With private health insurers set to increase premiums by an average 3.95 per cent from April 1, many are now asking the obvious question: “Is it worth it?”
As many as 13 million Australians have private health insurance. But the industry is bracing for clients downgrading their policies or giving them up altogether.
It will add to growing dissatisfaction around gaps and continuing spiralling costs.
The biggest argument for private health cover is the power it gives to patients to leap over the waiting lists at public hospitals.
It will cost the average single Australian an extra $73 a year – $143 a year for families.
Given that wages and inflation rose by just 1.9 per cent last year, an almost 4 per cent hike in health premiums is steep.
But are there really alternatives?
Yes, says Ian McCauley, a research fellow at the Centre for Policy Development. If a reasonably healthy person at the age of 25 wisely invested the equivalent of their insurance premium every month to cover medical expenses, they would have about $80,000 left over at death in their 80s to pay for their wake.
Currently consumers lose whatever is left in the extras policy cover come 31 December every year. With a health savings account, they keep whatever they did not spend and the amount grows each year.
“Having control of your health dollars rather than losing any unspent benefits each year will benefit everyone in the long run,’’ says Dr Hugo Sachs, president of the Australian Dental Association.
But health insurance is much more than just covering costly medical bills, says the industry.
Here are four reasons why health insurance is a good idea, according to health insurance companies:
- If you have health insurance, you can choose your own doctor and hospital without having to worry about astronomical fees. If you have a serious medical condition, you like the option of having a private room in a hospital – and only private health insurance is more likely to provide.
- There is no waiting in queues for treatment if you have health insurance. In the public system, there can be lengthy waiting lists, especially for elective surgery.
- You pay less tax if you have health insurance. For singles with a taxable income of $90,000 and $180,000 for couples, the Australian Tax Office will charge an extra 1 per cent in tax called the Medicare Levy Surcharge. The MLS will increase to 1.25 per cent if you earn over $105,000 ($210,000 for couples) and 1.5 per cent if you earn over $140,000 ($280,00 for couples). This is on top of the two per cent Medicare Levy everyone pays.
- You enjoy greater peace of mind if you have medical insurance – that’s one thing you can’t put a price on.
So if you believe it’s for you, at what age should you consider buying a medical insurance?
According to comparison site, Canstar, you are usually covered by your parents’ family policy until you turn 25 – or earlier if you stop full-time study, graduate, get married or get a full-time job.
It also says that if you are close to 31 years of age and don’t take out health insurance by the time you reach 31, you may have to pay the extra loading if you require cover later on in life.
Another Important factor to keep in mind is that, if you are planning to start a family, you may want to consider adding obstetrics cover long before you fall pregnant.
This is because, there’s a 12 month waiting period before you can be covered for obstetrics related services.
So is it worth paying for private health insurance?
You will probably be better off without private health insurance unless you are a high income earner, you have a chronic illness, you are approaching an age where serious illness is considered more likely, you are aged over 55 or you are planning to get pregnant.