Health insurance reforms: Reducing out-of-pocket expenses

How the government's reforms help keep money in your pocket.

Nobody likes out-of-pocket expenses, especially when you're not properly informed about them prior to treatment. Sometimes, they can run into the thousands, forcing you into debt or with no other option but to withdraw funds from your superannuation.

Private health insurance (PHI) shouldn't work this way and the government has recognised the need for change. Alongside a raft of reforms, the Australian government has put forward plans to help better inform consumers about large, out-of-pocket expenses.

What's happening with out of pocket costs?

The government set up a committee of consumers, insurers and medical professionals tasked with finding ways to make out-of-pocket medical costs easier to understand and more transparent, both for hospital and general cover.

Around 14% of services have an out-of-pocket cost and 1 in 7 patients will have an out-of-pocket expense. The changes are primarily about making you aware of these costs from the outset. Insurers will now be required to provide you with a one-page information sheet explaining what is and isn't covered by their policy.

Additionally, a new simplified tiered health insurance system launched on 1 April 2019, with all new hospital policies falling into one of four categories: Gold, Silver, Bronze or Basic. New extras policies have three tiers: Gold, Silver and Bronze. This means there are now standardised clinical categories for medical treatments, making it easier to understand and harder to miss any potential out-of-pocket expenses. By April 2020, all policies will be required to fit this structure.

The government has also boosted the powers of the Private Health Insurance Ombudsman, increasing its resources to help you should you feel you've not been properly informed or misled in some way.

Importantly, the government has also introduced standard terms for medical treatments. That means it will get rid of all the confusing medical jargon that often results in you paying for something you weren't aware of.

How could you be impacted by the out of pocket changes?

Insurance companies and private health services will be affected by the change as they can make a lot of money from the gap you need to pay. However, increasing transparency will highlight both the insurance companies that are offering the best deals and the ones that aren't. This can only benefit you as the consumer and will force certain insurers to get their act together or risk going out of business.

Will it impact your finances?

The changes will not eliminate out-of-pocket expenses as there will always be some things that aren't covered by your private health insurer. However, what will decrease are unexpected or hidden fees, which will definitely help keep money in your wallet.

Why is it changing?

Out-of-pocket expenses can be incredibly frustrating. According to the Consumer Health Forum's Out-Of-Pocket Pain survey, the PHI system can often be expensive, complex and confusing. If your policy is unclear, you misread or are misled, you can face bills running into the thousands.

Sometimes you'll be hit with multiple out-of-pocket costs at once. For example, a medical procedure may require a surgeon, assistant surgeon and anaesthetist who each bill you separately.

The government has recognised that patients should know upfront the financial impact of a course of treatment. While the majority of times you use your PHI, there are no or minimal unexpected out-of-pocket costs, complaints to the ombudsman highlight there are cases where consumers are not clearly informed upfront of the costs, prompting the need for change.

When will these changes happen?

On 2 January 2018, the minister for health Greg Hunt announced the establishment of a Ministerial Advisory Committee on out-of-pocket costs. The committee was set up to advise the government on the best-practice models to ensure consumers are properly informed about potential out-of-pocket costs for hospital treatment. The committee will receive funding from 2017–18 to 2019–20 in order to continue tackling the issue.

What else is changing with the health reforms in 2019?

The PHI industry is in the middle of reform, with a whole range of changes being made including:

  • Tiered health cover. The new four-tiered structure simplifies the current system by categorising every policy under one of the following: Gold, Silver, Bronze or Basic.
  • Discounts for the young. There are now discounts for 18- to 29-year-olds.
  • Better access to mental health services. Improved access to those needing immediate access to mental health services.
  • Removal of natural therapy coverage. Some natural therapy benefits have been cut to curb rising premiums.
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