Two of Australia's biggest health insurers are cutting the amount they will refund patients for alternative therapies and gym memberships at the same time they are raising the cost of insurance.
For years, insurers have been locked in a price and service war to woo customers by offering to pay a share of the costs of many "extras", including more unconventional treatments such as reiki and Alexander technique.
But now NIB has cut the amount it will pay by $250 - from $400 to $150 - for "healthier lifestyle" benefits under its wellbeing extras cover.
The cuts come as NIB, the country's fourth-biggest health insurer, joins other funds in lifting its premiums on April 1. NIB premiums will rise by an average 6.55 per cent.
As part of its changes, NIB will also cut the annual rebate for natural therapies - including naturopathy and herbalism - by $100, and cap massage claims at $150 a year.
An NIB spokesman said the company regularly reviewed its products and pricing.
"We appreciate that premium changes are never welcomed and have worked hard to keep the premium and product changes to a minimum," the spokesman said. "However, growing healthcare expenses, combined with an increase in benefits paid to customers, continues to place pressure on claims costs for all health funds.
"In the 2014 financial year we paid out a total of $1.2 billion ... This is an increase of 11.9 per cent on the previous year. This equates to us paying back to customers 88¢ in benefits for every $1 contributed in premiums."
NIB's changes follow a similar move by the nation's largest health fund, Medibank Private, in September last year.
In response to "high claims activity" in some areas of south-western Sydney, the company introduced a $100 annual limit on remedial massage.
Depending on their policy, members previously had access of up to $450 in rebates for a group of services including physiotherapy, chiropractic services and natural therapies, including remedial massage.
While members are still able to claim either $450 or $300 on physiotherapy and chiropractic services and $100 on natural therapies, the amount that can be claimed for natural therapies has been cut significantly.
Medibank, which floated on the Australian Securities Exchange last November, will next month increase its premiums by an average of 6.59 per cent.
A Medibank spokeswoman said the changes were made "to ensure our members have access to great cover that is competitive - but also sustainable for Medibank in the long term".
"Medibank is committed to looking after the interests of our members and this includes seeking to ensure that they receive benefits in accordance with our fund rules," the spokeswoman said. "As a result, we regularly check and review the claims that we receive from providers, to ensure they are delivering their services according to our requirements."
But Choice spokesman Tom Godfrey said with premiums rising and refunds falling across the industry, customers should reconsider whether they really needed private health insurance at all, or whether they'd be better cutting the cover and banking the savings.
"Ask yourself why you've got it – is it for tax purposes? What we find is, with the payout ratios diminishing in value in certain things, you're often better just putting money aside without paying the premiums.
"If you're paying more in premiums than you're getting back, you might just want to set up up a savings account."
Private health funds will next month increase their premiums by a weighted industry average of 6.18 per cent, a rise almost three times the rate of inflation, which will add about $200 a year to the cost of the average family policy.
Announcing the increases last month, Health Minister Sussan Ley said total benefits paid to private health insurance members grew by 7.4 per cent in the year to December 2014.
Ms Ley urged people to use the government's comparison website www.privatehealth.gov.au to ensure they were getting the best value.
with Liam Mannix
Have your private health benefits been cut? Contact dharrison@fairfaxmedia.com.au
