What you need to know

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In what has been described as a rort, health funds have been paying prices for medical devices that are up to five times higher than prices paid by public hospitals.

This has helped to drive up premiums.

By cutting these costs, it should become cheaper for patients who need things like pacemakers, implanted defibrillators, hip and knee implants.

Health funds have also promised to pass on savings to consumers overall and the government has strengthened the powers of the Private Health Insurance Ombudsman to ensure this happens.

Private Healthcare Australia chief executive Dr Rachel David told The Daily Telegraph that the $1 billion in savings over four years was expected to cut premium increases by about 1 per cent a year, according to its calculations.

Making it easier to choose

Comparing policies can be very difficult and while websites like iSelect and Compare the Market claim to do this, they get commissions from health funds and don’t always show all the options.

As part of the changes, the privatehealth.gov.au website will be upgraded to suggest policies from every health fund. People will be asked what they want to be covered for and what their income is.

More clarity about what’s covered

Policies will be classified as Gold, Silver, Bronze or Basic and each of these will have to meet certain coverage standards.

The minimum requirements will be set in 2017—18.

‘Junk policies’ will remain

Basic entry policies that only cover treatment in a public hospital will continue as people on these policies may have been forced to pay up to 16 per cent more to move up to the next level of cover.

The Australian Medical Association has raised concerns about so-called ‘junk policies’ because they don’t cover many illnesses.

For example, people may have paid premiums for many years, only to discover things like hip or knee replacements are not covered under their policy.

— With AAP