CONSUMER group Choice is urging the government to simplify health insurance policies after it found nearly half of Australians believed the process of finding a suitable policy too difficult.
Its survey found 44 per cent of policyholders believed comparing policies was "difficult", while the rest was split between "neutral" and "easy".
"Health insurance is so complex that it's become toxic," said Choice's Matt Levey. "People are buying or sticking with policies that they may not understand or may not work for them."
Respondents said it was hard to compare policies side by side, out-of-pocket hospital costs and extras rebates, and they were baffled by the inconsistent terminology and technical language.
A quick look at policies via the websites of insurers, comparison services and a government agency showed even "easy to read" summaries were littered with jargon such as "sub limits", "gap bonuses" and "excess waivers".
Choice is calling on the government, which has green-lighted a cumulative premium increase of 54.6 per cent since 2009, to make policies easier to digest.
"When you're pushing people into it and they're faced with this overwhelming complexity, it could make a grudge purchase a bad one, leading to poor outcomes for everyone," said Mr Levey.
The survey revealed the top reason for buying insurance was extras coverage, which he said was concerning as it might indicate consumer confusion and lack of understanding that it was "mainly a budgeting tool".
An analysis of nearly 20,000 extras policies found that, while premiums continued to rise, the amount members could claim for individual items had failed to keep up.
"For example, in 2016 a typical benefit for an initial physio consult was $36, the same as it was in 2013," said Mr Levey. "Meanwhile, average physio fees increased from $64 to $71."
Rachel David, head of peak body Private Healthcare Australia, said health funds were paying more in claims for extras than ever before, from $2.7 billion in 2008 to $4.8 billion last year.
"Many health funds have gone down the path of contractual arrangements with dental and allied health providers to help address the issue of variable out-of-pocket costs for consumers," she said.
"This enables them to provide consumers with access to things like no-gap preventive dental care, which is very important in terms of individual and public health."
She conceded products had become increasingly complex and explained exclusions were introduced in response to consumer demand for affordable, "bespoke" products.
She agreed with Choice the government-mandated "standard information sheet" (SIS) was "dense" and "hard to read" and needed to be improved.
"I also personally believe more needs to be done to improve health literacy in the community, as there is little point in any of this if consumers have incorrectly assessed their own health needs," she said.
A spokesman for federal Health Minister Greg Hunt said the government would consider changes to the SIS. The government had been trying to reform the system for the past two years, but there had been few changes.
He said the option of introducing a gold, silver and bronze model for categorising policies was part of "reforms being actively considered by the Private Health Ministerial Advisory Committee that will report to the Minister in the second half of the year".
The survey also found 21 per cent planned to decrease or cancel their cover, and the biggest reason was cost.
This would be concerning news to insurers which had seen the proportion of Australians with hospital cover drop from 47.4 per cent in 2015 to 46.6 per cent in December 2016.
It also found that consumers relied heavily on profit-driven comparison services as a source of information. For example 25 per cent used iSelect.
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