Low priced private health insurance products

Page last updated: 10 January 2018

Low priced products have an important part to play in our community-rated private health insurance system. They can be important for people on fixed incomes, people living in rural and regional areas, and people who want to access private services in public hospitals. Younger people responding to Lifetime Health Cover may purchase low priced products to avoid paying the loading, and retain the option to upgrade their cover at a later date.

Importantly, all private hospital insurance contributes to the Risk Equalisation Pool, which supports community rating and helps to keep private health insurance affordable for all policyholders.

The Private Health Ministerial Advisory Committee considered the role of low priced products, and Deloitte was engaged to model the impact that removing low priced products would have on premiums and the number of people purchasing private health insurance. Deloitte found that removing low priced products would increase premiums and reduce the number of people covered by private health insurance.

Affordability is a major consideration for consumers. The Government is committed to keeping premiums as low as possible. The Government considered how consumers would respond if coverage for certain treatment types was mandated and this then led to significant increases in premiums. Large premium increases due to changing regulation would be unacceptable, so the Government has decided to maintain the current minimum product standards.

On 13 October 2017, the Government announced a package of reforms designed to make private health insurance simpler and more affordable. As part of this package, the Government has announced new reforms to make private health insurance easier to understand, so that people understand what they are and are not covered for. These reforms include:

  • The introduction of Gold, Silver, Bronze and Basic categories, and standard clinical definitions, for all private health insurance products;
  • Upgrading the privatehealth.gov.au website; and
  • Improving the powers and resources of the Private Health Insurance Ombudsman.

More information about the reforms is available on the Department of Health website.