ExtrasJar: an alternative to extras health insurance

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ExtrasJar
Extras Jar founders John Connor (left) and Reece Frazier.

With private health insurance getting more expensive and extras health insurance for services such as dental care often poor value for money, the advent of an alternative model is good news for consumers. By Kerry Faulkner

Co-founder Reece Frazier agrees the private health insurance (PHI) industry was ripe for disruption when he and partner John Connor launched their new company ExtrasJar, which provides an innovative alternative to the existing PHI model. 

He says people were dropping out of private health funds at a staggering rate during COVID-19 lockdowns since they couldn’t use their health services. At the same time many insurers raised premiums despite not upping rebates.

Frazier says the extras component of health insurance, under which dental falls, isn’t really insurance anyway. Rather, he describes it as a ‘money swap’ where the customer gets a voucher to swap for a service. But he says it’s not a fair swap; the rebate on most dental treatments is usually about $65 when a simple scale and clean may cost between $100 and $150. 

He says of the hundreds of people he researched, just one was able to claim back more from their extras than they paid as cover. 

That’s backed by research published by leading consumer advocacy group CHOICE (September 2022) which found that according to the Australian Prudential Regulation Authority (APRA), the average annual extras premium per person was about $500 but the average annual benefit just $390, meaning many people spent more on extras cover than they got back from their health fund.

Frazier says using APRA research, 12.5 million Australians who take out extras cover are being ‘scammed’ because only $5.6 billion of the $12 billion spent on extras insurance is returned in benefits.

We think having people saving and having access to that money that’s rolled over and is always there—even if conservatively people are going to get 30 per cent more in their pockets now to pay for treatments than they did going through someone else—that’s better for their health and for the whole network of the health system.

Reece Frazier, co-founder, ExtrasJar

“That’s a really big thing. I know too, anecdotally, from talking to other people that for dentists, with the drop out of extras, they see a correlation in the drop out of visitors,” he says.  

ExtrasJar is their solution, with its founders describing it as a blend of the best of banking, investment and insurance with its revenue coming from the commissions on premiums and fees for investment products. 

The new model promises customers that if they don’t use their extras cover this year, one hundred per cent is rolled over to the following year until it’s needed. Further the fund doesn’t limit customers to a certain amount under things like dental, physiotherapy or optical—if customers have enough money in their ‘kitty’ they can pay for treatments in full.   

“So we think having people saving and having access to that money that’s rolled over and is always there—even if conservatively people are going to get 30 per cent more in their pockets now to pay for treatments than they did going through someone else—that’s better for their health and for the whole network of the health system,” Frazier says.    

In addition, ExtrasJar has changed the way hospital cover is paid by creating a self-deposit system with the customer paying a self-insurance deposit in the same way renters pay a security bond. The bond brings down the cost of the hospital visit and if it’s not used it’s rolled over to the following year. 

A spokesperson for the Australian Dental Association (ADA) says it can’t comment on individual health fund models like ExtrasJar, however it has long been critical of extra or ancillary models that include dental, physiotherapy, optometry and some natural therapies as being poor value for money with rebates well below the average cost of treatments.

I was interested to finally see some people making public statements lately around the amount of money that doesn’t get given back through extras because that’s something that we’ve been acutely aware of.

Damian Mitsch, CEO, ADA

ADA CEO Damian Mitsch is eager to stress that dental fee increases are not the reason for massive PHI premium increases, and figures from the ADA’s Dental Fee Survey show that dental fees have increased at rates below CPI increases. PHI premiums however have generally risen at rates above CPI increases while rebates back to customers who choose to see their own dentist have remained static. 

“I was interested to finally see some people making public statements lately around the amount of money that doesn’t get given back through extras because that’s something that we’ve been acutely aware of,” he says.  

“How do we make sure that money can be better used by really thinking about how it is collected and redistributed? 

“If you look at the stats and extras in isolation, given that some 52 to 53 per cent of extras is spent on dental, if we’re seeing that sort of money not returned to consumers, then I would say that 52 per cent of the money not being returned to consumers ought to be flowing into their oral healthcare and it’s not.”

He says the ADA has long advocated for a Health Savings Account (HSA) as a better way for people to save for future health needs, and in 2018 commissioned one of Australia’s top economic firms, The Centre for International Economics, to do an analysis of the proposed HSA. 

The modelling suggests that a well-designed set of incentives for a HSA, self-financing for dental and allied health care, would provide much better value to taxpayers than they currently get from their outlays on general treatment insurance premiums and associated PHI premium tax rebates.

“With HSAs, people would be better off putting their money in one of these accounts than paying for increasing PHI premiums, and only paying for dentistry when it’s needed—and reaping the reward of the interest accrued as it sits there. It is a win-win for the consumer,” he says.   

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