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Is Private Health Insurance Worth It?
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NIBWith annual premium increases for private health insurance, you might be reconsidering whether health insurance is worth it. Generally, this decision should be based on your personal circumstances.
Private health insurance might be worth considering if you have children, planning to fall pregnant, are managing a chronic illness or are over the age of 65. Purchasing health insurance can also help you avoid paying the Medicare Levy Surcharge and Lifetime Health Cover loading. You could also be eligible to claim a health insurance rebate through your tax return.
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The pros and cons of private health insurance
If you are considering health insurance, you might want to review the pros and cons to help you decide whether the benefits outweigh the cost of paying monthly premiums.
What are the benefits of private health insurance?
- Reduce waiting times
Having private health insurance could reduce your waiting time for elective surgeries, compared to Medicare. - Choice of Hospital and doctor
With private health insurance, you usually get to choose your hospital, doctor and surgeon. Should you be pregnant, this also means you can generally rely on the obstetrician you’ve come to trust. - More privacy
When being admitted as a private patient in a public or private hospital, you can generally request a private room. However, this depends on your level of Hospital cover: Basic, Bronze, Silver or Gold. - Cover for general treatments
Health funds offer Extras cover,
which provides benefits for general treatments outside of the hospital, for example, dental, optical and physiotherapy. - Ambulance cover
You might want to consider private health insurance to avoid the high cost of emergency and non-emergency ambulance fees. Medicare does not cover the cost of ambulance transportation when you’re living in a state that does not provide full ambulance coverage, for example, South Australia, NSW and Western Australia. - Avoid the Medicare Levy Surcharge (MLS)
Private health insurance members with an eligible Hospital policy are typically exempt from paying the Medicare Levy Surcharge. - Avoid the Lifetime Health Cover (LHC) loading
If you purchase health insurance before 1 July following your 31st birthday, you can avoid paying the yearly 2% loading fee. - Claim a rebate
Health insurance can be more affordable if you are eligible to receive a private health insurance rebate. Generally, your rebate depends on your taxable income, age and family structure. You can typically choose to receive the rebate either as a reduction on your premiums or as a refund claimed through your tax return. - Aged-based discounts
If you are between the ages of 18 and 29 and take out an eligible Hospital policy, you might be eligible to receive an aged-based discount on your premiums. The percentage discount you receive depends on your age when you first purchased an eligible policy. - Claim travel and accommodation
Australians living in remote or rural areas might need to travel far from home for proper health treatments and services. Some health insurance funds now offer travel and accommodation benefits as part of their Hospital cover.
Disadvantages of private health insurance
- Yearly premium increases
Private health insurance premiums increase annually on the 1st of April. The percentage increase you’ll have to pay generally depends on your chosen health fund and the state you live in. - High price for value
Although more affordable, entry-level policies, for example, Basic Hospital and Lite Extras, generally only cover minimal treatments and services. You’ll usually need a more expensive top/comprehensive policy, like Gold Hospital, if you want full coverage, for example, pregnancy and birth-related services or cardiac and cardiac-related. - Out of pocket costs
Depending on your choice of health fund, policy type and level of cover, you may still be liable for some out-of-pocket costs when treatments and services exceed what Medicare and your insurer will cover. However, you can generally reduce these costs by purchasing private health insurance with gap-cover. - Benefit limits
Depending on your choice and level of cover, you can only claim treatments and services up to your annual benefit limit. Generally, these limits reset every year. However, specific policies also include sub-limits, where you might have a combined limit for a few treatments. For example, acupuncture and remedial massage could have a $600 combined limit, so if you claim $400 for acupuncture, you’ll only be able to claim $200 for remedial massage. - Co-payments and Hospital Excess
When you’re admitted to a hospital as a private patient, your Hospital policy will generally require you to pay an upfront fee (Excess) in exchange for lower premiums. Your Excess amount will be indicated in your Private Health Information Statement (PHIS). - Waiting periods
New policyholders generally have to serve waiting periods for certain treatments and services before you can claim benefits. For example, the standard waiting period for pre-existing conditions and pregnancy cover is usually 12 months.
Who needs to buy health insurance?
Medicare generally makes health care available to all Australian citizens. However, if you are starting or growing a family, are a senior citizen, have any pre-existing conditions or if you are a relatively active person, you may want to consider taking out private health insurance. Private health insurance may be considered by overseas travellers or for individuals wanting Extras cover.
- If you are planning to fall pregnant within the next 12 months: While you may be able to have a baby through the public system at no cost, there are benefits to opting for private health insurance. Typically, having a private room and having the ability to choose your obstetrician are generally common motivations when opting for private health insurance.
- Chronic illnesses or pre-existing conditions: Private health insurance is generally worth taking out for individuals living with a chronic illness, such as diabetes or heart disease or those who have injuries or are in recovery. For individuals who require medical equipment such as hearing aids or treatments such as speech therapy or regular scrapes for endometriosis, private health insurance might also be beneficial. Generally, pre-existing conditions or pregnancy will exclude you from benefits for 12 months.
- Senior Australians: Health problems generally increase as you get older. Therefore, taking out health insurance in your senior years may be worth it. Although Medicare may subsidise some of the costs of your health requirements, private health insurance can be used to minimise out of pocket costs. Government rebates for those over the age of 65 could also help make the cover more affordable.
- Individuals with upcoming general procedures: Extras cover generally helps to cover the costs associated with treatments not typically covered by Medicare, such as physiotherapy and dental care. The value of this type of cover depends on the stage of life you are in and what your health requirements are. Extras health plans are typically available to purchase on their own or in combination with Hospital cover.
- If you are generally active: It might be worth opting for private health insurance, as you could get more value out of your Extras cover. You might benefit from health maintenance programmes for healthier living, saving on your gym membership, for example. It may also be beneficial should you need physiotherapy to assist in your recovery from an injury, for example. When older, you might also need physio treatments or joint replacement surgery due to the impact on your body. Extras cover and health rewards for being active depends on the type of cover you have and your chosen health insurance fund.
Who doesn’t need private health cover?
While private health insurance may be worth it for some Australians, there are others for who it may not be worth it, including:
- The young and healthy: You may not require private health insurance if you rarely, if ever, need to visit the doctor or need Extras, like dental and optical. However, be sure to have enough money saved should something unforeseen happen; for example, an accident requires you to get joint reconstruction surgery.
- Those that are happy to rely on the public health system: If the level of care you receive from Medicare and public hospitals is satisfactory for you and your family, you might not want to invest in private health insurance.
- If you have sufficient savings: Individuals that feel they have enough money saved to cover the cost of any future treatments and services, as well as paying the Medicare Levy Surcharge might not consider health insurance worth it.
What does health insurance cover?
When you start reviewing health insurance policies, you may find that premiums and benefits differ from brand to brand. However, new Australian regulations specify that all Hospital policies should have the same four tiers, each covering a minimum amount of clinical categories: Basic, Bronze, Silver and Gold.
While you are usually able to take out separate Hospital and Extras cover, health funds will generally offer you’re the opportunity to combine them into one package.
If you opt to choose a combined Hospital and Extras cover option, you would generally be able to access services both inside and outside of a Hospital. This means, for example, you could claim in-Hospital services such as accommodation and theatre fees and claim general treatments such as physiotherapy or dental procedures. The benefits you can claim and how much you can claim is dependent on the type and level of cover you’ve selected.
Hospital cover
As part of the government reforms in 2019, all Hospital policies are divided into four tiers: Basic, Bronze, Silver and Gold. Each option should be carefully evaluated for its list of benefits, restrictions and exclusions. Generally, benefits and limits increase with a higher Hospital level. However, a higher level of cover usually results in more expensive premiums.
General benefits of Hospital cover include:
- Accommodation as a private patient in a public or private Hospital.
- You may be able to claim a tax rebate on your health insurance premiums.
- Avoid paying the Medicare Levy Surcharge.
- Ability to choose your own doctor, specialist and Hospital.
- Reduced waiting times for elective surgeries.
- Avoid paying the Lifetime Health Cover (LHC) loading when purchasing Hospital cover before your 31st birthday.
Extras cover
Generally, taking out Extras cover helps to reduce the out-of-pocket costs associated with general treatments that help prevent and manage health conditions, for example, physiotherapy and dental.
Extras only health insurance typically offers three different levels of cover; Basic, Medium/Mid or Top/comprehensive. The top or comprehensive Extras policies usually provide the broadest range of treatments and include higher benefit limits. As with the Hospital benefits, the top tier generally costs more than the Basic or Medium options.
Extras cover usually offers the following benefits:
- Reduce out-of-pocket costs for general treatments received outside of the Hospital.
- An opportunity to take control of your health by actively preventing or managing illnesses and injuries.
- You can generally choose from an extensive list of registered providers, that might help you save even more.
- Could improve your quality of life should you have any pre-existing conditions.
Is health insurance in Australia good value for money?
Deciding whether health insurance is good value for you, generally depends on factors including your age, health, budget and family structure. You should also consider what Medicare generally will and will not cover you for. Also, keep in mind that you will generally pay a Medicare Levy Surcharge up to 2% if you do not have appropriate private health insurance.
You may want to compare quotes from different health funds before making a decision.
Finding a policy that meets your requirements
There is no one best option for everyone when it comes to health insurance. Here are a few things to consider should you be searching for a policy that will meet your requirements:
- Understand your health insurance options and the policy types available to you.
- Consider your stage of life, your health, and what you can afford.
- Be sure to request and compare policies from various major health insurance companies.
- Review and compare the Private Health Information Statement (PHIS) of your top choices. The PHIS will help you see the full list of treatments and services covered, as well as the annual limits and sub-limits that apply.
- Ask your doctor/specialist which health insurance plan they accept more readily.
Frequently asked questions and answers
What happens if you don’t have health insurance?
Australian taxpayers without private Hospital cover might face extra tax fees, such as the Medicare Levy Surcharge, ranging from between 1% to 1.5% of your annual income provided that you earn over $90 000 as an individual or $180 000 as a couple.Do pensioners need private health insurance?
Generally, health insurance for seniors could help alleviate some of the costs associated with the increased risk of health problems. Private health cover could be more affordable for pensioners over the age of 65, depending on your income and whether you have an appropriate health care card.Why is there a penalty for not having health insurance?
The Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loading fees are there as an incentive to take out Private Hospital cover, in order to reduce the demand and strain on the public health system.Are there tax benefits to having private health insurance?
Yes, you can generally claim a health insurance rebate in the form of a tax refund or as a reduction on your premiums. Health insurance also helps you avoid the Medicare Levy Surcharge and Lifetime Health Cover loading.How do you get private health insurance?
To get covered by private health insurance, you can fill in the quote form above and a specialist will provide you with an online comparison that meets your requirements. Alternatively, you can call a specialist directly on 1300 795 560.Should you get health insurance when pregnant?
It might be worth considering taking out private health insurance if you prefer to choose your obstetrician and want a private room in Hospital. It is important to note that pregnancy is generally considered to be a pre-existing condition, and there is generally a waiting period of 12 months. Be sure to purchase or upgrade your policy at least three months before trying to get pregnant.
