Staying on the same health insurance policy for years can be detrimental to both you and the market. For many Australians, comparing health insurance and switching to a new policy seems perplexing and downright scary. A significant number of the 13.5 million insured Australians have been with the same health fund for over ten years. But is sticking with the same policy and insurer really a smart investment?
The Importance of Portability in Health Insurance
The health insurance market is driven by a crucial rule embedded in the Private Health Insurance Act 2007: Portability. This rule applies to all private health insurers in Australia and states that when someone switches to a new health insurance policy, they don’t have to re-serve hospital and extras waiting periods for services they are already covered for.
Why Staying on the Same Policy Can Be Costly
Many products in the market are of poor value, especially those that have been around for a long time.
The Problem with Closed Health Insurance Products
Many people are on closed policies that are no longer available for new customers. Health funds technically can’t kick you off these policies until you cancel them, leading many to remain on outdated health insurance products. These old products often inflate in price every April 1st, but the benefits and rebates stay the same.
Closed products were often designed for an older market, and as the cost of health services like dental, physiotherapy, chiropractic, and massage increases, the benefits of these old policies remain stagnant. Each year, the policy cost goes up, medical treatment costs go up, but the benefits stay the same.
The Release of New Health Insurance Products
Every two to three years, most private health insurers release new products designed to meet the needs of an ever-changing market. These products have new names, new combinations of benefits, and, most importantly, higher benefits that match the inflation of health costs.
It would make more sense for health funds to increase their extras rebates in line with policy cost increases. For example, if the April 1st rate rise for extras is 4.3%, then the extras rebates should increase by 4.3% as well. However, this rarely happens. Instead, many funds leave members on outdated policies until the customer indicates they are unhappy or may switch.
Portability and the ‘Devil You Know’ Mentality
The ‘Devil you know’ mentality is one of the most detrimental approaches to health insurance, particularly among seniors. Many people are afraid to switch from the health fund they have been with for a long time. While recognition offers comfort and security, it’s crucial to ensure you are with the most reputable and best health fund available.
Private Health Insurance has a rule called Community Rating, which ensures all Australians are offered the same health insurance rates regardless of pre-existing health conditions. Coupled with the rule of Portability, it becomes clear that the health insurance market is designed for people to compare health insurance often.
Benefits of Comparing Health Insurance
When you compare health insurance, you stimulate the market and encourage insurers to remain competitive. Here are some benefits of comparing and switching health insurance policies:
- You encourage health funds to create better value products with higher benefits.
- You initiate contact with your previous health fund’s retention team.
- You encourage your previous health fund to be more competitive.
- You ensure you are always on an up-to-date health policy with benefits that match your changing needs.
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*All content and media found on the CheckYourBill Blog are created and published online for informational purposes only. They are not intended to be a substitute for professional medical advice and should not be relied upon as health or personal advice. Always seek the guidance of your doctor or another qualified health professional with any questions you may have regarding your health or a medical condition. Never disregard professional medical advice or delay seeking it because of something you have read on this website. If you think you may have a medical emergency, call your doctor, visit the nearest hospital emergency department, or call emergency services immediately.
