restrictions-min

Health insurance reforms: The impact of removing restrictions

How your premiums may be affected by changes in restrictions.

The introduction of a new, simplified tiered health insurance system will come into effect later this year, placing all hospital policies into one of four categories: Gold, Silver, Bronze or Basic.

The new tiered system will make various hospital treatments compulsory if they are to be included in one of four categories. This will affect certain restrictions in some health insurance policies, an issue that the government has looked to address.

What's changing with health insurance premiums?

The government considered plans to stop private health insurers from offering products with restricted cover for clinical categories except hospital psychiatric care, rehabilitation and palliative care.

Yet many of us have cover with restrictions. In fact, roughly 25% of Australians that have hospital cover buy a policy that has some form of restriction that impacts a clinical category outside of hospital psychiatric care, rehabilitation and palliative care.

A Deloitte report modelled the impact of the government's proposals to remove these restrictions. It found that there would be an increase in premiums and an overall reduction in the number of people covered by private health insurance (PHI).

As a result, the government has permitted insurers to apply restrictions in Basic products. By retaining restrictions for psychiatric care, rehabilitation and palliative care in Silver, Bronze and Basic tiers, as well as for all other clinical categories in the Basic product tier, you're likely to be protected from large premium increases.

How will this affect you?

The Private Health Insurance Ombudsman (PHIO) has said that removing all restrictions would have a detrimental effect on many of us. Not only would it affect both our hospital and general cover, it would remove things we currently have in our policies. Removing restrictions could stop us from being able to choose our own doctor and potential prostheses benefits.

The Deloitte report also found that removing restrictions would increase the drawing rate of mid-level products by about 10% and this would flow through to premiums.

Higher premiums are bad not just for customers, but for insurance companies as well. In recent years, premiums have gone up by almost 50%. It might be going into the insurer's pockets, but in the long run it's turning people away from PHI. With health insurance premiums set to go up an average of 3.25% on 1 April 2019, an 18-year low, the insurance industry will be hoping this trend continues as much as the customer.

Will it impact your wallet?

The Deloitte report found that removing the current restrictions in some health insurance policies would increase costs to insurers by about 3.5%. However, this is offset by the impact the four-tier structure will have, so you should find that you have more money in your wallet at the end of the month.

Why are there going to be changes to premiums?

The private healthcare system is in need of reform and looking at how some of the restrictions can be changed is an inevitable part of that. Many people with PHI value the cover provided by restricted products. For instance, if you live in regional and rural areas, where access to private hospitals is usually more limited and expensive, it's likely you value the cover provided by restricted products. It keeps your policy affordable and your premiums lower.

Retaining restrictions then helps protect consumers from facing large premiums. While policies in the Gold tier won't have any restrictions, there will still be restrictions on hospital psychiatric care, rehabilitation and palliative care in Silver, Bronze and Basic tiers, as well as all other clinical categories for the Basic tier.

When's it changing?

Changes are set to come in at the start of April 2019, with insurance companies having up to a year to adopt the changes. This gives providers plenty of time to make minor upgrades to policies that include restrictions or exclusions, ensuring that you continue to enjoy the same level of cover after 1 April 2019.

What else is changing with the 2019 health insurance reforms?

Among the wide range of changes being made to PHI, there will be:

  • Discount for under-30s. Discounts for 18- to 29-year-olds at a rate of 2% per year up to a maximum of 10%.
  • Better access to mental health services. Waiting periods will be scrapped for those in need of access to mental health services.
  • Improved care for those in rural areas. Accomodation benefits may now be offered through general insurance products in order to improve access to those in remote or rural areas.
  • Cuts to some natural therapies. A range of benefits for natural therapies will be cut to curb the rising cost of PHI.

Picture: Unsplash

Gary Hunter

Gary Hunter is a writer at Finder, specialising in insurance. He has a Bachelor of Arts in English Literature from the University of Glasgow and has previously worked for Real Insurance as a content specialist. Gary loves language, the way it has the ability to engage, entertain and anger people, and always aims for the first.

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