Australia's private health insurance industry is flawed and its shortcomings could well be rendering millions of Australians with inadequate protection.
A report from the Australian Competition and Consumer Commission (ACCC) to the Australian Senate, released today, highlights what it refers to as "market failings" in the $21.1 billion industry.
Among the biggest issues is the lack of clarity included in the description of various policies, which creates confusion for policyholders. This can sometimes result in the individual or family simply selecting the cheapest option, without realising that such a decision could leave them worse off or uncovered for certain conditions or events.
To quote the report:
"Imperfect and asymmetric information impede consumers' ability to make choices that are likely in their best interests. These problems mean that consumers experience difficulty in determining the effectiveness of various policies given their uncertain future health needs, which makes it difficult for consumers to choose the appropriate level of cover. This in turn affects competition in the industry."
Here are just some of the difficulties policyholders may experience under the current system:
- What am I covered for? For instance, the definition of 'cardiac' cover varies from one policy or insurer to another
- How much of the cost will I be forced to cover for using a health service?
- Am I still covered for this? Policies can change, and the process often lacks transparency.
- Where do I find the information relevant to my needs, and what questions do I need to ask to find out what I need to know?
Indeed, these 'market failings' are serious issues and certainly don't create a system that consumers can be confident in. This is also something that the ACCC has committed to improving for the sake of those seeking adequate insurance coverage. It has even suggested a "detailed and easily searchable" schedule of benefits and services as a way to combat this issue.
However, it is important to note that providing greater transparency is also in the best interests of the insurers themselves!
Australia's private health insurance industry is dominated by key players such as BUPA, HCF, NIB Holdings Limited (ASX: NHF) and Medibank Private Ltd (ASX: MPL), and I think it's likely that consumers would be more willing to pay up for something they can be more confident in.
