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How to Switch Health Insurance

Jonathan January 30th, 2015 0 comments

Over half of Australians have private health cover for general treatments such as dental care and other health services. Consumers have the option to shop around among multiple private health funds to find coverage that meets their needs.

The key to consumer choice in the health market is the portability system. According to the Australian government?s Private Health Insurance Administration Council, portability is ?the mechanism that allows consumers to move from one insurer to another (or within products in the same insurer) without having to re-serve waiting periods.?

You must understand the portability system in Australia so you will know your rights when switching to a new provider.

Why Switch Health Insurance Plans?

Consumers switch health plans for many reasons. You may choose to switch to a different health insurance fund because:

  • Your lifestyle changes. Getting married, divorced or having a baby changes the types of cover you need. You may switch to a different health fund or to a different policy offered by the same health fund.
  • You want different types of cover.  Different health funds have different levels of Hospital cover. There are lots of variations regarding gap fees; types of hospital services; and amounts of excess fees or co-payments. If you expect to require more care, you may want a policy that pays for more. If you want more certainty regarding medical costs, you may switch to a policy with lower gap fees.  Your cover needs can change and your policy should change with them.
  • You want to lower costs. Some health funds offer lower premiums than others. You may be able to reduce costs while maintaining a similar level of cover or while dropping unnecessary cover.
  • You are unhappy with the health fund you have. Your health fund may provide poor customer service. It is your right to shop for a company that deserves your business.

How To Re-Evaluate Your Coverage Needs

Review your health insurance coverage needs and the available health funds at least once per year to ensure your coverage is right for you.  It is important to review both your hospital coverage and your extras coverage.

Your hospital health fund and your general treatment policies coverage do not need to be with the same insurer. Evaluate each fund independently to secure coverage that is appropriate for your current lifestyle stage and health needs. Consider:

  • Do you want to pay more in premiums for lower gap fees and co-pays in order to avoid unexpected costs?
  • What types of treatments are you interested in receiving? Health funds for general care can include coverage for a myriad of medical needs including dental treatment; orthodontic services; optical services; physiotherapy; occupational therapy; chiropractic care; mental health services; and home nursing care. Shop for a policy that offers coverages for the services you and your family need.
  • Have you had any recent lifestyle changes or are you expecting any big changes? Although you do not have to re-serve waiting periods for hospital coverage, there is a waiting period if you add on services you did not have before. Be sure to covered for needed services before you actually require care. For example, a 12-month waiting period for pregnancy coverage means you need to buy obstetrics coverage before you fall pregnant in order for your private insurer to pay for prenatal care and birth.

What is a Waiting Period and How Does It Affect Your Ability to Switch Funds?

When you purchase insurance for the first time after having no coverage, you must wait before becoming eligible for benefits. The purpose of waiting periods is to prevent people from waiting until they get sick to buy private health coverage.

There are different waiting periods for different benefits types.A 12-month waiting period generally applies to private pregnancy and birth services while many Extras services have waiting periods of several months.

If insurers required you to re-serve a waiting period when switching to a new fund, most people would not want to switch. You would be essentially locked in to your provider or lose benefits for several months. Australia law protects you and ensures this does not occur by limiting an insurer?s ability to impose new waiting periods when you switch insurance providers.  The laws protecting consumer?s right to switch funds are called portability rules.

What Does Portability Mean?

According to the Private Health Insurance Administration Council, portability is ?the process that enables competitive movement of consumers seeking the best value product for their particular circumstances.?

The Private Health Insurance Act 2007 established special portability rules to protect consumers who want to change health funds. Portability rules apply to hospital coverage ONLY and prohibit health insurers from imposing new waiting periods when consumers switch to a new hospital coverage fund.

Without portability protections, having to re-serve a waiting period would impose a significant barrier preventing consumers from moving from one insurance fund to another.

What Rights Do You Have When Switching Health Insurance?

When switching to a new hospital policy, you are not required to re-serve a waiting period that you previously completed. You may switch to a new policy with no waiting period for equivalent cover as long as:

  • There is no lengthy break in coverage. No more than seven days must pass between the time when you were insured by your old policy and the time when you become insured by your new policy.
  • Your paid your premiums in full for your old policy up through the time your new coverage became active.
  • Your old policy complied with all Australian laws related to private health insurance cover for hospital services. The policy must be provided by a registered health insurer and fulfill obligations for insurers set forth in the Private Health Insurance Act 2007.

The guarantee of coverage with no waiting period ensures you will get the same level of benefits you had under your old policy without having to wait months to become eligible. If your new policy has expanded coverage, there will be a waiting period before you are eligible for the higher level of benefits.

How Does Switching Health Plans Affect Hospital Cover?

Portability rules protect your right to switch funds or providers for hospital cover. Provided you switch from a complying policy and there is no coverage gap, you can avoid waiting periods for a comparable level of coverage. Insurers are also prohibited from imposing benefit limitation periods. Benefit limitations periods are a set amount of time when new members receive only minimal coverage for specific types of hospital care.

Portability rules only apply to hospital treatment and to substitute hospital treatment, not general treatment. If you new policy has higher levels of coverage, you must serve the required waiting period before you are eligible for the expanded benefits.

If your new policy has a lower co-payment or excess than your old coverage, you will not become eligible for these reduced payments immediately.  The insurer can impose a waiting period up to the prescribed maximum under the law before you are eligible for the new lower copayments or excesses.

If your waiting period with your prior fund was not completed, you must see out the waiting period with your new insurer. Portability rules require that your new insurer recognises the time you have already spent waiting for benefits to kick in. If you were subject to a 12-month waiting period for a pre-existing condition and you have already been waiting for six of the 12 months, your waiting period will not restart when you switch health fund coverage. You will finish the remaining six months of your waiting period with your new insurer.

How Does Switching Heath Plans Affect Extras Coverage?

Portability rules protect consumers only when a change is made to hospital cover. If you switch to a new policy for extras cover, you may need to re-serve the entire waiting period before you become eligible for benefits. However, some health insurance funds will voluntarily give you immediate coverage for extras benefits that you had under your previous health fund. You need to ask your insurer if this option is available and confirm whether there are any waiting periods for extras before you switch to a new insurance provider.

The waiting period for extras cover may vary slightly among different insurers. Examples of typical waiting periods may include:

  • Two months for general dental services.
  • Two months for physiotherapy
  • Six months for eyeglasses or contact lenses
  • Twelve months for pregnancy/birth services
  • One year for bridges, crowns and other major dental procedures
  • Twelve months for orthodontic treatment

If you add new extras or if your insurer will not waive the waiting period, you must wait the full time before becoming eligible for benefits under your new health fund.

How Does Switching To a New Fund Affect Benefits Limitation Periods?

Some insurers have a benefits limitation period in which cover for certain services is restricted for a set period of time.If your new fund has a benefits limitation period, this limitations period will not apply if you are switching from an existing fund. You will immediately become eligible for full benefits available as soon as you switch to your new insurer.

How to Avoid Paying for Two Funds Simultaneously

If more than seven days pass between the time your old policy coverage ends and you become covered by your new fund, you lose portability protections and waiting periods may apply before you are eligible for benefits.  Premiums for your old policy must also be paid in full in order for you to be eligible for portability protections.

To avoid paying for two funds simultaneously, ask your old fund to cancel your coverage. The cancellation date should be the same date as your new cover starts. Request a ?clearance certificate? from your old insurer when canceling the old fund and provide that certificate to your new fund. Be sure to cancel any automatic deductions from your bank account or credit card if you were electronically paying for insurance.

How Switching Health Plans Affects Lifetime Health Coverage

Lifetime Health Cover is intended to encourage Australians to purchase hospital cover early in life and maintain continuous coverage. If you do not purchase coverage by age 30, you will pay a two percent loading fee on top of premiums.

Your Lifetime Health Cover status should not be affected by switching to a different health fund as long as you maintain hospital coverage. If you allow coverage to lapse, you may be required to pay loading on top of premiums.

There are exceptions. You are permitted to be without hospital coverage for up to 1094 days during your lifetime without your load being affected. Once your days of absence have been used up, you will pay a two percent loading when you purchase new hospital cover. For each year that you are without coverage, your loading will increase.

Cooling Off Periods When Switching Health Plans

When you change coverage, the new insurer must provide details of your policy in writing. You have a 30-day period to change your mind after first joining a new health fund. If you have not made a claim for benefits during this time and you decide you do not want to keep the new cover, you will be entitled to a refund of any contributions that you have paid. This 30-day period is referred to as a ?cooling-off? period.

Disclaimer: The above information is correct and current at the time of publication.

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