Basic cover is an essential part of the complex private health insurance market, and a product of high value to those who use it. Despite that fact, it has come under fire in the media recently with some industry commentators questioning it's value.
With that in mind, let's have a closer look at why the market needs basic health insurance, and why so many customers value it.
Why basic health insurance is important for consumers
Basic cover isn't for everyone, but for a many it's the most suitable option available. In a recent media release, Dr Rachel David, CEO of Private Healthcare Australia elaborated on the importance of retaining basic cover:
"Historically these products have been predominantly chosen by people in rural and regional Australia who have limited access to private hospitals, but need continuity of specialist care. There is a core group of mostly older people in this category who would be severely disadvantaged should they be forced to upgrade to more expensive products they don't need."
If basic cover were abolished countless customers would be pushed off their insurance.
Basic health insurance is also used by younger people and those on lower incomes who need care, but can't afford premium cover. For such consumers basic health cover is excellent value.
The function of basic health insurance within the market
Another reason why basic health insurance is so important is the role it plays within the market. Consumers are all charged the same premium regardless of their expected claims, and for that reason premiums directly reflect the average claim costs of everyone insured. When one insurer experiences higher than average claim costs funds are transferred from an insurer with lower costs, in order to manage risk. This is known as risk equalisation.
The large number of customers on basic health cover contribute to the risk equalisation pool, and those with lower claim costs (particularly younger customers) are vital in helping balance the risk posed by higher claiming customers.
If basic cover were abolished, countless customers would be pushed off their insurance due to higher costs, and the size and effectiveness of the risk equalisation pool would decrease. This would mean more risk for insurers, higher premiums for customers and less value for all.
The problems that people have with basic health insurance often come as a result of not fully understanding their cover. This is usually due to no fault on the consumer's behalf, but instead due to providers being unclear about what's included.
To make sure you understand every inch of your health insurance policy, and to find out whether or not basic cover is right for you – get in touch with an expert health insurance broker here at HICA.