Spinal Musings

Why health insurance is a game with loaded dice


The government’s looming private health insurance reforms are a slick marketing gimmick. It will still mean patients making wagers on their future health.

Next April will see the rollout of Federal Government reforms of the private health insurance sector — an attempt to end the bamboozlement of thousands of customers by big corporations, which often sell junk policies worth less than the paper they are printed on.

The government’s plan is a simple one: insurers will be required to code their wares — gold, silver, bronze and basic — depending on what healthcare the policy covers. These tiers are meant to make it easier for customers to know exactly what they are buying before, rather than after, they sign on the dotted line.

In truth, this is nothing more than a marketing gimmick.

During the government’s own consultations, it admitted that consumers found health insurance complex, policies difficult to compare and they did not understand the business of exclusions. As I see it, when a patient discovers that they are not covered for a procedure that will improve their health, their quality of life and longevity, it is a failure in the duty of care of their insurance company to properly attend to their client rather than the fault of the patient. Is it any wonder then that exclusions are a major source of complaints about health insurance? But what are these looming reforms based upon? You guessed it — exclusions. The new categories are defined by their exclusions. They are defined by what they minimally cover.

For instance, ‘basic’ policies (what more honest marketing would dub ‘junk’ policies) only have to include, as a minimum, rehabilitation, hospital psychiatric services and palliative care. The twist is that the system allows patients to pay more to have less excluded versions. In practice, you could have a silver policy, plus joint replacement, plus cataracts, or a bronze policy, plus dental surgery. It still sounds confusing. Basing insurance policies on exclusions also has the financial effect of focusing the health risks of a subset of the population on to that same subset. Rather than spreading the load, the ever-expanding older population will need to pay their own way, while the healthier will pay less. Given the ageing population, this is quite unsustainable.

But there is an even more fundamental problem with exclusion- based policy categorisations. We’re forced to make a guess based upon nothing more than our intuition about what to exclude from our cover. Sadly, we are often wrong. Young people may be convinced of their invincibility and take out basic or bronze cover but will later find themselves in need of a hip replacement, cataract surgery or spinal reconstruction and have to make do on the public waiting list. Not that that’s a bad thing, but when you’ve been paying for insurance, it hardly seems fair that you also have been excluded from private care by that same policy.

In essence, rather than being insured for the costs of our illness and having peace of mind, we are being made to gamble on our health.

When faced with these exclusions first-hand, is it any wonder that patients complain and leave private health altogether? A more equitable and fairer system would be to abolish exclusion- based criteria all together and have all policies cover all conditions. All clients, from young to old, would be subsidising all the health needs of all the others, spreading the risk and making health insurance immeasurably more simple to understand. This would remove the secondary gamble we make with our health when we decide on exclusions to not pay for. If a young person with a silver policy suddenly needed dialysis, for example, they wouldn’t be disappointed to discover they were not covered for it.

Conversations could then be had about effectiveness, rather than costs alone. Patients would pay their insurance premiums to have their treatment in a timely manner with the hospital and the doctor of their choosing, without the heavy cloud of exclusions hanging over their heads. Policies would be simple to understand and could even be differentiated on the basis of a simple excess scheme. As happens in other forms of insurance, cheaper policies would have a larger excess and more expensive policies less.

The government could even encourage health savings accounts specifically to cover these excesses and make those accounts tax free. If they have savings to even partly cover excesses, I imagine patients would be far more accepting if they then had to dig into their pockets. You wouldn’t insure your car’s front panels but not its rear panels, and yet we have come to accept exclusions as the health insurance policy norm.

Health insurance needs a transformation, rather than the paltry reformation currently being offered. To combat the march of people declining to take out insurance and loading up the public health system, we need to remove the health gamble of exclusions that we have come to accept.

To re-establish the confidence that the public has lost in private health insurance, they need to be confident that they are covered, rather than scared that they’re not.

As published in Medical Observer 5 Oct 18