The ideal medical insurance product

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Russell Hutchinson wonders what the ideal medical insurance product would look like, and whether we are close to having it.

Monday, September 3rd 2012, 7:17AM 8 Comments

by Russell Hutchinson

For a tiny market we're treated to a good number of insurers and in amongst them are some innovators. We probably have a better medical insurance market than we deserve and it hasn't yet been wrecked by American or Australian levels of wishful thinking and absurdity (boondoggles like requiring cover for baldness, or restricting the ability to underwrite and price risk).

Having said all that we don't yet have the perfect medical product. Consumers rightly see the perfect product as being one that pays for everything and costs nothing. Dialling back just a notch or two from that Nirvana we could sensibly describe what might be a ‘super-premium' medical product - designed shamelessly from the client's perspective:

1.       Unlimited cover levels - I don't want to even think that my cover is limited. So don't scare me by saying that it could be. Even reasonably. When I am sick and scared for my life I want unreasonable levels of care (most private medical providers)

2.       Coverage for any form of care - yes, including doctor's visits, optical, and dental, because why wouldn't I want my cover to meet all the expenses I perceive as ‘medical?' (Southern Cross and others)

3.       Non-Pharmac treatments - because if it's my wife, child, or selfishly: me, I might want the best possible treatment that isn't yet sanctioned by the state (Partners Life and OnePath)

4.       Second opinion services - It's a small talent pool, and we know that people can't be right all the time. The best second opinion may also be from overseas (Sovereign)

5.       Guaranteed Wordings- so you can't wriggle out of what you promised me

6.       Treatment of my choice anywhere in the world - let's be realistic, we're all glad we aren't restricted to cars or mobile phones designed and built here, so this isn't about saving a dollar, this is medical tourism with the aim of using world-best services (international insurers such as William Russell)

All of these cover features are available. The only problem is, you can't buy them all from one provider. In fact, I don't think you can even buy them all from less than three providers. If you did buy them all they total two to four times the typical total cost of a more stripped down major-medical product.

Compromises will have to be made at least some of the time.

This is the order in which I would cut out parts of the cover. The first item on the list is dollar swapping so out it goes. Second, I would cut out treatment overseas. Third, I can live without ‘unlimited' cover levels most limited cover levels are more than adequate. Personally I'd stop there and keep Non-Pharmac, Second-Opinions, and guaranteed wording. Non-Pharmac has the greater ability to meet a catastrophic risk (big cost, but low incidence) but second-opinion has the ability to correct wrong diagnosis across every disorder (which could deliver more ‘disability adjusted life years').

Having said all that, if you can't afford to have those in your private medical you can still buy reasonable coverage without them, with a very big excess, and have a useful back-up to standing in line if you hit a blockage in the state system.

What will you recommend?

Do you have a legal responsibility only to cover ‘everything?' As a contribution to recent debates about a legal responsibility to sell the best cover you should bear in mind three things:

1. You won't see any medical insurer withdraw their products from sale because of perceived limitations; the law cares about the quality of your advice process, not the product.

2. But your competence could be called into question if you aren't aware of the options, or you present a less-good solution as being better than it is.

3. When your clients need pragmatic advice about how to allocate their limit insurance dollar you will be okay provided you are:

a) well informed about the relative merits of coverage,

b) run a good process for selection with your client, and

c) have documented the process to arrive at the plan to be implemented.

But on a wider perspective, because we do actually have quite a good health-care system I think you and your client will be exposed if you haven't adequately covered the income protection requirement before spending on medical.

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