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Private health insurance: Do you really need it?

Should you keep your health insuranceLet’s be honest, private health insurance can start to seem just like another bill on top of all the other costs of raising young kids – childcare fees anyone?

And with health premiums set to rise again soon, it’s not surprising that many young families are questioning whether or not they really need private cover.

Private health insurance premiums will increase again on 1 April 2020, this time by an average of 2.92%.[1]  This works out to an extra $127 a year on the average family policy. [2]

Now the good news is that this is lowest average increase in the past 19 years. The bad news is that over the past decade alone, premiums have risen by a whopping 61% on average. [3]

But the key word here is average. Some premiums are set to rise by as much as 5% or more, and others less. [4] My own family policy is set to rise by 4.36% on April 1, which works out to an extra $215 a year.

So I’ll be honest, I have been questioning whether or not I really need private cover. Am I better off simply putting the money saved on my mortgage and relying on the public system?

Now because I work in the industry, I have a good overview of the benefits and drawbacks of private health insurance. If like me, you are questioning the cost then here are the things you should consider when making a decision about your cover.

Keeping your private health insurance — the pros

Peace of mind

Once you have kids, you really can’t put a price on the peace of mind that comes from knowing you’ll have greater choice should they require medical treatment. Our son will be needing an operation soon and I’m relieved we have the option of going private. Which leads me to my next point …

Choice of doctor and hospital

Private cover means we’re able to go with the doctor who comes highly recommended to us, rather than just the one allocated (just make sure they participate with your health fund).

Shorter waiting times for elective surgery

Having health insurance means we aren’t left at the mercy of public waiting lists for our son’s surgery and have more control over when he will have the operation.

Extras

My son is only two-year-old so extras haven’t really come into play for us yet but even looking at his teeth now, I’m pretty sure I see braces in our future! Extras cover can help to cover the cost of some medical treatments not covered by Medicare such as dental, physio, optical and orthodontics. And as my son gets heavier, I’ve been taking advantage of my extras policy to have regular remedial massages to ease the sore muscles from lugging around a toddler.

Avoid extra tax

If you have a combined taxable income of $180,000 or more, then having private hospital cover means you’ll avoid paying the Medicare Levy Surcharge (MLS). If you earn more than this and don’t have hospital cover, then you’ll pay at least 1% (up to 1.5%) of your taxable income in additional tax.[5]

Keeping private health insurance — the cons

The cost of premiums

The average family policy according to iSelect sales data is $4,359 a year[6]. Now that’s a lot of money in anyone’s language, especially given the great irony of insurance is that you hope you don’t need to use it! But many families pay even more than this because they are paying for things they don’t need – such as still paying for pregnancy despite their family being complete. So before you ditch, see if you can switch! That’s where the trained consultants at iSelect can help you better understand some options.

Out-of-pocket costs

One of the biggest bugbears with private cover is that you can still be left with out-of-pocket costs, if there is a ‘gap’ between the cost of your treatment and what is covered by Medicare and your health fund.

Excess payments

You can opt for a higher excess payment in order to bring down the cost of your monthly premiums but if you do need to go into hospital, you’ll be required to pay your excess up front which can really hurt. I got caught out by this – I increased our excess to $750 to lower my monthly costs but then unexpectedly had to go into hospital and had to cough up the $750. As such, I’m considering lowering my excess back down.

Confusion

I know more about health insurance than the average person and I still find it confusing! Understanding what the right level of cover is for your family can be really overwhelming and while many of us know we should shop around, we tend to put it in the ‘too hard basket’ and as such may keep paying more than we need for outdated cover. A comparison service like iSelect can help you compare your private health insurance to their range of policies and providers to see if you can find better value.*

So while I have thought about cancelling my cover altogether (shhhh, don’t tell work!) ultimately I decided the peace of mind outweighed the costs. And while I’m going to stick with private cover – for now – everyone’s situation is different.

That’s why it’s worth taking the time before April 1 to review your policy to see if you are still getting good value. And if not, be prepared to vote with your feet and move to a policy better suited to your needs and budget.

— By Laura Crowden, iSelect spokeswoman

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This blog post is sponsored by iSelect

Disclaimer: *iSelect does not compare all health insurance providers or policies in the market. The availability of policies will change from time to time. Not all policies available from its providers are compared by iSelect and due to commercial arrangements, your stated needs and circumstances, not all policies compared by iSelect are available to all customers. Some policies and special offers are available only from iSelect’s contact centre or website. Click here to view iSelect’s range of providers.

 

[1] Source: https://www1.health.gov.au/internet/main/publishing.nsf/Content/health-phicircular2019-80
[2] Based on iSelect sales data (1 April – 31 December 2019) with the average 2.92% increase from April 1 applied.  Average premiums in 2019 were $4,359 for a family policy, $4,780 for a couples policy and $2,014 for a singles policy, which will increase on average by $127, $140 and $59 respectively on 1 April 2020.
[3] Source:  health.gov.au – industry weighted average premium increases by insurer by year (1 April 2011 to 1 April 2020 inclusive).
[4] Source: https://www1.health.gov.au/internet/main/publishing.nsf/Content/health-phicircular2019-80
[5] Source: https://www.privatehealth.gov.au/health_insurance/surcharges_incentives/medicare_levy.htm
[6] Based on iSelect sales data (1 April – 31 December 2019).  Average premiums in 2019 were $4,359 for a family policy.

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