Information and informed
decision-making
A report to the Australian Senate on anti-competitive and
other practices by health insurers and providers in relation
to private health insurance
www.accc.gov.au
ACCC Report
For the period of 1 July 2013 to 30 June 2014
Information and informed decision-making in
private health insurance
AreporttotheAustralianSenateonanti-competitiveand
otherpracticesbyhealthinsurersandprovidersinrelationto
privatehealthinsurance
FortheperiodofJulytoJune
ISBN
AustralianCompetitionandConsumerCommission
MarcusClarkeStreetCanberraAustralianCapitalTerritory
©CommonwealthofAustralia
ThisworkiscopyrightInadditiontoanyusepermittedundertheCopyright Act 1968allmaterialcontainedwithin
thisworkisprovidedunderaCreativeCommonsAttributionAustralialicencewiththeexceptionof
 
 
 

ThedetailsoftherelevantlicenceconditionsareavailableontheCreativeCommonswebsiteasisthefulllegalcode
fortheCCBYAUlicence

CommunicationsACCCGPOBoxCanberraACTorpublishingunit@acccgovau
Importantnotice
TheinformationinthispublicationisforgeneralguidanceonlyItdoesnotconstitutelegalorotherprofessional
adviceandshouldnotbereliedonasastatementofthelawinanyjurisdictionBecauseitisintendedonlyasa
generalguideitmaycontaingeneralisationsYoushouldobtainprofessionaladviceifyouhaveanyspecificconcern
TheACCChasmadeeveryreasonableeorttoprovidecurrentandaccurateinformationbutitdoesnotmakeany
guaranteesregardingtheaccuracycurrencyorcompletenessofthatinformation
Partieswhowishtore-publishorotherwiseusetheinformationinthispublicationmustcheckthisinformationfor
currencyandaccuracypriortopublicationThisshouldbedonepriortoeachpublicationeditionasACCCguidance

CorporateCommunicationsACCCGPOBoxCanberraACTorpublishingunit@acccgovau
ACCC
wwwacccgovau
ACCC Private Health Insurance Report 2013–14
Contents
Executivesummary
Competitioncomplexityandconsumerengagement 
Keyobservations 
TheroleoftheACCC 
 Introduction
 Senateorder
 
 Methodologyinpreparingthisreport
 Operationoftheprivatehealthinsuranceindustry
 Industryoverview
 Privatehealthcoveroptions
 TheregulatoryframeworkoftheprivatehealthinsuranceindustryinAustralia
ThePrivateHealthInsuranceAct 

PrivateHealthInsuranceCodeofConduct 
 Whydoconsumerspurchaseprivatehealthinsurance?
Therationaleforgovernmentintervention 
 Complaintbodies 
 Purchasingprivatehealthinsuranceandaccessinghealthcareservices—theconsumer
experience 
 Whatinformationissoughtbyconsumers? 
 Isthisinformationeasytofind? 
 Theimportanceofprice 
 
 Complexityandconsumerbehaviour 
 
 Thecontributorstocomplexity 
 
Thegrowthinbenefitsrestrictionsandexclusions 
Preferredproviderarrangements—therelationshipbetweenpractitioners
andinsurers 
 
Accuracyofinformation 
 Insurers’websites—addingtocomplexity 
 
 Whenconsumersaccesshealthcareandclaimbenefits 
 Comparingandchoosingpolicies 
 Howdoconsumerscomparepolicies? 
Comparatorwebsites 
 Changinginsurers 
 StandardInformationStatements 
FutureoftheSIS 
iv
ACCC Private Health Insurance Report 2013–14
 Communicatingpolicychanges 
  
 Policychangesandconsumerprotectionlaws 
 Methodsofcommunicatingpolicychanges 
 Resolvingproblemswithprivatehealthinsurance 
 Otherconcernsidentifiedbystakeholders 
 Preferredproviders 
 Fundownedclinics 
 Limitedcoverageofservices 
 Prostheses 
 Costofprivatehealthinsurance 
 Insurerbehaviourtowardproviders’levelofservice 
 Second-tierdefaultbenefitsystem 
 Privatepatientsinpublichospitals 
 Fundingmodelforinpatientadmissionsandinterstatecoverage 
 Frustrationofthetransferprocessfromoneinsurertoanother 
 Findingsandstakeholdersuggestionsforchange 
 
AppendixA—Researchandsubmissions 
Consultationandresearch 
Invitationletter 
Listofpubliclyavailablesubmissions 
AppendixB—Overviewofprivatehealthinsuranceindustryregulatoryframework 
Listofacronymsanddefinitions 
ACCCcontacts 
ACCC Private Health Insurance Report 2013–14
Executive summary
Thisisthe
th
reporttotheAustralianSenatepreparedbytheAustralianCompetitionand
ConsumerCommission(ACCC)oncompetitionandconsumerissuesintheprivatehealth
insuranceindustryfortheperiodJulytoJune
TheACCChasapproachedthisyear’sreportbyundertakingadetailedreviewoftheindustry
withaparticularfocusoninformationprovisionincludingthetransparencyaccuracyand
consistencyofinformationaboutpoliciesandtheimpactthishasonconsumerbehaviour
Whilethereportaddressesissuesspecifictothereportingperioditalsogivesbroader
considerationtotheenduringimpactoftheseissuesonconsumersThisapproachaligns
withtheACCC’sCompliance and Enforcement Policywhichidentifiescompetitionand
consumerissuesinthehealthandmedicalsectorsasapriority
AlmostoneintwoAustraliansholdaprivatehealthinsurancepolicyforallorpartoftheir
hospitaltreatmentcosts
Itrepresentsasignificantfinancialinvestmentformanyconsumers
andtheirfamiliesTheACCChaspreviouslyfoundthattheindustryischaracterisedby
informationasymmetryandcomplexityThesefindingshavebeenreplicatedinthisreport
Competition, complexity and consumer engagement
Ingeneralcompetitiondeliversecientmarketoutcomeswhereconsumersengagewiththe
marketandrewardsupplierswhodelivergoodsandservicesthatmeettheirneedsThisdrives

wherethereismarketfailurecompetitionmaynotdeliverthemostecientoutcomes
ItappearsthereareanumberofmarketfailuresintheprivatehealthinsuranceindustryIn
particularimperfectandasymmetricinformationimpedeconsumers’abilitytomakechoices
thatarelikelyintheirbestinterestsTheseproblemsmeanthatconsumersexperiencediculty
indeterminingtheeectivenessofvariouspoliciesgiventheiruncertainfuturehealthneeds
whichmakesitdicultforconsumerstochoosetheappropriatelevelofcoverThisinturn
aectscompetitionintheindustry
Thecomplexityoftheprivatehealthinsurancesystemanditsimpactonconsumerswas

rangeoffactorscontributetothiscomplexityincludingregulatorysettingsthesheernumber
ofpoliciesavailabletherangeofpotentialpolicybenefitsandexclusionspreferredprovider
arrangementspolicyvariationsanddieringterminologybetweenfundswhichmakes
comparisondicult
Whenfacedwithsuchcomplexityconsumerdecision-makingisaectedandconsumers
arelessinclinedtoreviewandchangepoliciesthatisconsumersbecomelessengaged

forsupplierstooerbetterpoliciesarereducedandincreasesthelikelihoodofdecreasing
confidenceintheperceivedvalueofpolicies
Stakeholdersraisedanumberofconcernsaboutindustrypracticesthatimpactconsumer
decision-makingincluding
• alackofsucientandcomparableinformationbeforepurchase
• informationorterminologythatisambiguousordiculttointerpret
• inconsistentinformation
• dicultylocatingrelevantinformation
• 
 PHIACOperations of the Private Health Insurers Annual Report 2013–14p
ACCC Private Health Insurance Report 2013–14
Asaresultsomeconsumersfinditdiculttounderstandtheextentoftheircoverthecosts
theyarelikelytoincuriftheyuseahealthserviceanddeterminingwhotoseekinformationfrom
(insurerorhealthprovider)whichcanexacerbatetheproblemofinformationasymmetry
ThismaybeleadingtodisengagedconsumersTheACCC’sresearchindicatesthatconsumers
areengagedatthecommencementofthepurchasingprocessHoweversignificantnumbersof
consumerswhocontemplatechangingtheirinsurancearrangementsfailtodosoThereasons
forthisarevariedbuttheresearchsuggeststhatonesignificantreasonisthecomplexityfaced
byconsumerswhenundertakingameaningfulcomparisonprocess
Priceisacriticalfactorinmanyconsumers’decision-makingparticularlyaspremiumsare
increasingwithrisinghealthcarecostsTheregulatoryincentivesalongsideuncertainties
aboutfuturehealthcareneedsaswellaspolicycomplexitiesmaydriveconsumerstowards
lowerpricedpoliciesthantheywouldotherwisepreferWhilepriceisalegitimatemeansfor
consumerdecision-makingthereareconcernsthatsomeconsumersarenotfullyconsidering
thetrade-osbetweenthecostsandbenefitsofthevariouspoliciesonoerThisisleading

andfindtheirprocedureisnotcoveredThisisofconcerngivenrecentreportsthatsuggest
thatinsurersareencouragingconsumersmorebroadlytodowngradetheircovertosecure
cheaperpremiumsAsaresultconsumersarefindingthemselvesmoreoftenwithoutthecover
theyexpected

ACCCindicatedgeneralsatisfactionwiththeirprivatehealthinsuranceHowevertheresearch

consumersatisfactionisoftenbasedontheoverallcostofthepolicyForsomeconsumersthis
maymeanthattheirunderstandingoftherelevantinclusionsandexclusionsoftheirpolicywill
onlybetestedwhenthetimecomestomakeaclaimThisisofparticularconcerngivenour
researchindicatesthatinsurerscanoftenchangethecoverageoftheirpoliciesormakeother
changesthatimpactthebenefitsavailableanddonotalwayscommunicatechangeseectively
toconsumers
Thesubmissionsidentifiedasignificantdisconnectbetweenconsumers’expectationsofthe
servicesandrebatestheyareentitledtoreceiveundertheirpolicyandtherealityofthebenefits
theirpolicyprovidesComplaintstoregulatoryandcomplaintbodiesaboutunexpectedout-of-
pocketexpensesand‘billshock’arealsorising
TheACCChasalsoreceivedsubmissionsabout
certainconductbyinsurersthatmaypotentiallybreachtheAustralianConsumerLaw(ACL)
ForexamplesomeoftheconductmaybeatriskofmisleadingconsumersSuchconducthas
theabilitytoharmconsumersandalsocompetition
Key observations
Ourfindingshaveledtothreeprimaryobservations
• Firsttherearemarketfailuresintheprivatehealthinsuranceindustryduetoasymmetricand
imperfectinformationThisanditseectoncompetitionleadstocomplexitiesinprivate
healthinsurancepolicieswhichreduceconsumers’abilitytocomparepoliciesandmake
informedchoicesabouttheirfuturemedicalneeds
• Secondexistingregulatorysettingscanchangeconsumers’incentivesinpurchasingprivate
healthinsuranceanddriveinsurerstooerproductstoprimarilyreduceconsumers’tax
liabilitiesAsfundsrespondtomarketdemandforaordablepoliciesthereareincreasing
policylimitationsandexclusionsleadingtoanincreasedriskofunexpectedout-of-pocket
expensesandgeneraldissatisfactionwiththesystem
 TheWorldTodayJessicaKiddABCNews‘Buyerbeware’PrivateHealthInsurancecomplaintsrisesignificantly’
Junewwwabcnetauworldtodaycontentshtm
 ThePHIOQuarterly Bulletin for the period 1 January–31 March 2015,reportedreceivingcomplaintsa

whichrecordedcomplaints
ACCC Private Health Insurance Report 2013–14
• Thirdtheresearchhasrevealedexampleswhererepresentationsbyinsurerstoconsumers
includingwhenentwinedwithpolicychangesmaybeatriskofbreachingconsumerlaws
The role of the ACCC
TheACCCiscommittedtoincreasingawarenessamongconsumersabouttheprotections
oeredbyAustralia’sconsumerlawsWeconsideritisintheinterestsofbothconsumersand
insurerstobeasclearandtransparentaspossiblesothatconsumerspurchasinginsurance
canmakeinformeddecisionsabouttheirlevelofcoverItisalsoimportantthatinsurersdo
notassumethatcompliancewithspecificprivatehealthlawsandregulationsalonewillsatisfy
obligationsthatariseundertheACL
Currenttrendsintheprivatehealthinsuranceindustrywarrantacloserexaminationof
theconductofprivatehealthinsurersandhealthproviderspractitionersItalsowarrants
considerationoftheseissuesbypolicymakerstoensuregreatertransparencyanddecreased
informationasymmetryWhiletheACCChasanoverarchingconsumerprotectionrolethat
encompassestheprivatehealthinsurancesectorwedonothavepolicyresponsibilityformany
oftheissuesraisedinthisreport
InlinewiththeACCC’scurrentfocusonthehealthandmedicalsectorwewillbeclosely
reviewingsomepracticesinthehealthinsuranceindustryTheACCCwillconsideranyissues
identifiedinaccordancewiththeACCC’sCompliance and Enforcement Policy
Someoftheissuesthatwearecurrentlyconsideringinclude
• 

• misleadingconductthroughtheuseofindustrytermsorphrasesthatareinconsistentwith
plainlanguageorconsumers’understandingofcommonlyusedwords
• theprovisionofincompleteinformationthatcreatestherepresentationthatthereisbroader
insurancecoverthantheconsumerhas
• useofcomplicatedtermsandconditionsexclusionsandpracticesthatinhibitaconsumer’s
capacitytomakeappropriatecomparisonsandwhichriskmisleadingconsumersorexposing
themtounfairclaimsassessments
TheACCCrecognisesthatanumberofeortshavebeenmadebyindustryandgovernment
overrecentyearstoaddresstheseissuesHoweverasthisreportmakesclearfurtherwork
toenhanceconsumerengagementisneededSuggestionsforchangeareincludedatthe
conclusionofthisreport
 ACCC2015 ACCC Compliance and Enforcement Policy, Februarywwwacccgovaupublications
compliance-and-enforcement-policy
ACCC Private Health Insurance Report 2013–14
1. Introduction
ThisyeartheACCCexaminedtheinformationprovidedbytheprivatehealthinsuranceindustry
andtheimpactithasonconsumersInformedconsumersfacilitatecompetitiveoutcomesby
purchasingproductsthatoerthebestvaluefortheircircumstancesThisinturndriveslower


thesepotentialbenefitsareunlikelytoberealised
InpreviousSenatereportstheACCChasnotedthecomplexenvironmentwithinwhich
consumerdecision-makingoccursandhasfoundthattheprivatehealthinsuranceindustry
ischaracterisedbyinformationasymmetryandcomplexityWeremainconcernedthatthe
complexityoftheprivatehealthinsuranceoercanaectconsumers’abilitytomakeinformed
decisionsaboutthepolicythatbestsuitstheirhealthcareneedsThisreportconsidersthe
underlyingcausesoftheinformationasymmetryintheprivatehealthinsuranceindustryandthe
impactithasonconsumers
TheACCCexaminedtheroleofinsurershealthproviderspractitionersintermediariesand
governmentinprovidinginformationtoconsumersaboutprivatehealthinsurancepolicies
Wealsoconductedresearchandsoughtpublicsubmissionsinordertobetterinformour
understandingofconsumers’experiencesincomparingandchoosingprivatehealthinsurance
policiesandinaccessinghealthcareOurfindingsaresetoutinsections–ofthisreport
 Senateorder
TheACCChasanobligationtoprovideanannualreportoncompetitionandconsumerissues
withintheprivatehealthinsuranceindustryunderanAustralianSenateorder
Thecomplete
orderis
Senateorder
Therebelaidonthetableassoonaspracticableaftertheendofeachmonthsendingon
orafterJuneareportbytheAustralianCompetitionandConsumerCommission
containinganassessmentofanyanti-competitiveorotherpracticesbyhealthinsurersor
providerswhichreducetheextentofhealthcoverforconsumersandincreasetheirout-of-
pocketmedicalandotherexpenses
 RoleoftheACCC
TheACCCisanindependentCommonwealthstatutoryauthoritywhoseroleistoenforce
theCompetitionandConsumerAct(CCA)includingtheACLwhichisasinglenationallaw
thatprovidesuniformconsumerprotectionandfairtradinglawsacrossAustraliaTheACLis
enforcedbytheACCCandallstateandterritoryfairtradingagenciesTheobjectoftheCCAis
toenhancethewelfareofAustraliansbypromotingfairtradingandcompetitionandthrough
theprovisionofconsumerprotections
 SenateproceduralordernoHealth—AssessmentreportsbytheAustralianCompetitionandConsumer
CommissionagreedtoMarchbymeansofanamendmenttothemotionthatthereportofthe
committeeonHealthLegislationAmendmentBill(No)beadoptedJamendedSeptember
J
ACCC Private Health Insurance Report 2013–14
Allrelationshipswithintheprivatehealthinsuranceindustryaregovernedbythestatutory
protectionsoeredtoconsumersbytheconsumerlawsTheseincluderelationshipsbetween
consumersandhealthinsurershospitalshealthprovidersandpractitionersCompetition
lawsalsogovernrelationshipsbetweenindustryplayersandamongotherthingsrestrict
anti-competitivearrangementsandexclusionaryconduct
TheACCC’sroleintheprivatehealthinsuranceindustryincludessatisfyingthetermsofthe
SenateorderandenforcingandencouragingcompliancewiththeCCATheACCC’sCompliance
and Enforcement PolicyoutlinesourenforcementpowersfunctionsandprioritiesThisis
updatedyearlytoreflectcurrentandenduringprioritiesIncompetitionandconsumer

increaseawarenesswithinthehealthsectorgenerallyaboutconsumerrightsundertheCCAand
theobligationsonindustryparticipantswithaviewto
• reducingbarrierstoentryandimprovingcompetition
• protectingconsumersfromunlawfulbehaviourbymedicalandhealthproviders
• empoweringconsumersandpatientswithknowledgeoftheirconsumerrights
InconsideringtheprivatehealthinsuranceindustrytheACCC’sobjectiveistoincrease
transparencyanddecreaseinformationasymmetryincludingbytakingtargetedenforcement
actioninaccordancewithourCompliance and Enforcement Policywherepotentialbreachesof
thelawareidentified
 Methodologyinpreparingthisreport
Whilethisreportconsidersawiderangeofissuesithasfocusedontheprovisionofinformation
toconsumersSpecificallythereportexaminesthetransparencyaccuracyandconsistency
ofinformationandhowthiscontributestoinformationasymmetrybetweeninsurershealth
providerspractitionersandconsumers
InpreparingthisreporttheACCCsoughtsubmissionsconsultedwithawiderangeof

consumers’experiencesMoredetailedinformationregardingthesubmissionsconsultationand
researchisprovidedatappendixA
ACCC Private Health Insurance Report 2013–14
2. Operation of the private health insurance
industry
 Industryoverview
TheprivatehealthinsuranceindustryisanimportantcomponentoftheAustralianhealthcare
systemThenumberofpeoplewithprivatehealthinsurancehasbeengrowingsteadilywith
yearonyearaverageincreasesofpercentoverthelastyears
Attheendof–
percentofthepopulationwascoveredforhospitaltreatmentandpercentwas
coveredbygeneraltreatmentpolicies
commonlyreferredtoas‘extras’coverHealthinsurers
generaterevenuefromthesaleofhealthinsurancepoliciesaswellasthroughtheinvestment
ofpremiumreservesCurrentlythereareoverprivatehealthinsurancepoliciesonoer
toconsumersinAustralia
Thetablebelowprovidesabriefstatisticalsnapshotoftheindustry
forecastfor–
Table Industrysnapshot
bn   bn m 

totalannual
revenue
generatedby
theprivate
health
insurance
industry

annualgrowth
rateofthe
privatehealth
insurance
industry
between
–

annualgrowth
rateofthe
privatehealth
insurance
industry
between
–

totalannual
profit
generatedby
theprivate
health
insurance
industry
Amountthe
privatehealth
insurance
industry
spendson
wageseach
year
Totalnumber
ofbusinesses
providing
privatehealth
insurance
policiesin
Australia
Overthenextfiveyearsindustryrevenueandprofitareforecasttogrowatacompoundannual
rateofpercenttoreachbillion

Theindustryisconcentrated—whiletherearealargenumberofinsurersoverall

thetopfive
insurersissuedpercentofpoliciesnationallyThetwobiggestinsurersBUPAAustralian
Holdings(Bupa)andMedibankPrivate(Medibank)areestimatedtoaccountforpercent
andpercentofthepoliciesissuednationally

Theindustryisalsoexpectedtoconsolidate
furtheroverthenextfiveyears
Thetablebelowindicatesthecurrentmajorplayerswithintheindustryandtheirrespective
sharesbasedontotalnumbersofpoliciesnationally
Table Topfiveindustryplayers

Medibank Bupa HCF NIB HBFHealthLimited
    
 PHIACOperations of the Private Health Insurers Annual Report 2013–14p
 Ibid
 PHIOAnnual Report 2013–14p
 IBISWorld(ChiaS)Industry Report K6321: Health Insurance in AustraliaMayComparablyinthe
IBISWorldindustryreportofMarchtheestimatedannualrevenuefor–wasbntheestimated
annualgrowthratebetween–waspercenttheestimatedannualgrowthratebetween–was
percenttheestimatedtotalannualprofitwasbnthewagesspendwasandthetotalnumberof
insurerswas
 Ibid
 Therearecurrentlyinsurers
 PHIACOperations of the Private Health Insurers Annual Report 2013–14p
 Ibidpp–
ACCC Private Health Insurance Report 2013–14
Competitionwithintheindustryisbasedonpriceproductdesignmarketingandservice
Productdesignisvitalinattractingmembersandinsurerstendtotailortheirpoliciestospecific
consumersegmentstomaximisemembershipnumbers



anindustrythatisbecomingincreasinglyconcentratedthiscanalsodeternewplayersfrom
enteringtheindustry

Therearetwotypesofmembershipfundsthatoperatewithintheindustry‘Open’membership
fundsprovidepoliciestothegeneralpublicand‘restricted’healthfundsareaccessibleonlyto
employeesofcertaincompaniesoccupationsormembersofparticularorganisationsBothfund
typesoerprivatehealthinsurancetoarangeofconsumergroupsincludingfamiliescouples
andsinglesFamiliesgeneratethemostrevenuefollowedbysingles(whichhavethehighest
policynumbers)Couplesaccountforthethird-largestproportionofpremiumrevenueand
policynumbersforinsurers
 Privatehealthcoveroptions
Insurerssellpoliciesusingavarietyofmethodsincludingwebsitesoverthephoneorface-to-
faceatshopfrontsConsumersmayuseanyoneoracombinationofthesemethodstoseek
informationfrominsurers
Thedierenttypesofinsurancepoliciesthataconsumercanchoosefromareoutlinedinthe
tablebelow
Table Typesofprivatehealthinsurance
Typeofhealthinsurance Description
 Providesbenefitstocoverthecostsofservicesnotcoveredby
Medicare(egdentalandoptical)
Thereisalargevariationintheservicescoveredandthebenefits
providedbydierenthealthinsurers
Hospitalcover Providesbenefitstocoversomeorallofthecostsassociated
withbeingtreatedasaprivatepatientinpublicorprivate
hospitalsCoveragelevelsvarydependingonthepolicybut
generallyprovidesomeformofbenefittomeetthecostof
shared-wardaccommodationinpublichospitalsprivatehospital
accommodationandmedicalcostsincurredabovetheMedicare
rebate
Combinedcover Providescombinedcoverforbothgeneralandhospitaltreatment
 TheseareoptionswithintheabovetypesofinsuranceTheyoer
incentivesformemberstominimiseclaimsasopposedtotheno
excessandnoco-paymentpolicies

incrementalservice

hospitalstayisclaimed
 IBISWorld(ChiaS)Industry Report K6321: Health Insurance in AustraliaMay
ACCC Private Health Insurance Report 2013–14
Onceaconsumerdecidesonatypeofcoverandinsurertheywillformallyenterintoacontract
whichinvolvespayingaregularpremiuminreturnforinsurancecoverConsumerspurchasing
coverforthefirsttimeorupgradingtheirpolicymayneedtoserveawaitingperiodbeforethey

treatmentsormayreceivealowerbenefitthantheywouldotherwisebeentitled
 Theregulatoryframeworkoftheprivatehealth
insuranceindustryinAustralia
TheprivatehealthinsuranceindustryinAustraliaisprimarilygovernedbythePrivate Health
Insurance Act 2007 (Cth)(PrivateHealthInsuranceAct)Thislegislationissupportedbya
numberofsubordinaterulesAppendixBprovidesabriefoverviewoftherelevantlawsthat
applytotheindustry
The Private Health Insurance Act
UnderthePrivateHealthInsuranceActinsurerscannotpricediscriminateonthebasisofage
sexsexualityhealthstatusorclaimshistoryHoweverrestrictedfundscanconfinemembership
byreferencetoemploymentprofessionprofessionalassociationorunion
ThePrivateHealthInsuranceActregulatespremiumchargesandallowspremiumvariancesin
relationtoLifetimeHealthCover(LHC)loadingwhereapercentloadingonthepriceofa
premiumisaddedforeveryyearinwhichanadultoverdoesnothavetherelevantlevelof
coverTheLHCloadingisremovedonceaconsumerhasyearsofappropriatecover
ThePrivateHealthInsuranceActprovidesthattheresponsibleMinistermustapprovepremium
priceincreases

up-to-datestandardinformationstatements(SIS)Thesestatementsprovideabroad
summaryofkeypolicyfeaturesdesignedtoallowconsumerstoreviewexistingpoliciesor
comparepolicies
Regulatory bodies
NoteThebelowinformationisaccurateforthe–financialyear
Thereareanumberofgovernmentagenciesinvolvedintheadministrationandregulationof
privatehealthinsuranceandeachhasaspecificroleandfunctionwithintheindustry
DoH)isresponsibleforadministeringthePrivate
HealthInsuranceActThePrivateHealthInsuranceActalsoprovidesfortheMinisterforHealth

(PHIAC

aimedtoprotecttheinterestsofconsumersthroughprudentialandadministrativeregulation
oftheprivatehealthinsuranceindustryItalsohadaroleinadvisingthegovernmenton
competitionpolicywithintheindustry
ThePrivateHealthInsuranceOmbudsman(PHIO)(functionsnowtransferredtothe
CommonwealthOmbudsman)alsoplayedaroleinprotectingtheinterestsofconsumersby

itidentifiedunderlyingproblemsinthepracticesofinsurersorhealthprovidersinrelationto
theadministrationofprivatehealthinsuranceandprovidedadvicetogovernmentandindustry
aboutissuesaectingconsumerswithintheindustryPHIOalsomanagedthegovernment
comparatorwebsitePrivateHealthgovau
ACCC Private Health Insurance Report 2013–14
Private Health Insurance Code of Conduct
Theprivatehealthinsuranceindustryalsohasavoluntarycodethatappliestohealthinsurers
ThePrivateHealthInsuranceCodeofConduct(PrivateHealthInsuranceCode)isaself-
regulatedvoluntarycodethataimstomaintainandenhancetheregulatorycomplianceand
servicestandardsofprivatehealthinsurersacrosstheindustryandpromoteinformationsharing
betweeninsurersconsumersandintermediariesCurrentlyonlythreefunds

arenotsignatories
totheCode
TheCodeaimstocoverfourmainareasofinsurers’conductbyensuring
• consumersreceivecorrectinformationonprivatehealthinsurancefromappropriately
trainedsta
• consumersareawareofinternalandexternaldisputeresolutionproceduresavailableinthe
eventofadisputewithaninsurer
• policydocumentsareprovidedinplainlanguage
• communicationsareconductedinawaythatensurestheappropriateinformationflows
betweenconsumersandinsurers
• consumers’personalinformationisprotectedinaccordancewithprivacyprinciples
ACodeCommitteemadeupofrepresentativesfromPrivateHealthcareAustraliatheHealth
hirmaa)andtwoindependent
membersoverseestheCodeThisCommitteeisresponsibleformonitoringinvestigatingand
reviewinginsurers’compliancewiththeCode
 Whydoconsumerspurchaseprivatehealthinsurance?
Thelikelihoodthatanindividualwillpurchaseprivatehealthinsuranceisaectedbyanumber
offactorsandhasbeenfoundtoincreasewithfactorssuchasincomeagemaritalstatus
(higherformarriedpeople)countryofbirth(higherforthoseborninAustralia)employment
status(higherforfull-timeemployees)typeofemployment(higherforprofessionals)levelof
educationandchronichealthissues


• theprivatehealthinsurancerebate—taxpayersearninglessthanspecifiedthresholdsget
rebatesontheirpremiums
• LHCloading—peoplethathavenottakenoutprivatehealthinsurancebythetimetheyare
yearsoldpayapercentperyearloadingontheirpremium(whichincreaseswiththeage
atwhichtheyfirsttakeoutcover)
• Medicarelevy—peopleearningaboveacertainincomethresholdthatdonothaveprivate
hospitalcoverpayanadditionallevyaspartoftheirtax
• insurersmayonlyincreasepremiumswithapprovalfromtheCommonwealthMinisterfor
Health

InAustraliaprivatehealthcoverisalsotakenupbyconsumersforreasonsincluding
• totakeadvantageofspecificfeaturesparticularlyextrassuchasdentaloptometry
andphysiotherapy
• inanticipationofspecificsurgeryorprocedures(suchaschildbirth)orifconsumerswishto
avoidlongpublichospitalwaittimes
 health
comau
 Run for Cover Now or Later? The Impact of Premiums, Threats and
Deadlines on Private Health Insurance in Australia

 Section-PrivateHealthInsuranceAct

ACCC Private Health Insurance Report 2013–14
• tohavemorecontrolovertheirhealthcarechoiceofservicestheyusechoiceofhealth
providerspractitionersandtimingofappointments
• 
• forthosethatareriskaversetoinsureagainstanyfutureeventualities


olderconsumerstakeouthospitalandextrascover(percent)whilehospitalcoveronlyis
popularwithyoungerconsumers(percentofthoseaged–)
The rationale for government intervention

implementedintheprivatehealthinsuranceindustry
Asastartingpointcompetitionshouldbereliedupontodriveecientoutcomeswherever
possibleTheroleconsumersplayistodrivecompetitionbybuyingfromthosesupplierswho
deliverthegoodsandservicesthatbestmeettheirneedsHoweverwherethereisamarketor
regulatoryfailurecompetitionwillnotworktodeliverthoseecientoutcomes
Privatehealthinsuranceissubjecttotwowell-knownmarketfailuresrelatedtoinformation


tothedetrimentofaninsurerafteraprivatehealthinsurancepolicyhasbeenenteredintoTo
managethiseectinsurersseektomanagetheirexposuretoclaimsthroughforexample
exclusionsinpolicies
Intheprivatehealthinsurancecontextadverseselectionmeansthataconsumerhasmore
informationthantheinsurerabouttheirhealthandlikelihoodofmakingaclaimThereforein
theabsenceofotherincentivesthoseconsumerswhomostneedprivatehealthinsurancewill
purchaseitwhileconsumerswhoperceivealowriskwon’tbuyinsurance
InAustraliatheregulatorysystemprovidesfinancialincentivesforconsumerstopurchase
privatehealthinsurancetoovercometheeectsofadverseselectionandensureasucient
poolofinsurancefundsandsupportforbroaderhealthpolicy

complexitytoprivatehealthinsuranceThiscomplexityisfurtherexacerbatedbyimperfect
informationandthetendencyofconsumerstodisproportionatelyfavourimmediatebenefits
abovethoseavailableinthefuture
Furthersuppliersthatservicemarketsthathaveafewlargesuppliersmayhaveanincentiveto
engenderinformationthatiscomplexandconfusingbecausefacedwiththisconsumerswill
tendnottochangesuppliers
Allthesefactorsintheprivatehealthinsuranceindustrycanresultinconsumersbeingless
engagedwhichcanlessencompetitionamonginsurers
Inthesecircumstancesacaseforregulationcanbemadewiththeobjectiveofbetterinformed
consumersandbetterfunctioningmarkets

ACCC Private Health Insurance Report 2013–14
 Complaintbodies
In–themaincomplaintsagencyforconsumerswithconcernsabouttheirprivate

representingapercentincreaseoncomplaintsthepreviousyear

Afterseveralyearswhere
complaintlevelshadremainedsteadythiswasasignificantincrease—atrendthatcontinuedin
–
PHIO categorised the main consumer issues as complaints about:
• oral information—providedbyprivatehealthinsurerstaoverthetelephoneorinbranches
• hospital exclusions and restrictions—memberswhofoundoutwhentheyneededtreatment
thatthetreatmentwaspartiallycoveredorexcludedundertheirpolicy
• the pre-existing condition waiting period—benefitsexcludedduringapre-existingwaiting
periodorasaresultofapre-existingcondition
• cancellationandgeneral service issues

toconsumersabouthealthinsurancepoliciesandclaimingbenefitsThisisreflectedinthe
graphbelow
Figure PHIOcomplaintissues–
0
200
400
600
800
Other
Contract
Informed
financial
consent
Cost
Incentives
Rule
change
Waiting
period
Information
Membership
Service
issued
Benefit
Ofparticularrelevancetothisreporttrendsincomplaintsrelatingtoinformationprovisionare
outlinedbelow

 PHIOAnnual Report 2013–14p
 PHIOAnnual Report 2013–14p

ACCC Private Health Insurance Report 2013–14
Table PHIOInformationcomplaints–
Information
– – Change
Oraladvice   ↑
Lackofnotification
  ↑
Writtenadvice   ↑
Brochuresandwebsites   ↑
StandardInformationStatement  ↓

↑
TheACCCandstateandterritoryfairtradingagenciesalsoreceiveconsumercomplaints
relevanttotheprivatehealthinsurancesectorHoweverwearenotadisputeresolutionbody
andthereforenotthekeycomplaintagencyforprivatehealthinsuranceAssuchwedonot
generallyreceivealargenumberofcomplaintsregardingprivatehealthinsurance

SomeexamplesofrecentcomplaintsreceivedbytheACCCarebelow
Mr A complained about representations made by his private health insurer. Prior
to purchasing his policy, Mr A had reviewed the insurer’s website which included a
representation that members would receive 100percent back on specified benefits. After
taking out the policy, Mr A made a claim and was informed that the 100percent oer was
only available to him if he used the specified services with particular providers. This exclusion
was not disclosed to Mr A and he was significantly out-of-pocket as a result.
MsB took out private health insurance and subsequently had dental work carried out. She
understood that the dental work fell within the dollar value listed as the limit for dental work
in her annual extras cover. However, the insurer advised MsB that she was only covered to
a lesser amount. MsB complained that this information was not listed on any information
that the insurer provided on its website including the consumer’s personalised ‘what you’re
covered for’ section.
MsC’s health insurer covered her for day surgery and private hospitals. MsC required
gynaecological surgery which she understood was covered under the policy. However, after
the surgery Ms C discovered that her insurer defined her surgery as ‘obstetrics’, which was
excluded from her policy. MsC sought information from Medicare which confirmed the item
numbers claimed for were not obstetrics related. However, MsC has been unable to resolve
this with her insurer
TheACCC’sresearchandstakeholdersubmissionshaveindicatedthatexamplessuchasthese
whereconsumersmisunderstandtheextentoftheirprivatehealthinsurancecoverageandthe

arediscussedinmoredetailbelow
 
issuesThisrepresentedapercentincreasefromthepreviousyearwherewereceivedcontacts

ACCC Private Health Insurance Report 2013–14
3. Purchasing private health insurance and
accessing health care services—the consumer
experience
Whetheraconsumerispurchasinghealthinsuranceforthefirsttimeorreviewingandor
renewinganexistingpolicytherearearangeofcomplexitiesthroughwhichaconsumerhasto
navigatetoexerciseinformedchoice
Thesecomplexitiesinclude
• regulatorysettings
• policybenefitsandexclusions
• excessesco-paymentsandwaivers
• preferredproviderarrangements
• inaccurateinformation
• variationstopoliciesorvariationstothirdpartyarrangementsthatimpacttheavailabilityor
amountofbenefitprovided
Privatehealthcoverisalsoasignificantcostformanyfamiliesandisfurthercomplicatedbythe
natureoftheadvancepurchaseincircumstanceswhereconsumerscannotpredictthekindof
coverorexclusionsthatmayimpacttheminfutureyearsForexamplethedecisiontopurchase
coverthatexcludescertainconditionsmayhaveasignificantfinancialimpactbywayofout-of-
pocketexpensesifthatconditionunexpectedlyarisesinthefutureInthesecircumstancesitis
criticalthatinformationmadeavailabletoconsumerstoinformthesecomplexchoicesisclear
accessiblereadilyunderstandableandprovidesguidanceastoimportantfeaturestoconsider
 Whatinformationissoughtbyconsumers?
TheACCCengagedColmarBruntontoconductasurveyexploringtherelationshipbetween
consumersinformationprovisionandtheprivatehealthinsuranceindustryFormore
informationaboutthesurveymethodologyseeappendixAThisresearchrevealedthatthe
mostcommonactionundertakenbyconsumerspriortopurchasingprivatehealthinsurance
wastocomparedierentfunds(percent)followedbycontactingtheinsurer(percent)
SectionprovidesmoreinformationonhowconsumerscomparefundsOfthepercent
ofconsumerswhocontactedaninsurerpriortopurchasingapremiumthemostcommon
methodswerebytelephone(percent)website(percent)orvisitingtheshopfront
(percent)Fiftyfivepercentofconsumerssearchedforindividualfundsontheinternet
Thetypeofinformationsoughtbyconsumerspriortopurchasingapolicyvariedhoweverthe
mostcommonwastheoverallcostofthepolicyincludingthemonthlypremium(percent)
Consumersalsooftensoughtinformationaboutgeneralpolicybenefitsandexclusions
(percent)Seebelowforadetailedlistofinformationsought

ACCC Private Health Insurance Report 2013–14
Figure Informationspecificallysought
None of the above
Other
Confidentiality and privacy agreements
Overseas private health cover
Policy upgrade information
Lifetime health cover
Standard Information Statements
Information regarding pre-existing conditions
Accident and emergency
Medicare levy surcharge/Government rebate
Preferred providers/doctors/hospitals
A specific benefit (e.g. physiotherapy)
Claims process
Terms and conditions
Annual rebate limits
What dollar value will be paid back per visit
Gap and gap cover amounts, along with
further explanation on what this is
Waiting periods
Policy benefits and exclusions—general
Overall cost of the policy, including monthly premium
58%
41%
38%
32%
31%
26%
24%
23%
22%
21%
20%
19%
15%
13%
7%
5%
5%
2%
11%
11%
 Isthisinformationeasytofind?

reportedbeingabletofindtheinformationtheywerelookingforwithabouthalf(percent)
reportingthattheinformationwaseasytofindAtthetimetheyweresearchingforapolicy
mostconsumers(percent)thoughttheinformationwasaccurate


informationwasnotstraightforwardoreasilyaccessibledespitesomebeingself-reportedavid
researcherswithahighlevelofengagementwiththeirprivatehealthinsurancepoliciesThis
feedbackwasechoedinmanyofthepublicsubmissions(seefurtherbelow)
Participantsidentifiedthatconfusionwascausedby
• alackofinformationbeforepurchase
• dicultieslocatingrelevantinformation

ACCC Private Health Insurance Report 2013–14
• unfamiliarterminologyandlegaljargonthatwasambiguousanddiculttointerpret
• theneedtoconsultthefineprintandattendtoclausesmarkedwithanasterisk
• incorrectandinconsistentinformation
Commentsfromparticipantsincluded
• ‘Toomuchinformationandjargoninallthesedocumentsandweaslaymenmightinterpret
themwrongly’
• ‘Theterminologyisaproblembuteachfundusesdierentterminologyandgroupsdierent
coverstogether’
• ‘Howmanyotherpeoplearealsogivenwronginformationanddon’tknow?’
Participantscalledformoretransparencyandsimplicityofinformationprovidedbyinsurers
especiallywhenconductinginitialinformationsearchesandcomparingfundsManyfeltthat

thechallengesfacedbyconsumersincluded
• ‘Theinfoistherebutit’snotsetoutveryclearlyorexplainedwell’
• ‘IfoundtheinfoIhopeHowcanyoureallyknowuntilyouclaim?’
• 
mightneed?’

whichrevealedthatmanyconsumersfoundtheinformationprovidedtothembyinsurerswas
overwhelming(percent)andwouldhavepreferredtheinformationtohavebeeneasierto
understand(percent)
 Theimportanceofprice

relatedanditappearsthatconsumersareincreasinglyselectingpoliciesbasedsolelyorlargely
onpriceThereareanumberofpotentialcausesforthisincluding
• aperceptionthat‘valueformoney’isdiculttodetermine
• taxincentiveswhichdriveconsumerstofocusonthecheapestoption
• price(particularlypremiums)istheonlyreadilycomparablefactorbetweenpolicies
• anaturaltendencybyconsumerstodiscountfuturecostsandbenefitswhencomparedto
immediatecostsandbenefits—thatisconsumersoftenfocusmoreonimmediatesavings
thanpotentiallong-termbenefits
• thecomplexityandpresentationofinformationwhichimpactsinformeddecision-makingon
non-priceterms

researchwheresomeconsumersreportedhavingprivatehealthinsuranceprimarilytoavoid
havingtopaytheMedicarelevysurchargeandLHCloadingSomeindustryparticipantsalso
claimthatinsurerspresentinformationtoconsumersinawaythatencouragesconsumersto
ADA)initssubmissiontothedraftreportof

[Health insurers] deliberately pitch advertising and various levels of cover to make it
dicult for policy holders to compare the levels of cover on oer. It is not possible to
make direct comparison of levels of cover on oer by the 34 privatehealthinsurance
funds in Australia. The larger private health insurance funds engage in massive advertising
campaigns using minor aspects of their business such as gym memberships or ‘join now
claim now’ campaigns to make them attractive but give sparse details about the fine

ACCC Private Health Insurance Report 2013–14
print of eligible services or full cost of premiums. Rather the cheap option is used as ‘bait
advertising’ with the aim of having the consumer make direct contact in order to ‘up sell’
the level of cover.

PriceisanimportantconsiderationformostconsumersinmakinganypurchaseGiventhe
existingregulatorysettingspurchasingaprivatehealthinsurancepolicywithalowpremium
maybethebestchoiceforconsumersthatareprimarilytryingtoavoidpayinghighertaxesor
beingsubjecttotheLHCloadingHowevertheseconsumersareentitledtoexpectalevelof
coverfromtheirpoliciesFurthersomeconsumersmaybeseekingtobecoveredforarange
ofproceduresaswellreducingtheirtaxliabilitiesIftheseconsumersfocustooheavilyonprice
duetodicultiesinassessingthecoverageofthealternativepoliciesthismayleadthemto
unintentionallyunderinsurewhichwouldcauseconsumerdetrimentInadditionthismaylessen

Determining the value of cover


feltthatvalueformoneyisbecomingmorediculttoachieveandthatitisdiculttoknowifa
policyis‘goodvalueformoney’beforeusingit
InconductingwebsiteresearchtheACCCidentifiedanumberofbarriersforconsumersin
determiningthetruevalueofapolicyInmostinstanceswefoundthatconsumerswouldbe
unabletodetermineoraccuratelyestimatetheirlikelyout-of-pocketexpensesforaparticular
procedurebyusingtheinsurer’swebsiteTodeterminethisaconsumerwouldneedto
separatelyconsultatleasttheirtreatingpractitioner(s)thehospitalandtheirinsurer
TheACCCrecognisesthatinsurersoftenhavelimitedcontroloverout-of-pocketcostsimposed
byhospitalsorpractitionersItalsoacceptsthatforsomebenefitsitisnotpossibletoprovide
acompleteexplanationofpotentialcostasitisdependentonacase-by-caseassessment
(forexamplewhichhospitaldoctorbenefitsalreadyusedbillingmethod)andcanonlybe
determinedatthetimeoftreatment
Howeverwefoundthatinsurerscommonlydonotprovideclearinformationontheirwebsites
abouttheextentofcoveragesuchaswhethertreatmentataparticularhospitalorbya
particularspecialistwillbecoveredorprovideclearinformationaboutthegapthatthe
consumercanexpecttopay

Allofthesefactorslimittheabilityofconsumerstodeterminethe
valueoftheirpolicyandalsoundermineconsumers’abilitytocomparepolicies
Mostinsurersprovideanonlinesearchtoolforconsumerstodeterminewhethertheinsurer
hasanarrangementwithaparticularhospitalorspecialistHowevertheseonlinetools

simpleinformationaboutthenatureoftherelationshipbetweentheinsurerandthehospital
orspecialistandhowthiswillimpactthecostsaconsumerislikelytoincurMostinsurers
provideinformationontheamountofanexcesshoweverinmostinstancesitislessclearwhen
thecustomershouldexpecttopaytheexcessForexampleliabilitytopayanexcessmay
dependontimingwhichforsomeinsurersisdeterminedona‘membership’yearfrompolicy
commencementThisisdierentfromthe‘calendar’yearthatappliesforannuallimitswhich
couldconfuseconsumers
 Submission to the Competition Policy ReviewJunehttpcompetitionpolicyreviewgovau

 Consumerswhoaretreatedasprivatepatientsinahospital(publicorprivate)willbecoveredbyMedicarefor
percentoftheMBSfeeformedicalcostsTheremaininghospitalandmedicalcostswillbechargedtothe
consumerandsomeorallofthesecostsmaybecoveredbytheinsurerdependingontheconsumer’spolicyFor
hospitalandtheatrecostsiftheinsurerandhospitaldonothaveanagreementinplacethehospitalisabletoset



ACCC Private Health Insurance Report 2013–14
 Complexityandconsumerbehaviour
Consumers’understandingofpolicybenefitsandexclusionswillvarydependingonthe
complexityoftheinformationprovidedandtheirfamiliaritywiththehealthsystemandtheir
healthneedsWhereinsurersprovideinformationthatisoverwhelmingincompleteorcomplex
itislesslikelythatconsumerswillbeabletoexerciseinformedchoicestopurchasecoverthatis
appropriatetotheirneedsandcircumstancesInturntheseconsumersaremorelikelytoface
unknownorhiddencostsofprivateservicesthatarenotcoveredinfullbytheirinsurance

Aspreviouslynotedtherearearangeoffactorsintheprivatehealthsectorthatincrease
complexityforconsumersincluding
• regulatorysettingsprovidingparticipationincentivesandgovernmentrebatesthatvary
dependingonageandincome
• policyexclusionsexcessesco-paymentsandwaivers
• preferredproviderarrangements
• therewardsandbenefitsbeingoeredbylargerinsurersifcertainconditionsaremet

Addingtothecomplexityisthesheernumberofoptionsavailable

andthateachinsurerhas
dierentterminologyandwaysofpresentinginformationwhichmakescomparisonsdicult
PoliciescancontainamixofleviessurchargesandrebatesSometimesthespecificdetailsare
hiddenorobscuredinlengthyandcomplexpolicydocumentsthatarenoteasilyaccessible
toconsumers
Inadditionprivatehealthinsurancecontractsallowfortheinsurertounilaterallyvarya
consumer’spolicytermsconditionsandexclusions(subjecttoprivatehealthinsurance
legislation)Thismeansthatevenwhereaconsumerspendsconsiderableeortinunderstanding
thepoliciesonoerinordertomakeaninformedchoicethateortmaybecomeredundantif

unilateralvariationsmayconstituteunfaircontractterms(subjecttoanumberofexemptions)
particularlyifthetermisnottransparentandcausesconsumerdetriment
Themixofleviescombinedwithatendencybyfundstochangetheirpoliciesovertime
makeitdicultforevenastuteconsumerstojudgethetruecostandvalueoftheirprivate
healthinsurance

Theissueofthecomplexityofprivatehealthinsurancecoverfeaturedinmanyofthe
submissionsfromindustrybodiesandconsumersalikeForexampletheConsumers’Health
Forum(CHF)submittedthatconsumerconfusionandthecomplexityoftheprivatehealth
insuranceindustrycontributestotheproblemof‘setandforget’behaviourbyconsumers
SimilarlytheAustralianSocietyofAnaesthetists(ASA)claimsthatthecomplexityandvariability
ofpoliciesandthereluctanceofinsurerstofullyeducatetheircustomershasresultedina

CollegeofOphthalmologistsclaimsthatitisincreasinglydicultforconsumerstocompare
healthinsurancepoliciesduetotheircomplexityresultinginaneectivelossofcompetition
Submissionsalsopointedtoasignificantlevelofconsumerconfusionaboutprivate
healthinsurance
 
insurance?’ Marchhttpstheconversationcomexplainer-why-do-australians-have-private-health-
insurance-
 SeeMedibankoersofFitbitandsportsvouchersviewedJunewwwmedibankcomauhealth-
insurancecompare-medibank-health-cover
 PHIOAnnual Report 2013–14indicatesthereareoverpoliciesonoer
 
httpstheconversationcomthe-debate-were-yet-to-have-about-private-health-insurance-

ACCC Private Health Insurance Report 2013–14
Bupaadvisedthattheircustomerresearchconfirmedthatvariouspracticesofthehealth
insuranceindustrywereconfusingsotheyhavespecificallydesignedtheironlinesalespathway
tocaterforthevaryingneedsofprospectivecustomersandreducetheconfusionBupaalso
advisedthatconsumersareconfusedbythe‘basicmediumandtop’classificationsused
byinsurers

waysinwhichinsurerscommunicatewithconsumersThisincludescomplexwebsitesand

waitingtimes

confusionseveralsubmissionsadvisedthatconsumersareoftenunawareofthewaysinwhich
complexbusinessrulesmayaectthemandwarnedthattheimpactofconsumers’purchasing
choicemaynotbeapparentuntiltheycometomakeaclaim
Othersubmissionsnotedthedicultyforconsumersofaccessingsimpleinformation
hirmaasubmittedthatmember-ownedandcommunitybasedinsurersplacevalueonclear
communicationandmemberunderstandinghirmaasubmittedthatitsmemberfundshave
astrongunderstandingoftheimportanceofeectiveinformationcommunicationbutthat

thecomplexityofGovernmentregulationintheindustry

documentssuchasproductdisclosurestatements(PDS
locateallthedetailsofthefineprintforoneparticularpolicyitsubmittedthatitishighlyunlikely
thatconsumerswouldperformthesameexerciserepeatedlyacrossotherpoliciesofinsurersin
ordertomakeaninformedchoiceandoftenproceedwithapurchaseinthehopethatwhatis
beingpurchasedmeetstheirneeds
Severalsubmissionsalsohighlightedthatconsumersfinditdiculttolocateinformationabout
specificrebatesannuallimitsanddetailsofexclusions
Decision-making in the face of complexity
Whereconsumersarefacedwithcomplexityandconfusionandunabletoeasilyaccessrelevant
informationitaectstheirdecision-makingThisisparticularlysoincircumstanceswhere
consumersalsofacetheuncertaintyofhowtoaccuratelyassesstheirpotentialfutureneedsin
choosingappropriatecover
Inadditionconsumerstendtodiscountfuturebenefits(forexamplebroadercover)when
comparedtoimmediatebenefits(forexamplelowerpremiums)evenifthefuturebenefitsmay
ultimatelybeworthwhile

Thecomplexityofdecision-makingaboutprivatehealthinsurancealsostemsfromthe
sheernumberofoptionsavailableWhiletherearebenefitsforconsumershavingmultiple
optionsthereisapointatwhichtoomuchcomplexitywillreducetheabilityofconsumersto
makedecisions

… as the choice set grows there are increasing costs to an individual of processing
information. This happens if individuals continue to consider all alternatives as the choice
set expands. Even if short cuts are used (elimination of the worst alternative) information
processing costs grow with the choice set. This leads to the hypothesis that consumers
can be overwhelmed by ‘toomuch’ choice…

 
wwwnberorgpaperswpdf
 
‘WhenMoreAlternativesLeadtoLessChoice’Marketing ScienceVolNoMay–Junepp–
 
wwwnberorgpaperswp

ACCC Private Health Insurance Report 2013–14

In situations where decisions are complex, consequential and uncertain there is often
fear of making the wrong decision and later suering regrets. One set of responses to
such decision-making circumstances that have been observed in both experimental and
observational studies is a tendency towards decision avoidance by either opting for the
status quo or walking away from the decision entirely…


respondentssaidtheyhadseriouslyconsideredchanginginsurersbutdidnotproceedwiththe
transactionTheimplicationsforcompetitionareclearifconsumersdonotswitchinresponse
topoororconfusinginformationordissatisfactionwiththeircovertheincentivesforinsurersto

 Thecontributorstocomplexity
Regulatory settings
Ourconsultationalsorevealedthatthecomplexityencounteredbyconsumersisexacerbated

settingsaimtoencourageconsumertakeupofprivatehealthinsurancetoreducethenumber
ofconsumersrelyingonthepublichealthsystemandtoaddressissuesofadverseselectionand

Medibanksubmittedthatconsumersoftenfindpolicestobecomplexbutarguedthatthe
structureofthehealthcaresystemitselfcanincreasecomplexityAlthoughMedibank
acknowledgedthebenefitsofregulationitnotedthatitcandampeninnovationand
entrenchcomplexity
The growth in benefits, restrictions and exclusions
Thesubmissionshighlightconcernsthatthereisagrowingtrendtowardpolicieswithmore
exclusionsaswellasincreasingvariationstoexistingpoliciesthatdecreasethelevelofcover
Complaintsaboutexclusionshavealsobeenincreasing
ThisgrowthinpolicyexclusionsisreflectedinrecentPHIACreportswhichhighlightthat
apartoftheindustry’sresponsetorisingpremiumshasbeentheemergenceofagreater
arrayofpolicieswithexclusionsandexcessesPHIACdatafoundthataroundpercentof
policiesnowhaveimportantexclusionsforexampleregardingjointreplacementcostsand
cardiactreatments


thatrestrictorexcludearangeofhospitalserviceshasgraduallyincreasedAsatJune
approximatelypercentofpoliciesheldincludedoneormoreexclusionsorrestrictionsa
jumpfrompercentonthepreviousyear

APHA)showsthatpercentof
AustralianswithprivatehealthinsuranceareunsureiftheirpolicieshaveanyexclusionsFurther
ofthepercentwhostatethattheirpoliciesareexclusionarypercentdonotknow
whattheyarecoveredforThismeansthatoverhalf(percent)ofprivatehealthinsurance
customersdonotknowwhatifanyexclusionsarecontainedintheirpolicy

 
wwwnberorgpaperswp
 PHIACOperations of the Private Health Insurers Report 2013–14p
 PHIOAnnual Report 2012–13p
 APHASubmissiontotheACCC–SenatereportonprivatehealthinsuranceFebruary

ACCC Private Health Insurance Report 2013–14
UnderthePrivateHealthInsuranceActthereisnolimitonthenumberofservicesthatcanbe
restrictedorexcludedprovidedminimumbenefitsareprovidedforpsychiatricrehabilitationand
palliativecareservices

TheAustralianMedicalAssociation(AMA)submittedthatthemostcommoncomplaintsfromits
membersrelatetopolicieswithexclusionsTheyalsoadvisedthatthepoliciesmostcommonly
citedbytheirmembersasimpactingonthecareoftheirpatientsarepolicieswithexclusionsor
minimumbenefitsandpoliciesthatarefortreatmentinpublichospitalsonlyThesearedetails
whichareoftenonlyfullyexplainedinthe‘fineprint’ofhospitalcoverpolicies

proceduresforwhichpeopleexpecttobecoveredsuchasheartsurgerykneeandhip
replacementseyesurgerypsychiatriccarerehabilitationandpalliativecareOthersubmissions

consumerscanbeconfidenttheywillbecoveredforimportantprocedures
Thesubmissionsalsohighlightedtwoareaswheresignificantconsumerdetrimentmayarise—
limitationsonpsychiatricservicesandambulancecover
RANZCP)submittedthatthere
isinsucienttransparencyandconsistencyregardingthefeaturesofpoliciestoallowconsumers

specificallyforpsychiatriccareandnotedthatthereisnosinglesourceavailableforconsumers
tocomparethedierentkindsofpsychiatricpoliciesthatmightbeavailable

ofthemajorinsurerscoverthecostofadmissiontoprivatepsychiatrichospitalsThismeans

overstretchedSomeinsurershaverecentlymovedpsychiatrictreatmentfromfullbenefits

consumersdidnotrealisethattheirpsychiatriccoveriscappedresultinginthepotentialfor
detrimentalhealthandtreatmentoutcomesOneexampleprovidedisoutlinedbelow
RANZCPcasestudy—surpassingnumberofpsychiatricadmissiondays
Ayearoldmanwithsevereobsessivecompulsivedisorderandobsessivecompulsive
personalitydisorderwasdeniedadmissiontohospitalatacriticaltimebecausehehad
surpassedthenumberofpsychiatricadmissiondayshispolicypermittedperannumWhile
thepatientwaseventuallyadmittedwiththesupportoftherelevantfundhisadmission
processwasdelayedbymanydaystakingupagreatdealofunnecessaryadministrative
timeandcausingthepatientconcernedunduestress

byinsurerstoconsumersaboutwhethertheyarecoveredforpsychiatriccareandtheextentof
inclusionsandexclusionsontheirpolicies
Submissionsalsoadvisedthatinotherinstancesconsumersmayfindthatthenumberof
daysornumberofadmissionsforwhichfullcoverisprovidedislimitednotbyatermofthe
policytheyhaveselectedbutbytheinsurer’scontractwiththehospitalInsuchinstancesthe
consumerhasnooptionbuttoseekadmissionatanotherhospitalthuslosingtheadvantagesof

toparticularhealthprofessionalsthatledthemtoselectthathospitalinthefirstplace
TheAustralianSocietyofPlasticSurgeons(ASPS)submittedthatmanyinsurersoerpolicies
thatexcludeorprovidereducedbenefitsforplasticandreconstructivesurgeryIntheir
experiencewheninsurancesalesstaareaskedabouttheseexclusionstheyarenotawareof
whatisorisnotintendedtobeexcluded
 Section–PrivateHealthInsuranceAct

ACCC Private Health Insurance Report 2013–14
ASPSalsosubmittedthatduetoexclusionsfor‘cosmetic’surgeryonsomeoccasionsinsurers
denycoverforprocedurestheydescribeas‘cosmetic’butwhicharenot

treatmentofburnsbreastreconstructionaftercancertreatmentandreconstructiveprocedures
afterbodilyinjury
APHAalsosubmittedanexampleofproblemsarisingwherebenefittermsaremisunderstood
APHAcasestudy—ambulancecover
Consumersareoftenadvisedthathospitalpoliciesprovide‘comprehensivecover
forambulance(seeinsurerfordetails)’Inpracticethereissignificantvariationinthe
interpretationof‘comprehensivecover’Thistermmaymean
• emergencytransporttoahospitalbutnotbetweenhospitals
• emergencytransporttoahospitalbutnotforacalloutthatdoesnotresultintransport
tohospital
• emergencytransporttohospitalbutnotbetweenpublichospitalsandoronlybetweena
privatehospitalandanotherhospitalifwrittenmedicaladviceisprovided
TheACCCalsoreceivedacomplaintaboutconfusionregardingambulancecover
ACCCcasestudy
The ACCC received a complaint from MsH who switched health insurers in April 2012.
MsH received a disclosure document from her new insurer which represented that MsH
would receive ‘partial ambulance cover’* (*see insurer for details). MsH called the insurer
and was advised that this meant MsH was covered for part of the bill where an ambulance
was required for emergency response. In April 2013, the insurer sent MsH an amended
disclosure document. The insurer had made changes to the terms which now referred
to ‘comprehensive ambulance cover*’ (*see insurer for details). Upon calling the insurer
MsH was advised that ‘comprehensive’ referred to full ambulance cover and not just for
emergencies. Subsequently MsH’s husband required ambulance transport, and MsH
received a bill for $2500. MsH’s insurer did not cover the cost on the basis that it claimed she
did not have ‘emergency’ cover. The bill did not state that it was required for an ‘emergency’.
MsH had recordings of her conversations and was ultimately successful in resolving the
complaint with the insurer.
Preferred provider arrangements—the relationship between practitioners
and insurers
Theexistenceofpreferredproviderarrangementsbetweeninsurersandhospitalsor
practitionerswhileoeringsomebenefitsfurthercomplicatestherangeofmattersaconsumer
mustconsiderwhenpurchasingandusingprivatehealthinsuranceForinstanceaconsumer
mustconsiderwhethertheirinsurerhasaparticularagreementwiththeirpractitionerdoctoror
hospitalandtheassociatedgapandchargingarrangement
Sinceinsurersandhealthproviderspractitionershavebeenabletocontractwitheach
otherfortheprovisionofhospitalservicestomembersThesearrangementswereintroducedin
ordertoenhancecompetitionwiththeaimofbettermanagingcostswithintheindustry

The
agreementsallowformemberstoaccessarangeofprivatehospitalswithnoorminimalgaps
fortheatrefeesandaccommodationThesearecommercialarrangementsandtheagreement
isnegotiatedonthebasisoftheamounttheinsureriswillingtopayforservicesacrossthe
termofthecontractandtheamounttheprovideriswillingtoaccept


 PHIOAnnual Report 2013–14p
 Ibid

ACCC Private Health Insurance Report 2013–14
arrangementswithdierenthospitalswhichwillfullyorpartiallycoveraconsumer’scostsIf
consumersaretreatedatahospitalthatdoesnothaveanagreementwiththeirinsurertheymay
facesignificantout-of-pocketexpenses
Insurersalsohavearrangementswithparticulardoctorspractitionersthatcoverallorsome
ofthedoctor’sfeesforaconsumer’shospitaltreatmentTheseagreementswilldeterminethe
consumer’sout-of-pocketexpensesThesearetheexpensesincurredbytheconsumerfortheir
medicaltreatmentduringtheirstayinhospitalreflectingthedierencebetweenthetotalfee
chargedbythedoctorandanyMedicarerebateplusthebenefitpaidbytheinsurerUnlessan
insurerhasagapcoverarrangementinplacewiththetreatingdoctorpractitionerwhichwill
coverallofthechargetheconsumerwillhavetocontributetowardsthedoctor’sbilloutoftheir
ownpocket
ThesamearrangementsapplywithextrascoverprovidersManyfundsestablish‘preferred
provider’or‘participatingprovider’arrangementswithsomesuppliersofextrascoverservices
suchasdentistsoroptometristsThoseprovidersoeranagreedchargeforfundmembers
withtheintentionofloweringout-of-pocketcostsformembersafterfundbenefitsaretaken
intoaccount
Consumersoftenlooktomedicalandotherpractitionersforadviceaboutfeesandpotentialout-
of-pocketmedicalcostsTheAMAsubmittedthatsomeofitsmembersspendaconsiderable
amountoftimeassistingpatientstounderstandtheirprivatehealthinsurancepoliciesand
liaisingwithinsurersontheirpatients’behalftodeterminetheextentoftheircover
Consumerscanencountersignificantdicultyindeterminingwhataprocedurewillcostand
howtherelationshipbetweentheirinsurerandtherelevantproviderorhospitalwillaect
thiscostSubmissionsalsoraisedconcernsabouttheinabilityofconsumerstoreadilyaccess
MedicareBenefitsSchedule(MBS
forspecificproceduresorbenefitsanddeterminetheassociatedout-of-pocketexpenses
Stakeholderssuggestedaneedforaccesstothisinformationtoenableasmootherandmore
transparentprocessofdeterminingwhetheraprocedureiscoveredbyaconsumer’spolicywhat
itmaycostandanyassociatedout-of-pocketexpenses
Inpracticaltermsinordertoascertainout-of-pocketcostsonceaconsumerknowstherelevant
MBSitemnumberstheonusisonthembeforetheygotohospitaltocontact
• thehospitaltodeterminethefeespayableandwhethertheyhavespecificcontractual
arrangementswiththeirinsurerthatwouldresultinlowerout-of-pocketexpenses
• theirhealthproviderpractitioner(andanyassistingproviders)todeterminethefeespayable
andmethodofbillingincludingbreakdownofcostsandrelevantMBSitemnumbersto

• theinsurertodiscussestimatedout-of-pocketcostsbasedonthechosenhospital
practitionerdoctorandrelevantMBSitemnumbersprovidedbytheirpractitionerfor
theprocedure
NavigatingthisprocessisnoteasyStakeholdersadvisedtheACCCthatinsomecases
practitionersarenotprovidingconsumerswithsucientinformationtoallowthemtoseek
informationfromtheirinsureraboutcoverageforparticulartreatmentsandout-of-pocket
expensesandseveralsubmissionsidentifiedthatcomprehensiveinformationonfeesisnot
alwaysgiventoconsumersbeforeaprocedureorthereisnotsucienttimetodosoThis
meansconsumersmaynotbewellinformedtodeterminetheout-of-pocketexpensesthey
willincur

ACCC Private Health Insurance Report 2013–14
The ASA provided an example:
ASAcasestudy—anaesthetistfees
Ananaesthetistmayattimesnotreceiveinformationaboutapatient’sprocedureearly
enoughtoprovideafeeestimateItisnotuncommonforapatienttohaveelectivesurgery
bookedonlyafewdaysinadvanceAsaresult
• theanaesthetistisunabletoprovideasucientestimatetothepatientwellinadvanceof
theprocedureor
• theanaesthetistmaynothaveenoughtimetocontacttheconsumerpriortothe
procedure
ThisissuecanalsocreatedicultyforinsurersInsurersmaynotbeabletoprovidesucient
informationtoconsumersastheywillnotknowexactlywhattheconsumerwillbeclaiminguntil
theconsumerhasseenthepractitionerdoctororundergoneaprocedure
Therelationshipandcommunicationbetweenpractitionersandinsurerscanalsocontribute
toconsumermisunderstandingabouttheirprivatehealthinsuranceThecasestudiesbelow
provideexamplesofthis
ASAcasestudy—anaesthetistrequirementsforaboveMBS-rebates
Allhealthinsurersprovideabove-MBSrebatesforthein-hospitalservicesofanaesthetists
andotherdoctorsHoweverthetermsandconditionsapplyingtosuchpaymentsvary

‘registers’withthehealthinsurerorthataccountsarepresentedinaspecificformatIfa
doctorisnotfullycompliantwiththetermsandconditionsthepatientwillreceiveonlythe
MBSfeeastherebateandtheirout-of-pocketexpensesmaybesubstantiallyincreased
TheASAhasbeenmadeawareofnumerousinstanceswherepatientshavebeensubject
tounnecessaryexpensebecauseofthissituationanditappearsthatthenumberof

AustralianOrthoticProstheticAssociation(AOPA)casestudy—referralrequirements
MsMhasbeenwearingfootorthosesforanumberofyearsandreceivingtreatmentfrom
anorthotistSheselectedahealthcoverpolicyinordertoclaimsomeofthecostsofher

policywasappropriateUponsubmittingthepaperworkforherrebateMsMwasadvised
thatunlesstherewasareferralfromapodiatristoranorthopaedicsurgeonthenshewas
unabletoclaimarebateThereasongivenwasthatan‘orthotistisonlyeligibleto“supply”
onbehalfofaPodiatristfollowingabiomechanicalexaminationgaitanalysisnegativecast

Excesses, co-payments and waiting periods
TheAMAandotherstakeholderssubmittedthatproblemsalsoarisefromlimitedconsumer
awarenessandunderstandingaboutwhethertheirpolicyhasanexcessco-paymentand
waitingperiodprovisionManypoliciescontainwaitingperiodsforparticularproceduressuchas
maternitycoverOtherpoliciescontainexcessesorco-paymentsforhospitaladmissionssuchas
payinguponadmissionThisinformationissometimesburiedintheinformationprovided
toconsumersforgottenornotexplainedclearly
Severalothersubmissionsadvisedthatmanyconsumersmisunderstandexcessesandco-
paymentswhichbytheirinclusionlowerconsumers’annualpremiumsConsumersoftenneed
thisinformationclarifiedwhentheygotoclaimparticularlyasitcanleadto‘billshock’

ACCC Private Health Insurance Report 2013–14
Accuracy of information
Inothersubmissionsitwasarguedthatprivatehealthinsurancepolicybrochurescanbevague
aboutthebenefitsofapolicyTheseperceivedbenefitsmaybeinconsistentwiththedetailed
informationprovidedinlongerpolicydocumentswhichoftencontainlegalandindustryjargon
thatresultsinconsumersfailingtoreadorunderstandtherestrictions
AOPAsubmittedthattelephoneconversationsbetweenconsumersandinsurersareakeysource
ofmisinformationAOPAbelievesitisnotuncommonforconsumerstobeincorrectlyadvised
regardingtheircoverageortoreceivevariationsintheadvicedependingonwhichhealthinsurer
representativetheyspeaktoAOPApointstotheuseofcomplexterminologyandthelackofa
schedulefortheservicesoforthotistsasprimarydriversofthisproblem
OptometryAustralia(OA)alsosubmittedthatsomehealthfundsprovideinconsistentor
inaccurateinformationabouttherebatesthatconsumerscanclaimOAnotesthatconsumers

‘known-gap’opticalpolicieswhenthisisoftennotthecaseThesesituationsincreasetheriskof
unexpectedcostsand‘billshock’fortheconsumerandplacepressureonoptometriststocover
the‘gap’toretaintheconsumer’sbusiness
TheASAsubmittedtherearenumerousexamplesofpatientswhohavebeenledtobelievethat
becausetheyhave‘topcover’andaninsurerwitha‘gapcover’ora‘nogap’policythatallof
theirmedicalexpenseswillbecoveredwhenthisisnotthecaseThisonlyservestoworsenthe
problemofunexpectedout-of-pocketexpenses
 Insurers’websites—addingtocomplexity
Takingintoaccountthenumberofconsumerswhoaccessinsurers’websites(overhalfinthe


Wereviewedinsurers’websitesandidentifiedalackoftransparencyandavailabilityof
informationinthethreekeyareasbelow
Determining out-of-pocket costs and preferred providers
Thereweresignificantchallengesinfindinginformationwhichenabledaninformedestimateof
thegapaconsumercouldexpecttopayinparticularwherepreferredproviderarrangements
couldimpactthelevelofbenefitavailable
Manyinsurersdidnotprovidetransparentinformationaboutthenatureoftherelationship
betweentheinsurerandparticularhospitalsandspecialistsandtheimpactofthisforcoverage
andbenefitsForexampletheimplicationsofa‘nogap’arrangementora‘limitedgap’
arrangementwereunclearTherewerealsovagueexplanationsthatthebenefitpayablewould
bedeterminedona‘casebycase’basis
Manyinsurersalsodidnotprovideinformationaboutthebenefitspayableifaconsumerwas
admittedasaprivatepatientinapublichospital
Waiting periods and pre-existing conditions
Informationaboutanyapplicablewaitingperiodsorlimitationsrelatingtopre-existingconditions

onlybefoundintheproductguidepdflinkcontainingcompletepolicyinformation

ACCC Private Health Insurance Report 2013–14
Extras cover
Manyinsurersfailedtoprovideclearinformationabouttherebateandannuallimitsforsome
extrassuchasgeneraldentalSomeinsurersfailedtoprovidefurtherinformationaboutthe
rebateamountsforspecificextrasservicesandinsteadaskedconsumerstoringtheinsurer
fordetails


notedpreviously(seepage)highlightingthedicultyconsumerscanhaveinaccessing
importantinformation
Online quote processes

detailssuchasagelocationandstatus(singlecouplefamily)astheapplicablerebate



comparethepriceofsimilarpolicies
Somewebsitesenablebettertailoringofpolicyoptionssuchasincludingspecificitemsthe
consumerisseekingtobecoveredforegcataractsurgeryosteopathyorremedialmassage
Howevertherearesomechallengeswiththisapproachincludingthat
• consumersmaynotbeawareofthelimitationsontheparticularcategorywithouthavingto
findandreadextensivefineprint
• thereisinconsistentterminologyandalackofagreeddefinitionsabouttermssuchas
‘majordental’
• thereisnostandardisedapproachaboutwhatisincludedincoverforspecificconditionsfor
example‘cardiac’covermayincludedierentitemswithdierentinsurers
Asaresultconsumersmayhaveparticularexpectationswhichmaynotbecompatiblewiththe
termsoftheinsurers’oerThemoreeectivewebsitesprovideprominentdisclosureearlyinthe

itemandincludelinkstofurtherinformation
 Whenconsumersaccesshealthcareandclaim
benefits
Mostconsumerswithprivatehealthinsurancewillaccesssomeoftheirbenefitsatsomepoint


theirprivatehealthinsurance

insurancearemorelikelytofeelinformedabouttheirhealthinsuranceandconfidenttheyhave
receivedalltheyexpectedintermsoftheirrebateorclaimHoweverthedatafurtherdiscloses

occasionwheretheirexpectationswerenotmetlargelybecausetheyweredissatisfiedwiththe
claimamountorbelievedtheywerecoveredforsomethingthattheywerenot
TheAMAhighlightedinitssubmissionthatthereisasignificantdisconnectbetweensome
consumers’understandingandthereforeexpectationsoftheservicesandrebatestheyare
entitledtoundertheirpolicyandtherealityofwhattheirpolicyprovides

ACCC Private Health Insurance Report 2013–14
PHIO’sState of the Health Funds Reportalsodiscussescomplaintsthatarisewhere
consumerexpectationsarenotmet ThereportoutlinedthatPHIOreceivedcomplaints
concerninghospitalexclusionsandrestrictionsaectingbenefitstoconsumersduring–
ThiswasanincreaseofpercentonthepreviousyearThesecomplaintsmostlyresultedfrom
alackofknowledgethataparticularbenefitwasnotcoveredontheirpolicyorabeliefthata
particularhospitaltreatmentwasincorrectlydefinedasarestrictedorexcludedservice

This
lastpointisillustratedinthecasestudybelow
PHIOcasestudy—complaintregardingrestrictions
PHIOreceivedacomplaintfromaconsumerwhowascontestingahealthfund’sviewas
towhetheratreatmenttoalumbarjointintheirbackshouldbeconsideredrestrictedThe

revisions’whichthefundclaimedindicatedthatlumbarjointtreatmentswererestrictedThe
consumerwasoftheviewthatbecauseajointwasnotreplacedandbecausetheprocedure
wasaminorlumbarprocedureitshouldnotbeconsideredasrestrictedunderthe‘Joint


understandingpolicyexclusionsexcessesandgapswhenmakingaclaimForexampleCHF
outlinedthatitoftenhearsofconsumerssuering‘billshock’whentheygetfinalaccountsand

 PHIOState of the Health Funds Report 2014p

ACCC Private Health Insurance Report 2013–14
4. Comparing and choosing policies

thereforecriticalthatconsumershavesucientinformationandappropriatetoolstocompare
policiesandmakeinformedchoices
 Howdoconsumerscomparepolicies?


consumersgenerallyundertakemorethanoneactivityinaneorttodeterminethebestcover
forthemActivitiesinclude
• searchingforinformationonlineincludingonfunds’individualwebsites
• readingreviewsonreviewsites(egWhirlpoolblogsites)
• makingphonecallstoindividualfunds
• visitingindividualfundshopfronts
• settinguptheirowncomprehensivespreadsheetstocomparepolicies
• askingfamilyfriendscolleagues
Comparator websites

• fortypercentofrespondentswhocomparedfundsusedcomparatorwebsites
• theprimarywebsitesusedwereiselectcomau(percent)andcomparethemarketcomau
(percent)


• ‘comparisonwebsitesareagoodstartingpointbutIwouldn’tlimitmysearchtojustthisto
makeadecision’
• ‘comparisonwebsitesareausefulfirstlinelooktocompareatahighlevelbutyouneedto
lookandtalktoindividualcompanies’
• 
InNovembertheACCCreleasedThe comparator website industry in Australiareport
(thecomparatorreport)whichexamineshowthecomparatorwebsiteindustryoperatesand
identifieschallengesandbenefitsforbothconsumersandbusinesses

Thecomparatorreportfoundthatcomparatorwebsitescanassistconsumerstomakemore
informedpurchasingdecisionswhencomparingcomplexpoliciesandcanpromotehealthy
competitionbyassistingsmallornewserviceproviderstocompetemoreeectivelyThereport
alsoidentifiedissuesaroundmanycomparatorwebsitesincludingstatementsthattheservice
isunbiasedimpartialorindependentandundisclosedcommercialrelationshipsaecting
recommendationstoconsumersThisraisedconcernsthatsomestatementsoncomparator

• acomparatorwebsiteoperatorearnssomeorallofitsrevenuefromleadsorsalesunder
commercialrelationshipswithserviceproviderswhosepoliciesitcompares
• thenatureandextentofthecomparisonserviceisentirelyorlargelybasedonwhichservice
providersacomparatorwebsiteoperatorhascommercialrelationshipswith
 Seewwwacccgovaupublicationsthe-comparator-website-industry-in-australia

ACCC Private Health Insurance Report 2013–14
StakeholdersconsultedbytheACCCinpreparationofthecomparatorreportarguedthat
comparatorwebsitesprovideconsumerswithboththetoolsandabilitytoanalysetheirneeds
tohelpthemchoosetherightpolicySomestakeholdershighlightedthebenefitsofcomparator
websitesincludingthatinformationispresentedconsistentlywhichsupportsclearcomparison
andsimplifiespurchasingdecisionsHoweveritwasalsonotedthatthesimplificationof
informationtoprovideconsistencycandecreasethetransparencyofimportantdierences

whenconsumersfocusprimarilyonprice
ManyoftheissuesidentifiedbytheACCCinthecomparatorreportwerealsoraisedin
submissionstothisreview
ForexampletheCHFconductedanonlinesurveyacrossitsmembershiptoascertain
consumers’viewsonhowtheyfindoutaboutprivatehealthinsurancepoliciesTheresults
indicatedthatofthepercentofrespondentswhousednon-governmentcomparator
websitestoresearchinsurancepoliciesoverone-third(percent)didnotknowthatmost
non-governmentinsurancewebsitesdidnotcoverallpossiblepolicies

Itwasalsosubmittedthatconsumerswhousecomparatorwebsitesasopposedto

Furtheritwasacknowledgedthattransparencyaroundcoverageisparamountforconsumers’
trustincomparatorservices
SeveralsubmissionsreceivedbytheACCCindicatedconcernswiththecommission-based
modelforintermediariessuchascomparatorwebsitesTheyarguedthatthecommission-based
structuremeanscomparatorwebsiteoperatorshaveincentivestoenticeswitchingininstances
whereitisnotnecessarilyinthebestinterestsoftheconsumerConcernswerealsoraisedthat
consumersdonotunderstandthecommission-basedmodelandstructureofpricecomparators
whichmayleadtoanincorrectassumptionthatservicesareunbiasedindependentorimpartial
Concernswerealsoraisedthatcomparatorscanunnecessarilyfocusonpriceratherthan
healthneeds
ThePrivateHealthInsuranceCodeCommitteesubmittedthattheexpansionofthirdparty
intermediarieshasaddedtoconsumerconfusionandasconsumersareincreasinglyattractedto
lowercostpoliciesthereisagreaterlikelihoodofadiminishedconsumerexperience
AgainstthisthePrivateHealthInsuranceIntermediariesAssociation(PHIIA)submittedthat
intermediariesexisttofacilitateandimproveconsumerunderstandingThePHIIAclaimsthat
mostmembercompaniesboasthighlydevelopedweb-enabledcomparisonplatformsall
designedtoenhanceconsumerunderstandingthroughproducttransparencyCriticallythese
platformsaresupportedbytrainedemployeeswhoareabletoexplainthedierencesbetween
policiesoverthephoneandinvestmentsthatensurethecustomerexperienceunderscored
bycomparisontransparencyandchoiceisatitsoptimumPHIIAalsoadvisedthatinsurersin
isolationhavenointerestinnorcapabilitytocomparehealthcoverpoliciesofdierentfunds
Thisisbecauseanyinsurerisunderstandablyonlyinterestedinoeringandsellingtheproduct
theyhavetooer
PrivateHealth.gov.au
PrivateHealthgovauisanAustralianGovernmentinitiativemanagedbytheCommonwealth
Ombudsman

ThiswebsiteprovidestheSISforeveryhealthinsurancepolicyavailablefrom
everyregisteredhealthfundallowingconsumerstosearchallhealthinsurancepoliciesand
comparewhatiscoveredthroughtheSIS
 CHFSubmissiontotheACCC–SenatereportonprivatehealthinsuranceFebruaryhttps
consultationacccgovauipilphireport-consultationviewrespondent?uuId
 PriortoJulythiswebsitewasmanagedbythePHIOwhosefunctionsweretransferredtothe
CommonwealthOmbudsman

ACCC Private Health Insurance Report 2013–14
AnumberofsubmissionsnotedthatconsumerawarenessofthewebsiteislowTheCHF
advisedthatinitsconsumersurveynoneoftherespondentsusedinformationfrom
PHIACorPHIOinresearchingprivatehealthinsuranceandfewerthanoneinsixconsumers
(percent)usedPrivateHealthgovau

TheCHFstatesthatthereisaneedforthiswebsiteto
bepromotedmoreactivelyasitcouldbeusefulforconsumersiftheyknewaboutitandhowto
accessit

ofthewebsite
Somesubmissionsnotedthatspecificdetailsofpolicieswereunabletobecomparedthisis
largelybecausetheSISlacksinformationaboutimportantaspectssuchasrebateamounts
SubmissionsalsoadvisedthatPrivateHealthgovauisonlyaninformationsiteandnotashelpful
asnon-governmentcomparatorsitesItdoesnotallowforthepurchaseofpoliciesortheability
toconductasearchbasedonspecificneedsforexamplecomparingparticulartreatments
conditions
 Changinginsurers

healthinsuranceforormoreyearsHoweveronlypercentofrespondentshadchanged
insurersdespitepercenthavingthoughtaboutchanginginsurerandsometakingstepsto
dosowithoutcompletingthetransaction
Forrespondentswhohavechangedinsurerorcontemplateditthemostreportedreasonwas
thatthepremiumwastooexpensive(percent)followedbydissatisfactionwithclaimamount
andpolicybenefitsandexclusions(bothpercent)

reportedthattheirmainreasonfornotchangingwasthattheyhavenotfoundaninsurerthat
meetstheirneeds(percent)whilstpercentconsideredthattheprocessofchangingis
toodicult
Thetoolsandinformationavailabletofacilitatepolicycomparisonandchoicecaninfluence
consumerswitchingItappearsthatevenwhenconsumersmaybedissatisfiedwiththeir
currentinsurerandhavethoughtaboutchanginginsurersfewactuallydoTheresearchand
submissionsindicatedthatthiscouldbeduetoanumberofreasonsincluding
• aperceptionthattherearenosatisfactorypoliciesavailable
• dicultyassessingandcomparingthebenefitsandlimitationsofpolicies
• concernsthattheprocessofswitchingistoodicult
• concernsthatbyswitchingconsumerswillbedeniedbenefitstheymaycurrentlybeentitled
toandforegoanyloyaltiesaccrued
AstheACCChaspreviouslynotedwhere‘choicecanappeartoodicultconsumersremain
withtheircurrentprovider[insurer]leadingtosub-optimalresultsforcompetitionandAustralian
economicwelfare’.

 CHFSubmissiontotheACCC–SenatereportonprivatehealthinsuranceFebruaryhttps
consultationacccgovauipilphireport-consultationviewrespondent?uuId
 

November-pdf

ACCC Private Health Insurance Report 2013–14
 StandardInformationStatements
Submissions highlighted the important role insurers play in ensuring consumers have access
to the information they need to make informed decisions and to understand the terms and




consumerscanreviewtheirexistingpolicyorcomparepoliciesTheSISprovidesasummaryof

toprovideaSISforeachpolicytheyoerandthesearealsoavailableonthegovernment
comparatorwebsitePrivateHealthgovau


TheSIShasbeensubjecttoseveralchangessinceitsintroduction
TheSISwasdesignedtoprovideconsumerswithatooltocomparepoliciesandmakeinformed
choicesbutthereisgeneralagreementamongstakeholdersthattheSISlacksimportantpolicy
detailsThereisalsoconcernthatthepremiumpayableisdependentonpersonalcircumstances
whichisnotreflectedintheSISBenefitsarealsodependentonthetermsofthepolicythe

ManysubmissionsarguedthattheSISdoesnotincludesucientdetailtoenableconsumersto

relianceontheSISitwassubmittedmayleadtoclaimshock


allapproachwhichmeansthatinsurerscannotalwayseasilydescribetheirpolicyaccurately
particularlyasproductinnovationseesnewtypesofproductsreleased
Bupamadeasimilarsubmissionandnotedfurtherthatthebenefitstoconsumersofaninsurer’s
strongpreferredprovidernetworkcannotbereflectedintheSISBupaalsonotedthatto
addresstheinformationshortfallintheSISinsurersoftenprovideshortformbrochuresthat
moreaccuratelyrepresentthepolicyBupaalsonotedthathoweverthisisanotherpieceof
informationforconsumerstoreadandcansometimesappearinconsistentwiththeSISleading
tofurtherconfusion

theSIS

arerestrictedorlimitedthenatureofanylimitationsisnotdisclosedInsteadconsumersmust
seekfurtherinformationfromtherelevantfundandrestrictionscanvarysignificantlyInone
casethe‘restriction’maymeanthatcoverinaprivatehospitalforthatparticularserviceisonly
providedforasetnumberofdaysinanyoneyearInanothercasethe‘restriction’maymean
thatthefundwillonlypaytheminimumdefaulthospitalbenefitandtheconsumerwillneedto
payanyadditionalcostoutoftheirownpocket
ThePrivateHealthInsuranceCodeCommitteesubmittedthatinitsviewtheSIScompoundsthe
problemofinaccurateandincompleteinformationprovidedtoconsumersandisofdiminished
valuetoconsumersbecauseoftheinformationitdoesnotcontainTheCommitteesubmitted
thattheSISisinneedofreviewandshouldbereplacedwithanewversionwhichiscompatible
withcurrentpracticesincludingfullandaccuratedisclosureofessentialfacts
 SeeforadetailedexplanationofwhatSISentailandrelevant
brochuresdemonstratingwhatSISlooklikeandhowinformationispresented

ACCC Private Health Insurance Report 2013–14

theSIStopolicyholdersannuallywasconfusingforconsumersandnotofanyrealvalueIt

ofcommunication

onepieceofinformationabouttheirprivatehealthinsuranceHoweverwhilemostconsumers
readwebsitesummariesfewreadtheSIS

Future of the SIS
BasedontheresearchandsubmissionsoutlinedaboveitappearsthattheSISalonedoesnot
providesucientinformationforconsumerstounderstandthekeybenefitsandlimitationsof
theirpoliciesTheconcernshighlightedinsubmissionssuggestaneedforacompletereviewof
theroleoftheSISThisshouldincludeexploringincentivestoencourageconsumerstoreadthe
documentanduseittocompareprivatehealthinsuranceproducts


withflexibilityWherethepresentationofinformationishighlyflexibleandnotsuciently
standardisedconsumersmaybeunabletomakemeaningfulcomparisons
Thereisaneedtoworktowardsaconsistentlevelofinformationandterminologytoassist
consumerunderstandingandawarenessofconditionsassociatedwiththeirprivatehealth
insurancepolicy
 percentofconsumerssurveyeddidnotreadtheSISafterpurchasepercentreadtheSISbutdidnot
understanditandpercentreadandunderstoodtheSIS

ACCC Private Health Insurance Report 2013–14
5. Communicating policy changes
 Requirementstocommunicatepolicychanges
Insurersoftenvarytheirpoliciestochangetheproceduresandbenefitsthatareincludedand
excludedInsurersalsochangethearrangementsthattheyhaveinplacewiththirdpartiesMany
ofthesechangeshavethepotentialtocausedetrimenttopolicy-holders
UnderthePrivateHealthInsuranceActanyproposedchangetoaninsurer’srulesthatisormight
bedetrimentaltotheinterestsofaninsuredconsumermustbecommunicatedinareasonable
timebeforethechangetakeseectInadditioninsurershaveanobligationtoprovidetheir
memberswithanupdatedSISwherepolicychangesaremadeaswellastoprovideacopyof
thecurrentSISonceeverymonths
ThePrivateHealthInsuranceActdoesnotstipulatehowchangestoinsurerrulesaretobe
communicatedwhatamountstodetrimentorwhatisareasonabletimeHoweverthePrivate
HealthInsuranceCodeprovidesadefinitionofsignificantdetrimentalchangestohospital
policybenefits
ThePrivateHealthInsuranceCodestipulatesthatconsumersshouldbeprovidedwithor
dayswrittennoticedependingonthenatureofthechangeWhiletheCodeacknowledgesthat
changestofundhospitalcontractingarrangementscanaectaconsumertheCodedoesnot

Stakeholdersraisedsomeconcernswiththewayinwhichpolicychangesarecommunicated
submittedthatconsumersonlyreceivewritten
communicationtheinformationdoesnotcaterforallliteracylevelsandthatconsumersdonot
understandhowthechangesaecttheircurrentpolicy
OSSANZ)submittedthat
inanumberofinsurersmadechangestopoliciesrelatingtobariatricsurgeryaswellas
orthopaediccardiacandreconstructiveplasticsurgeryproceduresThisforcedmemberstopay
additionalpremiumsforthehighestlevelofcoverorelsetojoinextensivepublichospitalwaiting

thattheirsurgeonsreportedthatpatientsweresurprisedandaggrievedbythesepolicychanges

ThePHIOhasalsonotedthatconsumersarenotalwaysawarethatchangessuchasremoving
coverageforprocedurescanbemadetotheirpolicyasconsumersdonotalwayscarefullyread
policydocumentsthataresenttothembytheirinsurerAlthoughtheonusisontheconsumer
toreadimportantinformationinsurersalsohaveanobligationtoensuretheycommunicate
clearlytoconsumersThiswillencourageconsumersnottooverlookimportantinformationand
aidtheirunderstanding
PHIOreceivedcomplaintsaboutrulechangesintherelevantperiodupfromrulechange
complaintsin–

Themostcommoncomplaintsconcernedchangestohospitalpolicies
wherethenumberofservicescoveredbyapolicywasreducedbyoneormoreservices

asitprovidesanopportunityforconsumerstotransfertoadierentpolicyifheorshewantsto
maintaincoverforabenefitthatwouldotherwisebereducedorremoved

TheACCC’sengagementwithstakeholdersidentifiedthatthereissomeobscurityabout
whethertheobligationtonotifyofchangescoverinstanceswhereaninsurerchanges
itsarrangementwithserviceproviderssuchashospitalsandspecialistsbutthereisno

 PHIOAnnual Report 2013–14p
 Ibid

ACCC Private Health Insurance Report 2013–14
sinceachangeinthearrangementsdoesnotnecessarilycauseachangeinthetermsand
conditionsofthepolicy(namelytheinsurer’srules)suchinformationmaynotnecessarily
needtobecommunicatedunderthePrivateHealthInsuranceActTherewereconcerns
raisedthatsomepracticesthataredistinctfromchangestorulestermsandconditionsmay
neverthelessleadtoout-of-pocketcostsandbedetrimentaltoconsumersandthereforeought
tobecommunicated
Example
TheACCChasbeenmadeawarethataparticularinsurerhasrecentlymadeachangetoits
contractualarrangementswithparticularprovidersThismeantthatitwouldnolongercover
thefullcostofarangeofservicesprovidedbytheproviderandasaresultconsumerswould
receiveareducedbenefitThischangewasnotcommunicatedtopolicyholders
 Policychangesandconsumerprotectionlaws
Insurershaveakeyroleinensuringthatconsumersareinformedaboutchangesthatimpact

andthepracticesofsomeindustryparticipantswhotakeaminimalapproachtocompliance
ItappearsthatmanyinsurersdonotnotifyconsumersofchangesthatfalloutsidethePrivate
HealthInsuranceActorCodeeventhoughthesechangesmaynegativelyimpactconsumers
Thisincludeschangestocontractsbetweeninsurersandhealthprovidersthatmayresultin
higherout-of-pocketcostsforconsumers
CompliancewiththePrivateHealthInsuranceActandortheCodedoesnotofitselfnecessarily
resultincompliancewiththeACLInsomecircumstancesfailingtoinformconsumersabout
policychangescanamounttofalsemisleadingordeceptiveconduct
 Methodsofcommunicatingpolicychanges
Giventheabsenceofanymandatedmethodofcommunicatingpolicychangestocustomers
underthePrivateHealthInsuranceActthemethodisgenerallyatthediscretionoftheinsurer
Insurerscurrentlyhavearangeofprocessesforprovidingsuchinformation

policychangesbyletterandpercentbyemailAsmallnumberofcustomersrecalled
receivingthisinformationthroughtheirSISaphonecallorSMS

toalsocommunicatechangestoinsurerpracticesorarrangementstoclearlyinformconsumers
ofmattersthatmayimpacttheirout-of-pocketcostsorchoicesofhealthcare

communicateanyreductionincoverageinclearandunambiguouslanguagewithoutdiluting
themessagebyinterspersingunrelatedpromotionalmaterial

ACCC Private Health Insurance Report 2013–14
6. Resolving problems with private health
insurance
Itisclearfromstakeholderconsultationthatsomeconsumersexperienceproblemswiththeir
privatehealthinsurersandmakecomplaintsGenerallyconsumerswillnotbeawareofaproblem

makeclaims
Whenconsumersdoexperienceproblemssomeofthemostcommonlyexperiencedrelateto
claimamountsprocessesandinaccurateinformation
Whenthesetypesofproblemsariseresolvingthemcanbedicultandtimeconsuming
ForexampleasoutlinedintheAustralianHandTherapyAssociation’s(AHTA)submission

approvedoreligibleforarebateWhenconsumerscontacttheirinsurertoseekadetermination
onthisissuetheprocessisoftentimeconsuminganddoesnotalwaysimmediatelyresolve

complexitmaytakealongtimeforinsurerstogettheclaimsortedfortheconsumer


largeproportionofcomplaintsarenotlodgedwithPHIOandthismaybebecauseconsumers

Figure AwarenessofPHIO
20% 40% 60% 80%
20% 65% 15%
FromJulytheroleofthePHIOwastransferredtotheCommonwealthOmbudsman

ACCC Private Health Insurance Report 2013–14
7. Other concerns identified by stakeholders

increaseconsumers’out-of-pocketmedicalandotherexpensesandreducetheextentof
consumers’healthcoverThissectionsummariesotherissuesidentifiedbyindustrynotdirectly
relatedtothisyear’sfocusoninformationprovidedtoconsumersWearecarefullyreviewing
theseconcernsinlinewithourCompliance and Enforcement Policy
 Preferredproviders

toconsumersisbeingcompromisedThisisasadirectresultof
• consumersbeingledtobelievethatpreferredprovidersoerabetterserviceoranexclusive
productwhenthisisnotnecessarilythecase
• consumersbeingdirectedtopreferredprovidersbecausetheservicemaybecheaperbut


Questionswereraisedaboutwhetherthepreferredproviderschemeimpactsfreedomofchoice
forconsumers
Severaldentistsexpressedconcernaboutbeingforcedtobecomepreferredprovidersin
ordertoretaintheirpatientbaseTheyalsoadvisedthatinsomesituationswheretheymay
beinterestedinbecomingpreferredproviderssomeinsurerswerenotacceptinganymore
providersandhad‘closedtheirdoors’
Concernswerealsoexpressedaboutpreferredproviderschemeshavingthepotentialto
disadvantagepolicyholdersfromruralremoteareaswhopaythesamepremiumsbutmay
receivelowerbenefitsforcomparableservicesbecausetheyhavelesschoiceresultingingreater
out-of-pocketexpenses
 Fundownedclinics
TheACCCwasadvisedofconcernsaboutclinicswhichareownedandrunbythehealthfund
Thiswasespeciallyconcerningwherethehealthfundredirectscustomerstotheseclinics
Allegationsweremadethatthiscouldrestrictconsumers’freedomofchoicecompromisethe

 Limitedcoverageofservices
Thereareseveralserviceproviderswhobelievethelackofrecognitionoftheirprofessionby
insurersisunwarrantedandinsomecasesanti-competitiveTheincreasingtrendofexclusionary
policiesbyinsurersfurtheraddstothisconcernSpecificconcernsinclude
• ThelackofrecognitionofcounsellorsandpsychotherapistsThemajorityofpsychology
consultationsforwhichrebatesarepaidareconsultationsforcounsellingpsychotherapy
providedbypsychologists
• Privatehealthinsurancerebatesforpsychologyareusuallyavailableonlythroughpremium
healthinsurancepoliciesThislimitsaccesstorebatesforpsychologicaltreatmentstothose
withthemeanstopurchasethesepremiumpolicies
• TheintentionofthePodiatricSurgeryandOtherMattersBillwastoensurethat
admittedprivatepatientsbeingtreatedbyanaccreditedpodiatristareabletoaccess

ACCC Private Health Insurance Report 2013–14
benefitsunderanapplicablebenefitsarrangementforthehospitaltreatmentcostsasthey
wouldifamedicalpractitionerprovidedaprofessionalserviceTheintentionofthebillhasnot
beenfollowedbythemajorityofhealthinsurers’anditisallegedthattherefusalofinsurers’
tofollowthisrepresentsanti-competitivebehaviourThisresultsinalargediscrepancyof
out-of-pocketexpensesbetweenservicesprovidedbypodiatricsurgeonsascomparedto
orthopaedicsurgeons
• Inanumberofinsurersbeganforcingtheirhigher-riskmemberstopayadditional
premiumsforthehighestlevelofcovertoundergopotentiallylife-savingsurgeryincluding
bariatricprocedures
• Theclinicalservicesoforthotistsareoftenunrecognisedbyhealthfundswhilstthesame
servicesbyothertypesofprovidersareextensivelysupportedItisallegedthatthis
distinctionisunjustifiedplacesorthotistsatacompetitivedisadvantageandnegatively
impactsonconsumerswhoaredeniedtherighttoselecttheirpreferredhealthcareprovider
Thisconcernalsoextendstoassessmentandreviews
• Concernswereexpressedaboutthetwodierentmodelsofperfusionists—clinical
andmedicalThishashistoricallycreatedatwotieredanti-competitivesystemwhich
allowsmedicalperfusionists(doctors)tocollectarebatefromtheMBSfortheservice
of‘cardiopulmonarybypass’butnotclinicalperfusionistswhoroutinelyundertakethe
sameservice
• Concernsaboutpoorcoverageforpreventativedentalcarespecificallydietaryadviceand
oralhygieneinstructionwhichareavitalservicethateducatespeopleintheskillsnecessary
tomaintainoralhealth
• Onlyasmallnumberofprivatehealthinsurersociallyrecogniseandproviderebatesfor
credentialeddiabeteseducatorserviceswhichisanessentialserviceformanyconsumers—
moreandmorepeopleareturningtothepublichealthsystemforthisservice
• SomeinsurersdonotpaypsychiatristsforMedicareitemsregardingcaseconferencingwhich
isessentialtothesafeandeectivedischargeofcomplexpatients
 Prostheses
Severalsubmissionshaveadvisedthatthereshouldbeanurgentreviewofthesupplyof
prosthesesintheprivatehealthsystemSeveralallegationsweremadeofanti-competitiveand

privatehospitals
 Costofprivatehealthinsurance
Concernshavebeenexpressedaboutthecontinuedincreaseinpremiumscoupledwithan
increaseinpolicyexclusionsandnorelieffromachangeineligiblerebatesConsumersare
concernedabouttherisingcostmakingprivatehealthinsurancelessaordableAsaresultsome
consumersareeitheroptingoutofprivatehealthinsurancealtogetherorreducingtheirpolicy
coverageandincreasingtheriskofout-of-pocketexpenses
ThestrictrulesaroundtheLHCloadingarecreatingconsiderableexpenseforconsumersand
imposingadisincentivetotakeoutprivatehealthinsurancelaterinlifeThisisparticularlythe
caseforpeoplewhobecomeunemployedareself-employedandthosewithcasualjobswho
mayhavetolapseprivatehealthinsuranceduringhardtimesbecausetheyjustcannotaordit
Asaresultmorepeoplemayberelyingonthepublichealthcaresystemfortheirprocedures
eveniftheyhaveprivatehospitalcoverbecauseitischeaperandortheirpolicyexcludes
theirprocedure

ACCC Private Health Insurance Report 2013–14
Thisissuehasalsobeencoveredinthereportfromtheperspectivethatisaectsconsumer
choiceandcanultimatelyleadtounexpectedout-of-pocketexpenses
 Insurerbehaviourtowardproviders’levelofservice
TheACCCwasadvisedthathealthprovidersfeelpressuredbyinsurerstolimitthelevelof
serviceaccessibletopatientsthroughtheuseof‘takeitorleaveit’contractspreferredprovider
schemesandauditsItisallegedthatinsurershavebeenmarketingincreasedannualbenefit
limitsbutthenimplementingprocessestopressureprovidersintonotproviding‘toomany’
servicesormorecostlyservicesregardlessofpatientneed
 Second-tierdefaultbenefitsystem
Considerableconcernhasbeenexpressedaboutthesecondtierdefaultlegislationinitscurrent
formItisallegedthatthesystemisburdensomeoninsurersanddistortsnormalmarket
dynamicsultimatelyaectingserviceandpushingupthepriceofpremiumsforconsumers
purchasingprivatehealthinsurance
TheACCChasbeenadvisedthattherehasbeenatrendnottonegotiatecontractswithnewday
hospitalswhichisincreasinggapspayablebyconsumers
 Privatepatientsinpublichospitals
Ithasbeenallegedthatpublichospitalsarebecomingincreasinglyactiveinpressuringpatients
tousetheirinsuranceinapublichospitalWhatapparentlyoriginatedasanissueconfinedtoa
smallnumberofhospitalsisnowevolvingintostandardpracticeacrosspublichospitalsThere
aremanyincentivesinplaceforpublichospitalstopersuadepatientstoelecttobetreatedas
privatepatients
 Fundingmodelforinpatientadmissionsand
interstatecoverage
Thesubmissionsexpressedconcernsaboutfundingmodelsbetweeninsurersandhealth
providersthatresultinrestrictionsonprivatehealthinsuranceusageacrossdierentstates
ThiscanforceconsumerstoremainwithoutcareordefaulttothepublicsystemUnderthis
modelinsurersprovideaspecificamountoffundingtohealthprovidersforparticularcare
suchasprivatepsychiatriccarebasedontheirmembers’previoususeoveragivenperiodThe
healthcareprovidercanutilisethefundingforwhateverpurposesolongasitdoesnotaskfor
additionalfundingAsaresultofthisarrangementifaconsumerlivinginthatparticularstate
wherethisfundingagreementhastakenplacewishestoaccessspecialistinterstateservices
theconsumerisinformedthattheycannotdosoandcoverageisonlyprovidedinthestatethey
residein

ACCC Private Health Insurance Report 2013–14
 Frustrationofthetransferprocessfromoneinsurer
toanother
The ACCC has been advised that there are a select number of insurers who appear to be





Itwasalsoallegedthatduetothelackofappropriatelyenforcedlawsgoverningthetransfer
ofconsumersbetweenhealthfundsthecurrenttransferprocesscanbelengthyconfusingand
costlyforconsumersandserveasasignificantbarriertotransferbetweeninsurersItwasfurther
allegedthatthisdynamicisartificiallyconstraininghealthycompetitivemarketbehaviour
Concernshavealsobeenexpressedabouttheuseofcustomerretentionteamsbysomeinsurers
totrytoconvinceconsumersnottoswitchinsurersandremainwiththeircurrentinsurer

ACCC Private Health Insurance Report 2013–14
8. Findings and stakeholder suggestions for
change
TheACCCconsiderstheretobethreekeyconcernsarisingfromitsresearchontheprivate
healthinsuranceindustry
• FirsttherearemarketfailuresduetoasymmetricandimperfectinformationThisleadsto
complexityinprivatehealthinsurancepolicieswhichreduceconsumers’abilitytocompare
policiesandmakeinformedchoicesFurtherconsumershavelimitedinformationabouttheir
likelyfuturehealthneedswhichmayleadtoconsumersunderestimatingtheirfuturemedical
needsandinsteadfocusingontheimmediatecostsandbenefitsofprivatehealthinsurance
• Secondexistingregulatorysettingscanchangeconsumers’incentivesinpurchasingprivate
healthinsuranceanddriveinsurerstooerproductstoprimarilyreduceconsumers’tax
liabilitiesratherthanalsofocussingonconsumers’currentandfuturemedicalneeds(which
arediculttopredict)Asfundsrespondtomarketdemandforaordablepoliciesthereare
increasingpolicylimitationsandexclusionsleadingtohighernumbersofconsumershaving
policieswithlesscoverthantheyexpectedThisleadstoanincreasedriskofconsumers
facingunexpectedout-of-pocketexpensesandgeneraldissatisfactionwiththesystemWe
acceptthatsomeconsumersinpurchasingprivatehealthinsurancemayonlybeseekingto
reducetheirtaxburdenandortheriskoftheLHCloadingHowevertheystillexpectbasic
coverfromtheirpurchase
• 
PrivateHealthInsuranceActandtheCodetheresearchhasrevealedexampleswhere
representationsbyinsurerstoconsumersincludingwhenentwinedwithpolicyvariations
maybeatriskofbreachingtheconsumerlaws
TheACCCenforcescompetitionandconsumerlawitisforotherstoensurethattheregulatory
settingsarefitforpurposeThisreportshowsthoughthatthereisamarketfailureintheprivate
healthinsurancesectorandwhilemanyattemptshavebeenmadetoaddressthisinthepast
moreisneededifconsumersaretohavetheinformationtheyneedtomakeinformedchoices
andallowforeectivecompetitionbetweenhealthinsurers
Asisclearfromthereporttheregulationoftheprivatehealthinsurancesectorinvolvesa
complexarrayoflegislationandco-andself-regulationThisreporthasaimedtohighlight
consumerandstakeholderconcernswiththecurrentsystemitdoesnotprovidearoadmap
forreform(whichcouldbeapproachedbyindustrydrivenchangessuchasthroughthePrivate
HealthInsuranceCode

orbychangestoprivatehealthinsurancelegislation)Nevertheless
stakeholdersrepeatedlymadeanumberofsuggestionsthatshouldbehighlightedTheyinclude
• 
andcomparisontoolwithafocusonbalancingcomparabilityandthoroughnesswithout
overwhelmingconsumersModerntechnologymayhelphere
• IfreformoftheSISistooccurtheACCCwouldrecommendthatanyproposedreformsbe
consumertestedthroughapilotstudybeforebeingfinalisedSuchareviewshouldalsolook
atthebestmeansofprovidingtheSIStoencourageconsumerstoreadit
• Standardisationofterminologyusedinpromotingpoliciesanddescribinglevelsofcoverage
andspecificproceduresForexamplestandardisationaroundtermssuchas‘knowngap’
and‘nogap’policiestopmediumorlowcoverandaconsistentdefinitionofprocedures
suchas‘plasticandreconstructivesurgery’soitisclearwhattheinclusionsandexclusionsof
policiesare
 TheACCCnotesthatthePrivateHealthInsuranceCodeiscurrentlyupforreviewwithaproposed
implementationdateinJulyAsa‘livingcode’thisisthesixthversionsinceitsintroductioninandwill
aimtoincludeinputfromindustryaswellasvariousgovernmentagenciesthatareimpactedbytheCode

ACCC Private Health Insurance Report 2013–14
• 
andexclusions
• ThefunctionalityandpromotionofwwwprivatehealthgovauThisisavaluableand
independentsiteandtheoneplacewhereallprivatehealthinsurancepoliciescanbe
comparedWiththeCommonwealthOmbudsmanrecentlytakingoverresponsibilityforthe
siteaninvestmentinimprovingitsfunctionalitytoenableconsumerstocompareonfactors
beyondpricewouldbebeneficialBenefitswouldalsoflowfrombetterpromotionofthesite
toconsumers
• 
mayaecttheirout-of-pocketexpensesorchoiceofhospitalorpractitionerandhowthese
changesarecommunicatedAswithanychangestotheSIStheACCCwouldrecommend
thatanyreviewshouldalsolookatthemosteectivewaysofcommunicatingthisinformation
andrunapilottotesteectivenesspriortomakingformalchanges
• Consideringhowconsumerscanmoreeasilycalculatetheirlikelyout-of-pocketexpenses
beforecommittingtoapolicyandorprocedureIntelligentinteractivetoolsshouldbe
consideredtoassistwiththisStakeholdersubmissions

raisedsuggestionsthatcouldbe
exploredtoadvancethisgoalincluding
– healthproviderspractitionersprovidingstandardisedcostestimatestoconsumersthat
includespecificinformationsuchasMBSitemnumbersforeachpartoftheprocedure
– healthproviderspractitionersprovidingaverageormaximumratesforallproceduresfor
theMBSitemnumberscovered
– insurersprovidingadetailedandeasilysearchablescheduleofbenefitsandservices
theycoverincludingspecificdetailsaboutMBSitemnumberseligibleaidsappliance
inclusionsandexclusionshealthpractitionerseligibletoprovideservicesandreferral

Role of the ACCC
InsurersandhealthproviderspractitionersaresubjecttotheCCAandneedtounderstandtheir
obligationstoavoidbreachingthelawTheACCChasidentifiedcompetitionandconsumer
issuesinthehealthandmedicalsectorasapriorityareaforinitsCompliance and
Enforcement PolicyWewillconsiderconductbyhealthinsurersthatmaycontravenetheCCAin
linewiththispolicy
TheACCCwillalsoconsiderpreparingappropriateinformationtoempowerconsumersand
increaseawarenesswithintheprivatehealthinsuranceindustry
Industryparticipantsconsumersorrepresentativegroupsmaywishtodrawourattentionto
claimsorpracticesthattheyconsiderparticularlyproblematic
 SeeappendixAforalistofpublicallyavailablesubmissionsorvisithttpsconsultationacccgovauipil
phireport-

ACCC Private Health Insurance Report 2013–14
Appendix A—Research and submissions
Consultationandresearch
TheACCCconsultedwithawiderangeofstakeholdersAninvitationtomakeasubmissionto
thereportwasalsoavailableonourwebsiteTheinvitationletterisprovidedbelow
WereceivedatotalofsubmissionstothereportAlistofpublicsubmissionsisprovided
belowandlinkstoeachsubmissionareavailableonourwebsiteatwwwacccgovauphireport
Wewouldliketothankstakeholdersfortheirtimeinmakingasubmissiontothereport
TheACCCalsoconductedresearchincludingitsownreviewofinsurers’websitesandengaged
ColmarBruntontoconductasurveyexploringtherelationshipbetweenconsumersinformation
provisionandthePHIindustry
Theresearchconsistedof
• 
FromMarchtoAprilaminuteonlinesurveywasconductedwithmembersof
thegeneralpublicwhocurrentlyhavePHIpeopleweresurveyedandsurveys

partsreflectingtheconsumerjourneywhenpurchasingandusingPHI
• Qualitativeonlinefocusgroups

undertakenwithparticipantsrecruitedonthebasisoftheirresponsestotheonlinesurvey
Thegroupswereasfollows
– thosewhohaveexperiencedoccasionswheretheirexpectationswerenotmetafter
accessingtheirPHI
– thosewhocomparedpolicies(includingboththosewhoweresatisfiedandthosewho
experiencedchallenges)eitherviaacomparisonwebsiteordidtheirowncomparisons
Groupsweremixedwherepossibleintermsofparticipants’lengthoftimewithPHItypeofPHI
ageandgenderFieldworkwasconductedontheeveningofThursdayMayatpm

Thefullreportofthisresearchisavailableonourwebsite

ACCC Private Health Insurance Report 2013–14
Invitationletter


ReACCCReporttotheSenateonPHI
TheAustralianCompetitionandConsumerCommission(ACCC)iscommencingpreparation
ofitsannualreporttotheAustralianSenateonanti-competitiveandotherpracticesbyhealth
fundsandprovidersinrelationtoPHIfortheperiodJulytoJune

practicesbyhealthfundsorproviderswhichreducetheextentofhealthcoverforconsumers
andincreasetheirout-of-pocketmedicalorotherexpenses’
TheACCCisinvitingstakeholderstoprovideinputintoanycurrentoremerginganti-competitive
orotherpracticesobservedinthisindustry
TheACCChasalreadyidentifiedthatitwillexamineissuesrelatingtotheleveloftransparency
accuracyandconsistencyofinformationaboutPHIandtheimpactitmayhaveonconsumers
andcompetitionmorebroadlyItisconsideredthatthecomplexityofPHIproductsmayimpact
consumers’abilitytomakeinformeddecisionsaboutPHIandhealthcare

suchasstandardinformationstatementstheACCCisinterestedinunderstandingwhetherthere
areparticularproblemsrelatingtoinformationprovisioninthisindustryThisincludesexamining
theroleofinsurershealthprovidersandintermediariesinassistingconsumerstounderstand
theirpoliciesandmakeinformeddecisionsaboutaccessinghealthservicesthatbestsuits
theirneeds
Consumersmayseek(orbeprovidedwith)adviceorinformationrelatingtoPHIatseveral
stagesforexamplewhen
• comparingchoosingandsigninguptoaPHIpolicy
• seekingtotransferorswitchtoanotherinsurer
• choosingandaccessingheathcareandutilisingbenefitstheyexpecttobeavailableunder
apolicy
• determiningthecostgapsorrebatesthatmaybeapplicableorhavebeenpaidunder
apolicy
• beinginformedofpolicychangesandhowthesemayimpactthepolicyandtheirfutureor
existinghealthcareneeds
• makingacomplaintaboutanaspectoftheirinsurancepolicyorhealthcareoptions
Itisintendedthatthereportwillconsiderwhetherinsurersandotherparticipants’practices
maybeimpactingtheabilityofconsumerstomakeinformeddecisionswhenpurchasingand
comparingPHIoraccessingparticularproductsorservicesundertheirexistingpoliciesThis
includesexaminingwhethercurrentpracticesmayleadtounexpectedcostsforconsumersor
limittheiraccesstoorchoicesofhealthcare
GPOBOX
CanberraACT
MarcusClarkeSt
CanberraACT
tel
fax
wwwacccgovau

ACCC Private Health Insurance Report 2013–14

• whetherconsumersareabletoclearlyunderstand
– theextentofcoverageundertheirownordierentpoliciesand
– theimpactofexclusionsexcessesandgapsthatapplytopolicies
• whethertheprovisionofinformationissucientlycleartransparentandconsistentto
minimisetheriskofunexpectedcostsorreducebarrierstoaccessinghealthcare
Inordertohelpuspreparethisyear’sreportwewouldappreciateyourviewsonthe
followingissues
Private health insurers and policies
• Whatdoyouthinkareconsumers’experiencesinrelationtoaccessingaccurateandcomplete
informationabouttheirexistingpolicyornewpolicies?Pleaseprovidedetails
• 
services?ForexampleunderstandingtheextentandimpactofinclusionsandexclusionsIf
sowhatstepsarebeingtakenorcouldbetakentoimproveconsumerunderstanding?
• IstheresucienttransparencyandorconsistencyregardingthefeaturesofPHIpoliciesto
enableconsumerstomakeinformeddecisionsandchoicesabouttheirhealthcareandbe
abletocomparepolicies?
• Areyouawareofsituationswhereasaresultofadviceorinformationprovidedconsumers
have
– experienceddicultychoosingtherightcoverfortheircircumstances?
– beenmisledaboutthebenefitsandinclusionsoftheirpolicyegthepreferredproviders
includedwhichproceduresarecoveredortheexpectedcost?
– experiencedbillshock?
– beendiscouragedfromswitchingproviders?
Pleaseprovidedetails
• 
accessibletoassistconsumerstobetterunderstandthetermsandconditionsofpolicies?
Third parties, intermediaries and technology
• Arethereanyproblemsarisingfromadviceorinformationprovidedbyhealthprovidersor
intermediariesparticularlyinrelationtoaccesstoservicescoveragecostsorgaps?
• Whatistheroleofnewtechnologiesininformationprovisioninthisindustry?
Policy changes
• 
undertakeanyadditionalstepstoinformconsumersofpolicychanges?
• 
toconsumersegaretheybeingcommunicatedeectively?Ifsohowdoyouthink
communicationcouldbeimproved?
• Areyouawareofspecificexampleswherepolicychangeshavenotbeencommunicatedto
consumersinaclearandtransparentway?Pleaseprovidedetails
Complaints/concerns
• Ifyouareahealthinsurerorconsumerorganisationcouldyouprovideuswithinformation
aboutcomplaintsandorconcernsyoureceiverelatingtoinformationprovisionandadvice
forexample
– 
– maincausesofthesecomplaintsand
• howyouaddressthesecomplaints
• Arethesecomplaintschangingovertimeandifsohow?

ACCC Private Health Insurance Report 2013–14
Other issues
• Anyotherissuesyouwishtoraise
Makingasubmission
Thisyearsubmissionscanbemadeinthefollowingways
• Onlineathttpsconsultationacccgovauipilphireport-or
• 
SubmissionsarewelcomebyFridayJanuary
SimilartolastyearwestronglyencourageyoutoprovideyourresponsesonlineThiswillalso
ensurethatyoucanmanagethesubmissionprocessinrelationtoprivacyandconfidentiality
andwillensurethatyoureceiveanacknowledgementthatyoursubmissionhasbeenreceived
TheACCCwilltablethefinalreportintheSenateandcommunicateitsfindingstostakeholders
andthegeneralcommunityassoonaspracticableaftersubmissionsclose
FormoreinformationontheACCCreporttotheSenateandtoseepreviousreportsandpast
submissionspleasegotowwwacccgovauphireport
phireport@acccgovau
Yourssincerely
KimParker
GeneralManager
AustralianCompetitionandConsumerCommission

ACCC Private Health Insurance Report 2013–14
Listofpubliclyavailablesubmissions
AustralasianCollegeofPodiatricSurgeons


AustralianHandTherapyAssociationInc
AustralianHolisticHealersCounsellorsAssociation
AustralianMedicalAssociation
AustralianOrthoticProstheticAssociation
AustralianSocietyofAnaesthetists
AustralianSocietyofPlasticSurgeonsInc

ConsumersHealthForumofAustralia


HelpMeChoose
Medibank


OptometryAustralia

jointsubmission
PrivateHealthInsuranceCodeofConductCommittee
PrivateHealthInsuranceIntermediariesAssociation
PsychotherapyandCounsellingFederationofAustralia


Serge—self-employeddentist

ACCC Private Health Insurance Report 2013–14
Appendix B—Overview of private health insurance
industry regulatory framework
Legislation Purpose
PrivateHealthInsurance
Private Health Insurance
Act 2007
Thisistheprimarylegislationgoverningtheprivatehealthinsurance
industryandhasthefollowingfunctions
• setsouttherulesgoverningprivatehealthinsurancepolicies
• 
insurancebusiness
• providesincentivesforpeopletohaveprivatehealthinsurance
• detailsthepowersandfunctionsoftheregulatorsintheprivate
healthinsurancesector
InsurerObligations
PrivateHealthInsurance
(HealthBenefits
FundAdministration)





PrivateHealthInsurance
(InsurerObligations)




prudentialstandardisabreachofaCouncil-supervisedobligation
ThismaytriggertheCouncil’senforcementpowers
PrivateHealthInsuranceAdministrationCouncil
PrivateHealthInsurance

TheserulesrelatetothepublicinformationfunctionsofthePHIAC
andtheperiodsofappointmentfortheCommissionerofPrivate

membersoftheCouncil
Private Health Insurance
(Council Administration
Levy) Act 2003
ThisActprovidesfortheMinistertomakerulestospecifytherate
oftheCouncilAdministrationLevyThislevyisimposedoninsurers
tomeetthegeneraladministrationcostsoftheCouncil
Private Health Insurance
(Collapsed Insurer Levy)
Act 2003
Thislevymaybeimposedtomeetacollapsedinsurer’sliabilitiesto
policyholdersthatitisunabletomeetitself
PrivateHealthInsurance
(LevyAdministration)


PrivateHealthInsurance
(CouncilAdministration


AdministrationLevy

ACCC Private Health Insurance Report 2013–14
List of acronyms and definitions
ACCC AustralianCompetitionandConsumerCommission
ACL AustralianConsumerLawScheduletotheCCA
 
AMA AustralianMedicalAssociation
AOPA AustralianOrthoticProstheticAssociation
APHA AustralianPrivateHospitalsAssociation
ASA AustralianSocietyofAnaesthetists
ASPS AustralianSocietyofPlasticSurgeons
Bupa BUPAAustralianHoldings
CCA Competition and Consumer Act 2010 (Cth)
CHF ConsumerHealthForum
 
hirmaa 
ofAustralia
LHC LifetimeHealthCover
MBS MedicareBenefitsSchedule
Medibank MedibankPrivate
OA OptometryAustralia
 
 
PrivateHealth
InsuranceAct
Private Health Insurance Act 2007 (Cth)
PHIAC PrivateHealthInsuranceAdministrationCouncil
PrivateHealth
InsuranceCode
PrivateHealthInsuranceCodeofConduct
PHIIA PrivateHealthInsuranceIntermediariesAssociation
PHIO PrivateHealthInsuranceOmbudsman
 
SIS StandardInformationStatement
Comparatorreport ThecomparatorwebsiteindustryinAustraliaAnACCCreport
Submissions Submissionsreceivedinrelationtothisreport
Quantitativeresearch ConsumersurveyconductedbyColmarBruntonfortheACCC
Qualitativeresearch ConsumerfocusgroupsconductedbyColmarBruntonfortheACCC

ACCC Private Health Insurance Report 2013–14
ACCC contacts

Website: 




ACCCaddresses
Nationaloce
MarcusClarkeStreet
CanberraACT
GPOBox
CanberraACT
Tel
Fax
NewSouthWales
Level
PittStreet
SydneyNSW
GPOBox
SydneyNSW
Tel
Fax
Victoria
LevelTheTower

MelbourneCentral
MelbourneVic
GPOBox
MelbourneVic
Tel
Fax
Queensland
Brisbane
Level
GeorgeStreet
BrisbaneQld
POBox
GeorgeStreetPostShop
BrisbaneQld
Tel
Fax
Townsville
SuiteLevel

–SturtStreet
TownsvilleQld
POBox
TownsvilleQld
Tel
Fax
SouthAustralia
LevelGrenfellStreet
AdelaideSA
GPOBox
AdelaideSA
Tel
Fax
WesternAustralia

AdelaideTerrace
PerthWA
POBox

Tel
Fax
NorthernTerritory
LevelNationalMutualCentre
CavenaghSt

GPOBox

Tel
Fax
Tasmania
Level
CollinsStreet
(CnrCollinsandArgylestreets)
HobartTas
GPOBox
HobartTas
Tel
Fax