Private health insurance: impossible to compare

One of the clearest areas that require some work is private health insurance. There’s basically no way to compare private health funds in any meaningful way. The problem is that for any particular procedure for which you get a doctor’s referral, your doctor needs to contact the service provider and see if it’s covered by your particular cover. And the service provider can change whether or not they charge through the insurer on a case-by-case basis!

The previous government had a crack at this problem with the Standard Information Statements web site. It wasn’t a bad start, given a complete lack of co-operation from insurers, but it’s really more like financial products “Product Disclosure Statements” and doesn’t go into enough detail. The biggest problem is not knowing what medical problems you’re going to have (this is insurance after all) and so any information about what ailments are covered is kind of pointless. Then again it’s not very useful even if you do focus on specific ailments: my father had a heart bypass, his father had a heart bypass, so perhaps I’ll see what they’re like for that. But again there’s no meaningful information available about what they cover for that procedure, or more importantly what they’ll cover in ten years’ time!

At the moment, comparing private health insurance amounts to comparing stock images used in advertising. Do you feel more like the sporty Medibank Private or the no-nonsense HCF? Or more likely, you’re being sold on components that aren’t actually insurance. The insurance add-ons where you give the insurer some money, and they give it back to you for things you really should be able to budget for, like sneakers, glasses and gym memberships. They’re exploiting human nature to sell people something they don’t need.

Solving private health insurance

This brings me to how I think our government should approach these kinds of difficult consumer information problems. The solution is to ask the industry themselves to solve the problem. Put together a committee of experts in the field to sit on the “consumer” side of the equation, tell the industry to come up with a proposed solution to the information deficit, and give them a deadline. If they don’t come up with something satisfactory, the government imposes a solution on them. Simple!

This carrot/stick approach can be applied to a whole range of industries where there’s an informational imbalance between providers and consumers. It means you don’t preclude innovative solutions, but you get a rocket up complacent industries to work out a way for mere mortals to compare their products in a way that highlights meaningful differences.

But of course, you need a government who, when the industry in question comes back with a wishy-washy meaningless approach, gives them a swift kick up the arse and imposes an genuinely meaningful system on the industry.