How to choose the best health insurance

20/12/2020

Money & Life team

At face value, private health insurance sounds like a good idea, especially if it’s around same price as the Medicare levy, which for many people without private cover is 2 percent (plus up to 1.5% more for those earning over $90k annually) of their taxable income. But when it comes to private health insurance, you get what you pay for, and price doesn’t necessarily mean value.

At face value, private health insurance sounds like a good idea, especially if it’s around same price as the Medicare levy, which for many people without private cover is 2 percent (plus up to 1.5% more for those earning over $90k annually) of their taxable income. But when it comes to private health insurance, you get what you pay for, and price doesn’t necessarily mean value.

That’s why you need to shop around and compare policies to ensure the right private health cover is better for you than relying on the low or no-cost public health system (aka Medicare).

Most people take out private health insurance expecting to be able to choose a doctor, their own room in a private hospital, and to avoid waiting times for elective surgery. But due to ever-changing exclusions within policies, this isn’t always what they get, so it’s important to do your homework.

However, before you get into the minutiae of comparison, between one health insurance product and another, there’s an even more important layer of consideration that you need to address. To add greater clarity when comparing what’s on offer, it’s critical you identify exactly what choosing the ‘best’ health insurance actually means to you.

The starting point is always going to be less about variations between competing health insurance products, and more about how they match the underlying needs of you and your family. The key is to identify how each of the products you’re interested in meet the very unique circumstances of you and your family, both now and potentially into the future.

 

What private health insurers don’t want you to know

One of the primary criticisms of private health insurance is its unaffordability. In an attempt to make private health insurers’ strong and competitive, premiums tend to be significantly cheaper for younger – typically under 30 – and healthier members, than their older counterparts, who are more likely to lodge claims.

Another criticism is that privately owned health insurers put profits over members’ needs. For example, in 2017/18 Australians paid $4 billion more in private health insurance premiums than they got back in benefits1

Equally concerning, despite the private health insurance sector making pre-tax profits of $1.8 billion in 2017/182 the number of policies containing excess or co-payments is on the rise. An excess is typically the gap between what Medicare and your health fund pays, and what the actual doctor’s fee is, and it can cost you dearly.

Unsurprisingly, with policies offering less than they did in the past and cost increases disproportionate to current wage growth, more people – young and older – are choosing not to take out private health insurance. However, one of the benefits of private health insurance is that you can cover things that Medicare won’t; including dental care, vision care, hearing aids, long-term care, like nursing homes and ambulance to name the most common3

 

How much cover is enough?

If you philosophically favour private health insurance over the public health system, 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. Determining how much cover is enough will depend on key variables, including your age, in some cases occupation, and whether you have any pre-existing conditions that you’re legally obliged to disclose.

Other determinants of cost also depend on the fund you choose, the policy you select, your family group, and where you live.

Remember, discovering what standard private health insurance includes, is as important as finding what it doesn’t. For example, if you don’t wear glasses, then ensure you’re not paying for vision care as one of your extras. Similarly, if you’re young and fit, you may wish to forgo ambulance cover.

Want to include private health insurance within the household budget, but don’t know where to start? A Financial Adviser professional can guide you through everything you need to know, by making it part of your overall plan for less money stress, and better financial wellbeing. Contact us for more info.

References

1) https://www.theguardian.com/business/grogonomics/2018/feb/06/is-private-health-insurance-a-con-the-answer-is-in-the-graphs

2) https://www.theguardian.com/business/grogonomics/2018/feb/06/is-private-health-insurance-a-con-the-answer-is-in-the-graphs

3) https://www.fool.com/retirement/2019/07/21/dont-count-on-medicare-to-cover-these-4-things.aspx