It’s one of those topics that often pops its head up around the financial new year, but for some people, it regularly plays on the mind: Is private health insurance worth it for you and your family?
Quite frankly, the system in Australia is confusing, particularly when you’re not at all familiar with how it works in terms of the government, your insurer, and your personal bottom line. So, this article is intended to demystify some aspects of private health insurance and make it easier for you to figure out whether it’s something you need, or something you can do without.
My Personal Story with Health Insurance:
“Personally, I have always had Private Health Insurance. No, I’m not rich, it has just been a priority for me, especially with young children. It was something drilled into me by my parents, and I have been with the same fund since I was in my twenties (Bupa). When I first signed up I did so through work and got a really good corporate deal – and I’ve pretty much not looked at it since. But I have used it.
I’ve had multiple surgeries over the years that I didn’t have to wait for (tonsillectomy, hysterectomy, boob job (they covered my hospital for that). I did quite a few years of IVF, I wear glasses (so does one of my sons), and both boys need a fair amount of dental work. My husband needs the osteopath for his neck.
So for me it is something I don’t want to go without. In saying that – I’m currently paying over $400 per month to cover this for my family. “
First Up – Medicare
All Australians are covered by Medicare, which we pay through via our taxes. Medicare is far from a perfect system, but most people get by on it. It covers most emergencies, but it is a little thin on elective procedures. Before assuming you’ll be covered for something, we recommend digging into Medicare, and actually getting a good understanding of the system. It also pays to keep in mind that the government has been making promises to reform Medicare for some time now, and you can almost guarantee that those reforms won’t necessarily make things easier for everyone.
If you need a procedure that is considered ‘elective’ and not an emergency, you need to go on the waiting list which is sometimes years long.
At the moment, the big things that Medicare doesn’t cover, which you’ll probably notice as a family include:
- Ambulance services (depending on what state you are in)
- Private hospital costs
- Non-bulk billing GPs
- Most dental treatments
- Most physiotherapy, including occupational, speech, eye, chiropractic, podiatry or psychology
- Glasses and contact lenses
- Hearing aids and similar appliances
- Home nursing support
Private Health Insurance
Now, onto Private Health Insurance. There are a few things you’ll definitely want to consider when you’re thinking about private health insurance, particularly when it comes to its worth to you. What you need to remember is that the government wants you to have private health insurance, to help encourage those with the money to relieve pressure on the public system.
So, here’s what to think about when you’re making that decision.
There are pro’s and con’s when it comes to Private Health Insurance.
Pro’s of Private Health Insurance:
- You can get the surgery you want, when you want. No waiting lists (provided your Health Insurance covers the procedure you are wanting done.)
- You can choose the hospital you want to stay in, and your Doctor.
- Some costs that are not covered by Medicare can be claimed on your Health Insurance.
- Depending on your cover, they will help you pay for dental, osteopathy, physiotherapy etc.
- When you have Private Health Insurance you don’t need to pay the Medicare levy surcharge.
Con’s of Private Health Insurance:
- It is very expensive! And getting more expensive each year.
- There will be a health fund rate rise in 2019.
- More people are opting out of Health Insurance due to the cost, which in turn makes it more expensive.
- Private Health Insurance doesn’t necessarily cover all costs of medical treatment – you can still be out of pocket depending on the out of hospital treatments you require.
How to Get a Better Deal on Health Insurance
Personally I find Health Insurance to be extremely confusing. I don’t know if I will need heart surgery or cataract surgery in the future. So I’ve been nervous about calling around and finding another deal. But then I was told by someone in the Health Insurance Industry that funds have gotten better over the years, so newer customers are getting the better deals.. and us old customers – well we are stuck with the ones we bought way back when.
I’m also nervous about using people like iSelect because aren’t they just trying to get the commission on the sale rather than finding the best solution for what I want???
There is however now a service that finds you the best deal, without wondering if the caller is just in it for a buck.
“On hearing my mate saying I should re-look at my health insurance (and the fact my policy was 20+ years old), I did some research to find a service that doesn’t just give me the ‘highest paid commission for the Sales Person’. I WANT to have the best coverage. I don’t want to pay as much, but I’m also not going to risk moving fund if it doesn’t mean I get the same high level of service and coverage.
I want someone that cares about what I want.
And although I haven’t yet changed…. I think I’m going to.
I went through Health Insurance Comparison. They found me an updated plan on what I currently have, but with better dental and osteopath rebates (at the moment for every $120 osteopath appointment, we only get $20 back!). Plus – the new plan is only $320 per month – so I save $100 per month with better payments.
Because I’m cautious, I took the information and then did some personal research on what they were offering me, I investigated the fund, the rebates, and reviews….
And they weren’t pushy. Cause I hate that!”
1. Your Age
It’s a fact of life that the older you are, the more health issues you’re likely to have. Thanks to this fact the Australian government have something called the Lifetime Health Cover surcharge. It’s a tax that adds a 2% surcharge to the cost of your premiums if you don’t get private health insurance until you’re older than 31. When you get it straight after you turn 31, there’s no charge, but every year you put off having health insurance, your surcharge goes up by 2%, so if you wait until you’re 40 years old, the premiums will be 20% higher than if you’d joined at 30. Damn.
The good news is that surcharge only lasts for 10 years, so if you join when you’re 35, you will have saved 4 years of premiums, but you’ll only have to pay 80% of a year’s premium over the 10-year timeframe. Of course, that 2% surcharge could change in the future, which is definitely worth keeping in mind.
2. Your Income
If you’re one of the lucky Australians who make more than $90,000 a year but don’t have private health insurance, the government will pocket between $1 and $1.50 of every hundred dollars that you earn. This additional tax is known as the Medicare Levy Surcharge. So, if you earn $98,000 a year, you’ll be paying another $980 in pax above what you already pay. For that kind of money, you could be getting an, admittedly basic, private health policy for just over $18/week. This additional tax hits particularly hard if you’re a family with two high earners, but put basically, the richer you are, the more you kinda want to have health insurance!
Of course, there’s more than that. See, the government may also pay you a private health insurance rebate if your family makes over $180,000 a year and has private health. In this scenario, you’ll get 27% of your insurance premium back from the government, which is pretty decent.
3. Your Needs
One of the biggest issues with private health in Australia at the moment is that a large group of people are buying health insurance just for tax purposes. These el-cheapo insurance policies are what most people would refer to as Junk Policies, which basically means they aren’t good for anything. Usually, people buy these policies for tax reasons, but find when they actually need them that they cover almost nothing, meaning they need to use the public system anyway. Crazy.
Essentially, whether or not you need private health comes down to what you need in terms of your health care. If you’re looking for dental, you’ve got kids with crooked teeth, you have a history of health issues in your family, or you just want to know that you’re covered, a private health insurance policy might be a smart idea. However, this is only true if you’ve really done your research, and you know you’re getting a policy that really works for you, not just one that’s cheap.
If you currently earn over $90,000 it’s probably a smart idea to consider health insurance of some kind, even if it’s just for tax purposes. This is even more true if you’ve just turned 31. For families, it’s important to remember that just getting a cheap health insurance policy is not going to make a difference. Cheap insurance policies are worth what you pay for them, so don’t just buy one and assume you’re going to be covered. Dig deep, do your research, and think long and hard before settling.
If you are a low-income earner and you don’t have money for private health insurance, it’s okay. The Medicare system is supposed to support you, and while it’s not necessarily perfect, you’d probably be better off putting money into a separate account for unexpected medical expenses not covered by Medicare than spending what you have on a cheap policy.
But by shopping around, and using sites like Health Insurance Comparison that actually care, you will get the best deal for you and your family.