Are consumers really concerned about exclusions?


AMA national president Dr Michael Gannon has called on government to legislate to limit the ability of private health funds to offer policies with exclusions.

Dr Gannon made the call during an interview with ABC Radio National. He is expected to repeat the call for government intervention during this week's address to the National Press Club.

"We've seen a proliferation of junk policies which are worth nothing more than the paper they're written on and are purely designed so that people avoid the tax penalty," said Dr Gannon. 

"The Government has the power to legislate to make sure that they are worthwhile for the people who take them out," he said.

Yet the extent to which consumers are concerned about exclusions remains unclear. 

A survey commissioned by Private Healthcare Australia in 2016 found 84 per cent of the 2,384 respondents were somewhat to very satisfied with their private health insurance.

Of the respondents who were not satisfied, only 15 per cent attributed their dissatisfaction to exclusions. The most significant areas of concern were premiums (72 per cent) and out-of-pocket fees charged by healthcare professionals, including allied health and specialists.

Consumers face the risk of high out-of-pocket fees if prices charged by specialists are higher than the Medicare Benefit Schedule (MBS) rate and there is no gap cover scheme in place.

Private health funds have little control over fees charged unless specialists enter individual agreements to provide ‘no-gap’ or ‘known gap’ services. A report by strategy consulting firm McKinsey, which was commissioned by Private Healthcare Australia, found on average specialists charge around 160 per cent of the MBS rate across hospital based procedures. The report recommended greater transparency in specialist fees.

In its submission to the ongoing parliamentary inquiry into the value and affordability of private health insurance and out-of-pocket medical costs, the AMA presents the anecdotal experience of its members as evidence of consumer concern over exclusions.

The submission does emphasise the importance of the private sector to the sustainability of Australia's health system.

"The private health sector is a large contributor to the system...Not only is it a large contribution, but it is a cost effective one," it says.

The submission also argues against enhanced transparency in specialist fees, unless accompanied by greater transparency in other parts of the system, but for the regulated inclusion of "services that the general consumer would expect to see in a policy."

It is understood funds have always offered basic products with exclusions to meet the specific needs of some consumer groups, including low income earners in rural and regional communities who want their choice of doctor but only have access to a pubic hospital, and people living with chronic conditions who choose to see particular specialists who only work in the public hospital system. Younger people, who might choose products with exclusions because they reflect their limited need, transition to more substantive policies as they move into different life stages.

The sector believes any move to legislate these products off the market would effectively force these consumers into more expensive products or even out of private health insurance altogether.

The number of people taking out private health insurance policies with exclusions jumped significantly following changes to indexation of the rebate that reduced its benefit. However, the rate of growth has slowed in recent years.