Confucius probably summed it up best: "Life is really simple, but we insist on making it complicated." It's been 2,500 years since the Chinese philosopher muttered these words, and yet we perhaps make things more complicated today than ever before.
This is becoming apparent in the world of private health insurance, which for many is becoming too confusing, putting people at risk of under-insurance. No one benefits from a junk policy, which is why we'd like to clear things up a bit.
The latest bulletin from the Commonwealth Ombudsman (CO) identified some health insurance jargon that can cause common confusion. Feeling ready for a test? Here are four terms every policyholder should know:
1) Equivalent policies
Much like fingerprints and snowflakes, no two private health insurance policies are exactly the same. Well, a very rare couple might be, but the vast majority are dissimilar. And yet they may be put under the term "equivalent policies".
This is one of the best barometers for comparing health insurance policies between insurers, as the policies will be very similar. It's useful when you switch insurers to ask for an equivalent policy and let your fund come up with something; however, it's important to remember that the new one may not be exactly identical to the old.
Health funds have different rules and benefits, different exclusions or restrictions; they could have distinct annual benefit limits and they may pay benefits in their own way, too. That means it's important to look at your new policy, either on your own or with an expert, to fully understand how similar and dissimilar your new policy is.
Understanding which benefits are restricted and which aren't is a key part of creating a quality health insurance policy.
2) Restricted benefits
Also known as a minimum benefit or default benefit, restrictions exist in some policies where you, the policyholder, will only have part of your healthcare covered. The remainder of your private hospital admission will be classed as an "out-of-pocket expense", meaning you'll chip in for some of the cost.
Restricted benefits could cover you for being a private patient in a public hospital's shared room. To be in a private room in a private hospital, there will be significant extra costs. However, the other side of the coin is that by restricting certain benefits, you can reduce the cost of your health insurance.
"Cardiac surgery, obstetrics, gastric banding and hip and knee replacements are some of the more commonly restricted items, but potentially any service can be restricted," the CO explained.
Understanding which benefits are restricted and which aren't is a key part of creating a quality health insurance policy. If you're unsure, check with your health fund. You can also ask the private hospital and its doctors for a written quote so you're not left with a surprisingly high bill.
3) Top hospital cover
The word "top" can be misleading. "The top of Mount Barney in Queensland" might sound impressive, but when compared with the summit of Mount Everest, there's around 7,490 metres of difference.
The same goes with your health fund. Top hospital cover only relates to that fund's best policy compared to their basic or essential levels of cover. Another health fund may offer something much more suited to your needs.
What a top policy is, however, is a collection of benefits that won't be restricted or excluded for any services deemed medically necessary by Medicare. The Commonwealth Ombudsman noted some other things to be aware of in terms of expenses.
"To be 'covered' for something doesn't mean that you will have no expenses. There is always the potential that you may have to pay extra if your doctor charges a gap fee or, less commonly, if you are admitted to a hospital which doesn't have an agreement with your health insurer."
4) Basic hospital cover
It's all too tempting to go for a basic hospital policy and think that you will be covered for every medical emergency. However, it's a common misconception that leads people to think they have coverage when they in fact don't.
The CO says that some basic policies can exclude almost any medical service. The worst basic hospital policies have fewer than 10 benefits to their name, meaning you could be at risk of a big bill should you need some pretty basic-sounding services, such as:
- Skin cancer surgery and treatment
- Heart-related treatments
- Colonoscopies, gastroscopies or other diagnostic procedures
- Nerve repair
If in doubt, speak with your insurer, or go over these things with your health insurance broker when shopping for a policy. The last thing you'll want is to be out of pocket for something you thought your great-sounding basic policy covered.
Challenge us to the jargon test
With many policyholders looking to switch health insurers before the April 1 premium-increase deadline, it puts the pressure on you to find a policy in time. However, don't let this lead you to an unsuitable level of cover.
HICA is a team of health insurance professionals with the expertise and network to find a policy that works for you. We can clear up the jargon and work to your needs – and, what's more, our services are free for individual, couple and family health insurance shoppers.
Seen some health insurance jargon that you need explaining? Give us a call on 1300 44 22 01 and put us to the test. We're sure we can help you out.