How to tell if your health insurance is a “junk policy”

Ever heard of ‘junk’ health insurance policies?

Every year around April, when health insurers raise their premiums, the cost and value of health insurance is heavily debated in the media, and the phrase ‘junk policy’ gets thrown around.

I’ve never fully understood what it meant or how it could impact me – until now.


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According to Choice, junk policies emerged in response to the ever-more-confusing Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC). They exist because consumers may want to buy a health insurance policy so they can save on tax – regardless of whether the policy is any good.

“These junk products account for around 13% of all policies on the market and while comparison sites and the funds may spruik them as a cheap way of avoiding the Medicare Levy Surcharge or the LHC loading,” Choice reports.

Unfortunately, I believe I’ve inadvertently fallen victim to a junk policy.

I recently had an operation and prior to booking my surgery, I called my health insurer and requested a quote.

I quoted 4 items numbers, and I was advised that my health insurance refund would total $3,960.

Today, I got my refund.

It was $469.

When I called my insurer, fuming and confused as to why my refund was around $3,500 less than expected, the customer service operator offered this explanation:

“You have four item numbers. If you’d had those four procedures on different days, we would pay the full refund. But because they all got grouped into together into one surgery, we’re only able to pay out on one item number.”

Are you for real?!

I tried my best to calmly explain that it would be impossible to have those four elements performed separately. The item numbers related to two procedures each on the left and right side of my abdomen, and my surgeon had to operate on it all at once. He couldn’t very well repair my left abdominal wall, stitch me up, and then the next day open me up and repair the right abdominal wall… then repeat on day 3 an day 4.

It would be medically and physically impossible.

Which means the insurer could never possibly pay out on all 4 item numbers under their current system.

Which makes it a junk policy.

Unfortunately, you don’t tend to find out these things until it’s too late.

For what it’s worth, I have complained and have been informed I’ll have an answer within two weeks.

In the interim, I’m weighing up whether private health insurance even makes sense any more?

Have you made the decision to cancel your PHI? If so, why – and do you have any regrets?

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This wasn’t a junk policy – it was a private health insurer who either made a mistake, didn’t read the invoice from the doctor properly, or who is deliberately trying to avoid paying out. Unfortunately this is increasingly common and insurance companies have little reason to fix it. If you don’t have any satisfaction from your complaint then take it to the Private Health Insurance Ombusman.