Is Private Health Insurance Worth It?

We’re sure you’ve heard this before, but your health is super important; and it’s vital to look after your health. If you’re ever unwell, sometimes you may need hospital care or medical extras to get yourself back into tip top shape. Health insurance is a way of covering these costs so you don’t find yourself majorly out of pocket, and is something to consider when it comes to looking after yourself (and investing your finances).

Did you know?

Health insurance premiums are set to increase by an average of 2.74% on April 1, 2021. According to Health Minister Greg Hunt, this means the average couple will pay an additional $126.88 a year, while the average single will pay an extra $59.28.

However, with premiums increasing every year the question of ‘is health insurance worth having?’ is more prevalent than ever. And rightfully so, because you want to make sure you’re getting the most bang for your buck. That’s why we put together this handy guide to look into the pros and cons of having health insurance, so you can understand what it’s all about and if it’s worth getting.

What is health insurance?

Before we get started, let’s clarify what health insurance actually is. Health insurance is a type of insurance coverage that finances medical care. If you take out a health insurance policy, it will be a private health insurance policy. This means you will pay monthly premiums to cover hospital care and/or general ancillary treatments such as optical and dental, plus some allied health services like physiotherapy.

In a nutshell, private health insurance is the alternative to the public healthcare system. Australia’s public healthcare system is known as Medicare; it’s subsidised by the government to give residents access to a wide range of hospital, medical, and pharmaceutical services at low or no cost. So if you have a Medicare card, you’ll have to pay out-of-pocket for anything outside of the list of covered medical services.

On the contrary, with private health insurance, patients are still entitled to Medicare but can be treated in private hospitals at reduced or zero out-of-pocket fees public patients would pay if they were treated there. Private health insurance also gives you more control over the medical treatment you receive.

There are three different products when it comes to health insurance; hospital cover, extras cover, and ambulance cover.

What are the advantages of private health insurance?

There’s nothing to say you won’t receive quality treatment as a public patient in the public system, but there’s definite benefits of private health insurance. Here are the key advantages to consider:

1. Reduced waiting times

Public hospital waitlists can be pretty lengthy, and this is certainly one advantage of private health insurance. Private health insurance members can essentially ‘jump the queue’, by locking in a date for their medical procedure instead of waiting for the next available spot and potentially having their procedure pushed back.

2. Freedom of choice

As a member of private healthcare, you have a greater choice when it comes to the treatment you receive, where you receive your treatment, and who performs your surgery. You also have the opportunity to choose your doctor should you be admitted to hospital.

3. Access to private hospital rooms

Another advantage of private health insurance is having the choice to be treated and/or recover in your very own room. Unlike a public hospital where you’re often placed in a room with other patients, private health insurance allows members to request their own space. This luxury, however, is subject to availability.

4. Greater coverage

Depending on your policy, you may be covered for health services that aren’t offered through the Medicare scheme. This can range from dental and optical work to psychological, physiotherapy, and podiatry consultations.

5. Pay less tax

If you have private health insurance, you might not have to pay the Medicare levy surcharge (MLS). The MLS encourages individuals with higher incomes to take out private health insurance, and subsequently take the pressure off the public health system. It is a levy of up to 1.5% of taxable income on people who don’t have private hospital cover (for themselves, their spouse or dependent children) and earn above a certain amount.

Discover whether the MLS applies to you.

What are the disadvantages of private health insurance?

As with any insurance policy, there’s always going to be disadvantages alongside the advantages. Before you invest in health insurance, make sure that you’re fully informed on what it entails so you aren’t met with any unpleasant surprises. Here are the key drawbacks of health insurance:

1. It can be costly

Depending on your insurance provider, policy, and the number of people it covers, health insurance can get quite pricey. Premiums (which incur on a monthly basis) can increase annually, adding up to thousands of dollars each year. This ongoing, and potentially inflating, price is something to consider when deciding on whether or not to get health insurance.

2. You aren’t guaranteed coverage for your treatments

Again, this factor depends on your policy. If you require treatment in hospital, there is the potential that you aren’t covered for that specific treatment. So make sure to do plenty of research beforehand, to ensure you invest in a policy that best aligns with your health history and future needs.

3. Out of pocket costs

In addition to the premium you pay every month, a private health insurance policy may only cover a small portion of a treatment or procedure. As a result, you could end up paying a lump sum to complete the outstanding cost. There is also an excess payment with most policies. If you are to be admitted into hospital, you are required to pay an excess fee.  This is an agreed lump sum payment to access your services. As a rule of thumb, the higher your excess fee, the lower your monthly repayment.

4. Waiting periods still apply

Before you can claim benefits under your private health insurance, you have to complete designated waiting periods. A waiting period protects members by ensuring that individuals aren’t able to make a large claim shortly after joining and then cancel their membership.

Here are the maximum waiting periods that insurers can impose for hospital treatment, which have been set by the government:

• 12 months for pre-existing conditions
• 12 months for pregnancy and birth (obstetrics)
• 2 months for psychiatric treatments, rehabilitation or palliative care, even for a pre-existing condition
• 2 months in all other circumstances

So, is health insurance worth getting?

At the end of the day, everyone’s health and finances are different, so deciding if health insurance is worth investing in is entirely up to you and your situation. As with anything you’re considering investing your hard-earned money into, we recommend weighing up the advantages and disadvantages to gauge whether it will reap you more benefits than losses.

If you are considering getting health insurance, make sure you compare policies so you find the right one for you.

NODDLE is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.