Health insurance reforms explained and what they mean for your health cover

By Ella Rossanis

11 minutes

06 January 2020

Young girl confused looking at laptop

On 1 April 2020, the Australian Government's reforms to health insurance officially kicked in. Here’s a few things you should know.

At the end of 2017, the Australian Government announced plans to shake up the private health insurance (PHI) industry for the first time in 20 years with some changes designed to make health insurance a little easier to grasp, and a little easier on the wallet too.

There are a few key changes—some optional, some not.

While some health funds, like HBF, have already started to make some changes, all health funds have until 1 April 2020 to fully align to the reforms.

This article will help you understand what's changing, why the government thinks that change is important, and what that change means for your health insurance.

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Reform #1: Simplifying levels of Hospital cover – Compulsory

The government has introduced a new tiered system for naming and categorising hospital insurance products: The Gold, Silver, Bronze and Basic system.

Each tier has a minimum list of categories of hospital treatments and services that they must include (e.g. for a policy to be called “Gold”, it must cover all 38 categories of treatments and services). This means that as well as renaming their products, some health funds may choose to make changes to their products to match these tiers.

Health funds can also choose to go above and beyond the government’s mandated list by including more categories in their products than the bare minimum required. If so, there is the option to add a “plus” or “+” after the name of the cover, i.e. “Bronze Hospital Plus”, to show that the product includes more than the minimum.

*Tip: As the highest tier of cover, “Gold” includes every hospital treatment and service under the clinical categories, which means that “Gold Plus” cover cannot exist.

Why the government thinks it’s important: Until now, there has been no consistency across health funds with the way hospital policies—as well as the services and treatments within them—have been named and categorised, making it pretty tough for customers to compare funds and choose the right one for them. A structured, tiered system with consistent names, and a standard minimum list of included categories (as well as standardised definitions for hospital treatments and services - see Reform #2) will make it easier for customer to compare the covers they need. However, it’s important to note that not all health covers in the market will be the same.

What we’re doing to address it: Since the government has given us until April 2020 to comply with the reforms, we’re taking it one step at a time to make sure we get it right. The changes we’ve made so far include having all Hospital cover options for sale aligned to the new tiered system.

What it means for your cover: You may have received a letter or email from us outlining the impact of these changes on your cover. It may be something as simple as a name change, or some differences to the list of services included and excluded in your cover.

*Tip: Once you are switched over to the new tiered system, you may find you are covered for too much or too little. In this case, you have the option to upgrade or downgrade your cover. Contact us now so we can help you identify the cover that best suits your health needs and explain any waiting periods that may apply.

Reform #2: Standardising categories of in-hospital treatment – Compulsory

The government has introduced a new standardised way of naming and categorising in-hospital treatments and services, which all health funds must use.

*Tip: “Clinical categories” is the term the government has given to the broad categories of treatments and services outlined in your policy. “Clinical definitions” are the specific hospital treatments and services within each category.

Why the government thinks it’s important: Every health fund currently has their own way of naming the broad hospital treatment categories and organising the services and treatments that are covered within them. For example, what we call the “Cardiac related services” category, and the services we include under it might be referred to as “Heart Procedures” by another health fund, with an entirely different list of included services. By standardising the categories and definitions of hospital treatments and services across all health funds, the hope is to clear up any confusion customers may have around what is and isn’t covered in each category. This means all services under the clinical category must be included or excluded. As you can no longer have partial coverage, many health funds will have to make changes to their existing products in order to align.

What we’re doing: We have already started to update our hospital treatment categories and the services listed within them to meet the government’s standard list of clinical categories and definitions. From 1 January 2020, our hospital products will use the updated terminology and reflect the new hospital treatment categories. By April 2020, we’ll be using updated terminology and categorisation across the board: on our website, in your membership guide, on the phone when you talk to us, and everywhere else.

What it means for your cover: We’ll be sending you a letter or email outlining the effects this change will have on your cover. It may be something as simple as the terminology used, a change to the list of services included and excluded in your cover, or a transfer to a new cover. Either way, we’ll let you know well in advance of any changes. This reform is one of the more confusing ones, so please contact us if you need a little more clarity.

Reform #3: Removing some natural therapies from Extras cover – Compulsory

Private health funds will no longer be able to offer benefits for the following natural therapies: Aromatherapy, Bowen therapy, Buteyko, Feldenkrais, Herbalism, Homeopathy, Iridology, Kinesiology, Naturopathy, Pilates, Reflexology, Rolfing, Shiatsu, Tai chi and Yoga.

*Tip: Natural Therapies (we also refer to them as “Alternative Therapies”) are holistic treatments, designed to help stimulate the body’s self-healing response through physical and emotional wellbeing, instead of conventional western drugs or medication.

Why the government thinks it’s important: After a review conducted by The National Health and Medical Research Council (NHMRC) to examine the effectiveness, safety and cost efficiency of 17 natural therapies, “no clear evidence demonstrating the efficacy of the listed natural therapies” was found. By removing them from private health insurance cover, the idea is to make sure that people are seeking medical treatments that are proven to be effective.

What we’re doing: We’ve already made this change, and understand it might be difficult for some of our members who regularly claim for natural therapies, but there is a positive side. We’re always on the lookout for ways to keep our annual rate increase as low as we possibly can. Removing these natural therapies is just one of the reasons why, this year, we have been able to deliver the lowest premium increase of any health fund nationally­

RELATED: Why do health insurance premiums go up every year?

What it means for your cover: You’ll no longer be able to claim benefits for the natural therapies mentioned above (and you won’t be able to find another health fund where you can). We still cover Acupuncture, Traditional Chinese Medicine, Hypnotherapy, and Remedial Massage so make sure to check your Extras cover to see what’s included.

Reform #4: Increasing maximum Hospital cover excess levels – Optional

Health funds can now increase the maximum excess they offer from $500 to $750 for singles and single parents, and from $1000 to $1500 for families and couples.

*Tip: An excess is the amount you agree to pay to cover hospital costs, before your health insurance kicks in. You agree on this amount when you buy your insurance but you’ll only pay it IF you need to be admitted to hospital. The higher your excess, the lower your premiums, which is why most members choose to pay one. The trade-off is that if you do end up in hospital­, and you have chosen a high excess to lower your premiums, you’ll need to pay it upfront.

Why the government thinks it’s important: Offering price-conscious customers more excess choices will make it easier to find a health fund and level of cover that suits them.

What we’re doing: 4 of our 5 Hospital cover options for sale now have the maximum excess levels available.

What it means for your cover: You can now reduce your premium by increasing your excess (if your Hospital cover includes that option).

Reform #5: Offering discounts for young Australians – Optional

Health funds can now offer 18 to 29-year-olds up to 10% off their hospital cover.

Why the government thinks it’s important: A youth discount will make Hospital cover more affordable and accessible to young Australians.

What we’re doing: We’re looking into the impact a change like this would have on all our members, not just our younger ones. We will never charge existing members higher premiums to offset the cost of a discount for younger members. We want customers under 30 to choose HBF because it’s the right cover for them, not because of any gimmick. These are just a couple of our considerations, but you can be sure that if we decide to offer this discount, it will be in a way that will benefit everyone.

What it means for your cover: Nothing at the moment. We’ll let you know if we decide to go ahead with this change. In the meantime, we encourage all our members to compare the price of their cover, and the services it includes, to other options out there. Discount or no discount, make sure your cover—and the value it offers—is right for you and your health needs.

Reform #6: Providing travel and accommodation benefits to rural members as part of their Hospital cover – Optional

Travel and Accommodation benefits apply when a member must travel a long way from home to access the medical or hospital treatment they need. In the past, most health funds would only cover these costs (like petrol, train and bus tickets or even airfares as well as hotel or motel accommodation) on the highest level of Extras cover. They can now be included in Hospital cover too.

Why the government thinks it’s important: By making Travel and Accommodation benefits claimable under Hospital insurance, the idea is to make Hospital cover more attractive for Australians living in remote areas.

What we’re doing: We’re looking into the impact a change like this would have on all our members, not just those living in rural or remote areas. We’re always exploring and reviewing our cover options, looking for ways to offer more value. If there’s a change that can benefit everyone, you can be sure that we’ll make it.

*Tip: Did you know that we already cover the cost of accommodation and meals for a loved one staying with you while you’re in hospital? If you have HBF Hospital cover, you’ll be able to claim for the cost of a hospital boarder as long as they are integral in managing your condition, the service you’re receiving is included on your cover, and hospital boarders are an agreed service with your chosen hospital1.

What it means for your cover: Again, nothing at the moment. We’ll let you know if we decide to go ahead with this change.

Other changes you should know about

There are a couple of other reforms that have already come into effect.

If your Hospital cover doesn’t offer full cover for in-hospital mental health treatment, you can now make a one-time upgrade to one that does without having to serve a waiting period for this service. This change was made in April 2018 and means that anyone who needs immediate psychiatric care can get it. Please refer to our product sheets for more information.

The government is working on ways to reduce the cost of prosthetics (like hips and joints) since they account for 14% of hospital benefits paid each year. This initiative will result in savings to health funds over the course of a 4-year period, which in turn will be passed onto customers through lower premium increases. This change came into effect in February 2018 and is ongoing through to 2021.

The Private Health Insurance Ombudsman (PHIO) was given more power throughout 2019, allowing them to conduct more-thorough investigations to solve more consumer complaints. Changes will allow the ombudsman to conduct inspections, audits and have full access to insurer's records and supplementary records such as phone calls, emails and letters. The ombudsman will receive additional staff to increase their capacity to investigate complaints.

One final note to our members

Change is happening, but our mission at HBF remains the same: to deliver quality health insurance at an affordable price. As a not-for-profit health fund, we have no shareholders to pay. This means that the only people we answer to are our members, and we'll always put you first.

The deadline for conforming to the reforms is April 1, 2020. But at HBF, all of our cover options are already in full compliance with the reforms. Take a look at our product suite and if you like what you see, give us a call.

Remember that we are just a phone call away and are always happy to answer any questions you may have, reforms or otherwise.

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