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Health insurance: Should you keep your cover?

By Megan Birot | 3 Jan 2019
7 min read

While over 13.5 million Aussies are covered by private health insurance, only half (56.9%) of policyholders believe their cover is necessary, according to a recent survey from Roy Morgan.[1]

This comes on the back of a declining trend in consumer sentiment regarding health insurance in the last four years. More health fund members (16.4%) are reporting seeing no real value in private health insurance, while customer satisfaction has dropped year on year since 2014.[2]

With the recent announcement of an average premium hike of 3.25% in 2019, more fund members are tossing up whether their health insurance is worth the hit to their hip pocket.

So, should you keep your cover?

There are a number of factors to consider before making any decision to take out, or close, your health insurance policy. This article outlines a few considerations to keep in mind when evaluating your health insurance situation.

Health reforms to bring simplicity and empowerment back to consumers in 2019

There’s never been a better time to evaluate your private health cover, with the biggest reforms to health insurance in the last two decades set to come into effect in 2019; bringing increased benefits and potential savings for fund members via simplification of the system.

Standardised ‘Gold’, ‘Silver’, ‘Bronze’ and ‘Basic’ product tiers will be introduced to hospital insurance cover, making it easier for consumers to understand their benefits and know what is covered under their policies. The uniform labels will standardise product names and cover across funds, giving consumers the power to make more informed choices in relation to their cover, while also allowing for easier recognition of the best price on like-for-like cover, irrespective of the insurer.

In addition, from 1 April 2019, private health insurers will be able to offer youth discounts of up to 10% to members under 29 to incentivise younger people to take out private health insurance. A single consumer could save up to $150 a year on a $1,500 policy while a young family on a $3,000 policy could save up to $300 a year. [3]

Under the private health insurance reforms, policyholders will also be able to pay more in permitted excesses for private hospital cover to lower their premiums. Families could save up to $350 a year by increasing voluntary excess and singles could pocket savings of $200.[4]

Aussies living in rural and remote areas who can’t access treatment locally, will also be able to access accommodation and travel benefits as part of their hospital treatment cover.

Health insurance can help you avoid waiting times

Public system waiting lists for elective or non-emergency surgeries are notoriously long and unless you’re prepared to join the queue, sticking with your cover can help you avoid it. Private patients enjoy median waiting times of 20 days for elective surgery, compared to 42 days for public patients according to a report by the Australia Institute of Health and Welfare (AIHW).[5]

Even simple dental treatments can carry waiting times of up to three years in some clinics which is why public patients are twice more likely than private patients to have had teeth extracted.[6] In New South Wales, tonsillectomies have waiting lists of up to 313 days and hip replacements have waiting times of up to 200 days.[7]

Emergency treatment is mostly provided in public hospitals, so the system operates on a priority patient order, with critical patients taking priority over others, often overstretching waiting periods for elective surgeries or non-critical care. As a private patient, however, you enjoy the security of a locked-in date, so you know that your surgery or procedure will go ahead on the day it was planned.

Private health insurance also gives you greater control over your health care. It allows you to be treated as a private patient in a public or private hospital of your choice and gives you the ability to choose your doctor and when to access your treatment. * Some policies may even cover the cost of a private room in a public or private hospital if one is available.

Subject to availability*

Health insurance can help you save on general treatments

If you’re re-evaluating your health cover, remember that out of pocket expenses could end up costing you more than a health insurance extras policy.

Private health insurance gives you rebates on general treatments and services that fall outside of hospital, which are not covered by Medicare. Extras cover provides benefits towards services like physiotherapy, optometry, dental care, hearing aids and home nursing, which can easily run in the thousands of dollars in out of pocket costs.

For example, a course of physiotherapy or chiropractic treatments can cost upwards of $1000[8] and the average cost for a dental check-up for public patients ranges anywhere from $150 to $400. However, for private patients, the average dental charge for a comprehensive oral examination is under $60.[9]

The most common claims for extras in the last financial quarter were for dental, optical, chiropractic and physiotherapy according to the Australian Prudential Regulation Authority (APRA). [10]

There are financial incentives to having private health insurance

While private health insurance is typically not a small expense, you may be able to take advantage of tax breaks and rebates which can help alleviate the costs of your cover.

Low-income earners can benefit from income-tested government rebates on private health insurance to help pay for their cover, that can be claimed through tax returns or as reduced premiums.

Fund members can also avoid paying the Lifetime Health Cover Loading by taking out hospital cover before the 1st of July following their 31st birthday and dodge the 2% loading on premiums that would accumulate yearly if they took it out later. So, if you planned on taking out hospital cover at the age of 40, you would pay 20% more on your premiums than a person who took their cover out before they turned 31.[11]

Another consideration that may skew some people towards taking out health insurance is the Medicare Levy Surcharge (MLS). High-income earners can avoid paying an extra 1 to 1.5% tax on their income by holding a suitable level of private hospital cover with a registered health fund. The levy amount will depend on which income threshold you or your family’s annual income falls under. For example, a single person earning $100,000 a year would have to pay a 1% tax on their income or $1,000 without the appropriate level of hospital cover.

Do your own research – it only takes a few minutes, but could save you hundreds

Before making any decision on health cover, we recommend reviewing and researching your options to ensure you’re well-informed of costs, policy coverage and benefits.

Doing your own research is key, given the needs or circumstances of others may not reflect your own. Health funds can be hard to navigate and untangling all the jargon can get confusing, which is why comparing with Compare the Market can save you both time and money by doing the hard yards for you!

It only takes a few minutes to use our free comparison tool which can help quickly narrow down your top suggestions from hundreds of policies across some of Australia’s leading health funds.

Get started here

Sources:

[1] Roy Morgan- Increasing doubt on value of private health insurance (2018).

[2] Roy Morgan- Private health insurance customers less satisfied (2018).

[3] The Department of Health- Private health insurance reforms: Discounts for 18 to 29 year olds (2018).

[4] The Department of Health- Private health insurance reforms: Increasing voluntary maximum excess levels (2018).

[5] Australian Institute of Health and Welfare- National report presents information on private health insurance use in public and private hospitals (2017).

[6] National Oral Health Alliance- Facts on dental health in Australia (2015).

[7] Australian Institute of Health and Welfare- Waiting times for elective surgery in 2016–17 (2018).

[8] Comcare- Allied health rates (2018).

[9] Private Health Insurance Ombudsman- Average dental charges (2015).

[10] Australian Prudential Regulation Authority- Quarterly Private Health Insurance Statistics (2018).

[11] Australian Government Department of Health- Private health Insurance Consumer Fact Sheet (2015).

 

 

 

 

 

 

 

 

 

 

 

 

 

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Written by Megan Birot

Megan considers herself a savvy saver. She aims to make finance fun and inspire people to make decisions best suited to their budget and lifestyle. Her number one tip is: “saving doesn’t have to be boring, get creative and reap the rewards.” Megan has a background in journalism and particularly loves to write about health and money. She hopes to one day pen a best-selling book but the topic is a well-guarded secret.

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