Unsure if ‘going private’ with health cover is a good idea?
Relax, you’re not alone, it’s not an easy decision at the best of times, and seismic shifts in government policy over the past 35 years have only added to consumer confusion.
Without boring you with the histrionics between 1984, when the Hawke government introduced Medicare, and the late 1990s, private health insurance uptake tanked from over half (54 per cent) to around a third.
Then along came the Howard government’s attempt to throw the health insurance industry a lifeline, which it did by ‘coercing’ people into taking out private cover or cop a levy, saw uptake bounce to just under half.
Fast track to 2019, and the fix around whether or not ‘going private’ stacks up seems to be in.
Recent surveys suggest the vast majority of Australians may – if it wasn’t for a government-mandated penalty – choose to abandon their private health insurance, on the basis that what they’re paying, just isn’t value for money.
Pay more, receive less
At face value, private health insurance may appear to be a good idea, especially if it’s around the same price as the Medicare levy, which for many people without private cover is 2 per cent.
Trouble is, policies contain exclusions, which due to complexity of the system, can leave you unaware of what you’re precisely covered for.
For example, while you might take private health insurance expecting to be able to choose a doctor, a private room and to avoid waiting times for elective surgery, due to ever-changing exclusions within policies, this isn’t always what you get.
Similarly, there’s been a large increase in the number of policies (now over 80 per cent) containing excess or co-payments.
This trend began with the introduction of what’s called a lifetime health cover, which saw people take out the cheapest policy to avoid paying an extra 2 per cent – for each subsequent year of cover – if they bought health insurance after July 1 following their 31st birthday.
If limited value wasn’t enough to put you off ‘going private’, a cocktail of recent profits, on the back of premium hikes – disproportionate to current wage growth – might be the tipping point you need to either avoid private health insurance, or cancel an existing policy.
In the previous financial year, Australians paid $4 billion more in private health insurance premiums than they got back in benefits – resulting in pre-tax profits for the industry of $1.8 billion.
If you think private health insurance can stack up in your favour, it still pays to shop around to ensure you’re actually better off than relying on Medicare.
To allow for simpler comparison of health insurance products, all Australian health insurers are required by law to provide details of each of their products to the Private Health Insurance Ombudsman.
PrivateHealth.gov.au contains details of every health insurance policy available in Australia.
When searching, remember to enter the right level of detail, including who needs to be covered, where you live, and the type of cover you want, plus any specific hospital services or general treatments.
But before you start comparing one health insurance product with another, Oak Advisory director James Harper recommends identifying exactly what choosing the ‘best’ health insurance actually means to you.
As a case in point, one of the benefits of private health insurance is that you can cover things Medicare won’t; including dental care, vision care, hearing aids, long-term care, like nursing homes and ambulance.
“If you don’t wear glasses, ensure you’re not paying for vision care as one of your extras,” Mr Harper said.
“If you’re young and fit, you may also wish to forgo ambulance cover.”
Instead of matching the underlying needs of you and your family, Mr Harper says too many Australians start by trying to compare between competing health insurance products, neither of which may meet your family’s unique circumstances.
“It’s important to ensure you’re getting the level of private hospital and extras cover that’s right for you, and at an appropriate price,” Mr Harper said.
“Determining how much cover is enough will depend on key variables, including your age, in some situations occupation, and whether you have any pre-existing conditions that you’re legally obliged to disclose.”