Five years ago this month it became mandatory for private health insurance providers to categorise their policies into one of four tiers.
The reform aimed to simplify the process of comparing different products that were available to the public.
However, a recent survey suggests many Australians are still confused about the different tiers. This confusion about health insurance is something GPs may need to be prepared to discuss with patients in the case it impacts care.
A survey carried out by Australian financial comparison platform www.money.com.au found most Australians still did not fully understand how the tiered system worked.
The findings showed more than half of Australians with private health insurance (56%) admitted they only somewhat understood the Basic, Bronze, Silver and Gold product tiers.
A smaller portion (13%) said the product tier system was just as confusing as the old insurer-specific policies.
Under the tiered system each category has a minimum set of hospital treatments included.
All Silver and Gold policies must cover heart and vascular system conditions, while Bronze policies do not.
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Gold hospital cover offers the highest level of protection and therefore typically has higher premiums, while Basic includes only limited cover and has lower premiums.
Each tier must cover every treatment listed under that tier.
Money.com.au’s General Manager of Health Insurance Chris Whitelaw said the system was not delivering the simplicity expected from it.
“People are paying thousands in premiums each year without really knowing the inclusions and exclusions of their hospital cover,” he said.
“The feedback we’re getting is that the tier system feels like new jargon layered over old complexity,” Mr Whitelaw said.
“In particular, there’s a lot of confusion around what additional coverage ‘Plus’ policies include, as this can vary between health funds, whereas core tiers have strict minimum requirements for hospital treatment coverage.”
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If a policy meets the minimum requirements of a tier but includes additional coverage, it can be called a ‘Plus’ policy, for example, Bronze Plus or Silver Plus.
These policies are not standardised across health funds and can vary significantly in their coverage and features.
Mr Whitelaw said the comparison website saw more policyholders with specific health needs wanting to switch providers but being unsure whether another ‘Plus’ policy in the same tier included all the benefits they were previously getting.
Some clinical categories under Basic, Bronze, and Silver policies can be either ‘restricted’ or ‘unrestricted’, which determines how much an insurer will pay for hospital costs like accommodation, theatre fees, and prostheses, but not doctors’ fees.
Gold hospital policies must include unrestricted cover for all clinical categories.
Millennials lead in understanding health insurance tiers, while Gen X struggles the most. The survey found only a third of Australians with health cover said they easily understood the tier system.
Millennials reported the highest level of understanding (36%), followed by baby boomers (30%), Gen Z (29%) with Gen X having the lowest level of understanding (26%).
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RACGP Vice President and WA Chair Ramya Raman said while GPs could only offer generic information to their patients with private health coverage in mind, a patient’s understanding of their coverage may form part of the basis of such conversations.
“Often as GPs we will discuss with patients the referral pathways that are initiated and we will have a discussion with patients about what their preference is,” she said.
“It can sometimes have an impact on some of the options offered or the discussions had.”
The peak representative body for the private health insurance industry Private Healthcare Australia has expressed its own frustrations with the tiered system.
In December 2024 statement it said the tiered system needed urgent review, labelling it unsustainable for health funds.
“Under the tiering system, Gold health insurance covers the most expensive treatments in our health system, including obstetrics, psychiatry, joint replacement surgery, weight loss surgery and other complex procedures,” the statement read.
“Confining the most expensive medical treatments to the Gold tier attracts people who know they are going to claim. This creates a high-risk pool where the cost of care compounds and rises quickly.”
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