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Health insurance reforms: Improved consumer protections for terminating products

If an insurer plans to change or terminate your policy, it's vital that you know beforehand.

On 13 October 2017, the Australian government announced a wide range of changes to the private health insurance (PHI) industry, set to come in between October 2017 and February 2020.

A major part of this is a shift to a new four-tier system in which insurers' policies must all adhere to specific requirements by April 2020. That means between now an then, insurers will be releasing new policies and tweaking some of their old ones that don't quite fit into the new structure.

So how will you know if your policy is being changed? Can the insurer just shift you over to a new policy without telling you?

It's important that you know exactly what your insurer is doing and whether it plans to make changes to your existing policy. Luckily, the government has foreseen any potential hiccups that might arise from the ongoing reforms and has introduced a series of new consumer protections.

What's changing with products for the health insurance reforms 2019?

As part of the new shake-up, the government has introduced a new four-tier healthcare structure, which labels policies in one of four tiers: Gold, Silver, Bronze or Basic. These tiers set minimum requirements that insurers must meet. Changes involve both hospital and extras cover though extras only has three tiers: Gold, Silver and Bronze. All products must comply with the new tiers by April 2020 but policies in these tiers have already started hitting the market.

As a result, most people will eventually find that their policies are changing, some more than others. This is partly why the government has introduced requirements that stipulate insurers must inform you if you're insured under a policy they intend to terminate or change. Since products under the new tier system are already starting to appear, these consumer protections are in effect now.

If your insurer does choose to terminate a product, it needs to provide information to you including:

  • Services that were covered under the previous policy that will no longer be covered under the new one.
  • Any changes or differences to your excesses under the new policy.
  • Important information regarding waiting periods that apply to you under the new policy.
  • Any premium changes surrounding your new policy.
  • Advice on transferring to a different policy. You don't need to move over to the one your insurer has recommended.

How will this affect you?

These protections will help you cope with any changes made to your policy, not just over the next year but into the future as well. It means you don't need to worry whether you're covered for certain treatments and products. Rather, your insurance provider is obliged to tell you. It's good because it puts the onus on insurance companies to inform you whenever they make a change, not the policyholder.

It's also helpful because you'll be better informed should your insurer choose to terminate a product. You'll be better placed to decide whether to transfer to the new product it has selected for you, to purchase a different product or move to a different insurer.

Most of all, it is another step towards making PHI simpler and easier to use. It lets you understand what you are and aren't covered for. In that way, it also benefits medical professionals, as there's no confusion over what's covered under your policy.

Will it impact your wallet?

By letting you know in advance, you could end up saving a lot on out-of-pocket expenses. For example, if you were to receive hip replacement surgery but found out after that a policy change meant you were no longer properly covered, you could receive a huge out-of-pocket expense. With the new protections, this won't happen, keeping you up-to-date and allowing you to make the most informed decision.

Why are these changes happening?

With over half of the Australian population having some form of PHI, the government recognises it has a duty to make sure we're receiving adequate health care. At the moment, it's far too easy for insurance companies to pass the buck of responsibility onto you. If they decide to make changes, you often have to find that out for yourself. While this isn't common practice, it can happen, which is why the government is increasing consumer protections.

Similarly, the changes to the PHI system, particularly the introduction of the four tiers, could lead to several policy alterations and terminations, which is why the improved customer protections are so crucial. They'll prevent you from falling through the cracks and exposing yourself to large out-of-pocket expenses if your policy changes.

When will the products be terminated?

The new protections were implemented on 1 April 2019, the same time as the new classification system started rolling out. Insurers have until April 2020 to shift to the new tier system, so you could receive information regarding changes any time between now and then.

What else is changing as part of the 2019 reforms?

Originally announced back in October 2017, the government reforms aim to reshape the PHI industry in Australia. Here are some of the changes:

  • Discounts for 18- to 29-year-olds. Insurers can now offer under-30s a discount up to a maximum of 10% on annual premiums.
  • Better access to mental health services. Insurers are now obligated to waive waiting periods when someone seeking mental health treatment upgrades their policy.
  • Better care for rural and regional Australians. The reforms will improve care for those in rural areas by allowing PHI companies to offer accommodation benefits through hospital cover.
  • Increase in maximum excess levels. Insurers can now give you the option to increase your excess to $750 on a singles policy ($1500 for couples and families). A higher excess means lower premiums.

Picture: Unsplash

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