to lower-priced policies that lack adequate coverage.

The report found that there were a number of failures in private health insurance that impede consumers’ ability to make choices that are best for them.

The complexity of the system was central to most consumer complaints.

“A range of factors contribute to this complexity, including regulatory settings, the sheer number of policies available, the range of benefits and exclusions, preferred provider arrangements, policy variations and differing terminology between funds which makes comparison difficult,” the ACCC said.

The report said there was a “significant disconnect” between what consumers expected of their policy and the reality of what it provided.

Of particular concern was the growing number of policies with exclusions.

The ACCC referenced a finding by the Australian Private Hospitals Association (APHA) that 40 per cent of policyholders did not know if their policy had any exclusions.

Of those aware of the exclusions, 33 per cent did not know what was excluded from their policies.

“APHA is advocating the health insurance rebate should be removed from these products,” Mr Roff said. “There is clearly a huge issue if large numbers of health insurance policy holders do not know what they are covered for.”

Research commissioned by APHA found there has been an increase in “junk” policies that don’t provide cover for private hospital care.

The percentage of hospital policies that provide full cover has fallen from 52.5 per cent to 46 per cent in the last three years, while policies with exclusions have risen from 28.7 per cent to 36 per cent.

Mr Roff said the ACCC’s acknowledgement of the issue was a good outcome, but called for the federal government to act further.

“We are pleased to see the problem with exclusionary products has been identified and acknowledged by the ACCC,” he said. “We are hopeful that these issues will be addressed in the federal government’s forthcoming review of private health insurance.”

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