Health insurance policies

You’ll want to choose your first health insurer carefully, as this decision may be a life-long one. Every time you sign up with a health insurer, you need to declare all pre-existing medical conditions. Fail to disclose something and you’re on your own.

If the health condition is assessed low risk, your insurer may provide cover. It also may apply a stand-down period – for example, some Nib and Southern Cross plans offer cover for lower-risk pre-existing conditions if you stick with the policy for at least three years.

However, if you have high-risk medical conditions, your new insurer will likely exclude cover for them. When switching providers, you’ll need to consider if the benefits of the new policy outweigh any limitations the new insurer will apply – these limits can be costly.

In a case handled by Financial Services Complaints (FSCL), a man’s claim for treatment for an injured thumb was declined after he switched insurer. The man and his partner had been with their previous insurer for 16 years.

According to the FSCL case file, the couple’s insurer reviewed the man’s full medical records and refused to cover any claims relating to the affected hand as the pain was due to a pre-existing condition.

Across the Tasman, regulations enable Australians to take their pre-existing conditions cover with them when they switch providers. Insurance companies can only exclude pre-dated illnesses and injuries for a maximum of a year.

Insurance specialist Jeremy Holmes, of Melville Jessup Weaver, said regulations to keep your pre-existing conditions cover when you switch would affect the cost of premiums. More claims would be approved, and insurers would pass on these extra costs. “All policyholders would end up paying more.”

Costs to Aussie consumers are offset to some extent by rebates and tax incentives, designed to encourage uptake of private medical insurance.

One notable difference between the plans we looked at is the limit an insurer will pay for a set type of claim within a year. For example, Accuro’s SmartCare, Nib’s Standard and the Partners Life and UniMed plans will pay up to $300,000 for surgical treatment, whereas AIA’s Real Health and Southern Cross’ Wellbeing Starter allow up to $500,000 – and Sovereign unlimited surgery.

However, a limit of $300,000 should suffice as few operations cost more than $150,000. We looked at the average cost of the five most common procedures paid out by Southern Cross:

1. Knee replacement: $22,000 to $30,000
2. Hip replacement: $21,000 to $28,000
3. Colonoscopy: $2000 to $3000
4. Skin surgery: $200 to $2500
5. Cataract removal: $3000 to $5000

Premium health insurance plans offer benefits such as extra travel and accommodation expenses or funeral costs. But these expenses aren’t as frequently claimed as surgical procedures, diagnostic tests or consultations – so consider if the extra cost of these plans is a better choice than squirreling the extra money away for a rainy day.

Health insurance companies must belong to a financial dispute resolution scheme.

All the companies in our survey are members of the Insurance & Financial Services Ombudsman scheme.

If you have a dispute that you can’t resolve with your insurer, you can take the case to the ombudsman. However, the complaint must be “deadlocked” with the company before you can go to the ombudsman.

The scheme can look at complaints about:

• policy and contract interpretations
• financial advice or services provided by the insurer
• the payout offered.

The ombudsman can’t look at complaints about premiums, excesses, underwriting decisions or claims above $200,000.