Hospital insurance waiting periods - charging premiums for no cover!

After six years since dropping private health insurance (PHI), I considered re-joining. However, I’m amazed by the practices PHI companies expect new/returning customers to accept. The worst is the practice of ‘waiting periods’: typicall two months before a new client may claim anything. That is, two-months’ premiums for no cover; so really a 17% (2/12) joining fee with a delay on actual membership. And if you are subject to the Lifetime Health Cover (LHC) punishment for not having maintained continuous health cover, the LHC still applies to your waiting period premium; meaning the government taxes you for buying something you can’t actually use!
Sure, it’s fair and reasonable that pre-existing conditions are subject to a waiting time (of up to two years); but unknown or new conditions? It’s a wonder car and home insurances haven’t implemented ‘waiting periods’ for new covers as well. What’s that - you’ve just bought your first decent car? Great, we’ll take your annual premium, but since you haven’t had comprehensive cover before, your car is not covered for anything for the first two months!

Well imagine what private health insurance would be like if there was no community rating and the insurers could base your premium on risk of claims like pretty much all other insurance.

Taking up health insurance again after dropping it would be seen as a sure sign a new customer was expecting to claim on it very soon.

They do. They don’t cover any pre-existing damage. In some respects, private health insurance is better as they cover pre-existing conditions after waiting period. Car/home insurers don’t do such with pre-existing damage.

A question an insurer would ask is why a person took out cover. Is it because they want assistance with future private health needs which are many years/decades away or because they think they need to claim something soon after cover is taken out?

If it is the former, why take out health insurance (if one is confident it is the case). If it is the later, this is why there is waiting periods to prevent individuals only taking out cover when a claim is likely to occur/be needed. A bit like having a premonition you are about to have a car accident and only taking out insurance the day before.

“Expecting to claim on it very soon” meets the definition of pre-existing conditions; so the community rating system is already protected from such ‘gaming’. Also, the LHC, as the risk-based punishment for having left the community-rated pool for more than three years, is applied to the next 10 years of premiums. So the morality of being charged an additional 17% “joining fee” along with a two-month queuing time for unforeseen hospitalisation remains highly questionable, even for a profit-making enterprise.

Waiting periods are not to be confused with exempting pre-existing damage/conditions from being covered. My point was about paying for a waiting period (which provides absolutely no cover).
And why do clients take out insurance? Simple, to cover the risk of unforeseen events, presumably from the day of laying down the bet (i.e. paying the premium). I want to bet an insurer for nasty events, and am happy to lose the bet every time; but I think it’s theft to make me pay for the period when “all bets are off”.

They also usually have waiting periods for predictable events like storm, fire and flood.

The maximum time they can enforce ‘waiting periods’ is ‘in the overall rules’ so they are all virtually the same, and to dissuade people from entering and exiting private insurance for convenience and opportunistically putting their costs onto existing members.

This page from HCI (a small and IMO ‘honest’ fund in how they communicate and operate) is typical for waiting periods and ‘the why’.

If accident cover is a focus and seems unfair, and you feel accidents are always unplanned (they are, but…) consider buying a new insurance because you are going skydiving or bungee jumping off a building or equally dangerous sports the next day with or without instruction. Fool hardy but illustrative of how some customers could try to manipulate insurance.

Thanks for the explanation from HCI (not one of the six insurers I looked at). Obviously I’m too naive to have considered such behaviour would be statistically significant without any counter-measures. But I still sense it is a theft to be charged a 12-month premium for the first 10 months of cover. Surely there is a fairer and more transparent counter-measure to opportunistic or fraudulent claims?
Armed with HCI’s explanation, I would understand if, say, the first two months’ premiums were payable as an advance on joining, but since the actual coverage didn’t commence for two months, the first monthly renewal was after four months. That is, there is a two-month waiting period with an initial payment up front (both to ‘prove’ your worthiness) but the waiting period is free, and so expending the premium begins when the actual cover of the risks begins.
However, since all of the few responses to my post have been supportive of the insurers’ “joining fees” and delay of coverage for new members, my take on these is either wrong or irrelevant in this sector. Now to decide whether to donate my $900 “joining fee” to my chosen insurer or continue to self-insure our risk of non-emergency hospitalisation…

The only way maybe to have a full and thorough independent medical examination and clearance when insurance is taken out. Such may cost many thousands and is likely to be more than the premium paid while the waiting lists are in place.

I personally would not want to have a full and thorough medical examination results provided to a health insurer as they may use this to ‘tailor’ premiums based on any foreseen risk.