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Is Private Health Insurance Worth It?

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Anneke Van Aswegen Updated: 04 June 2020
Types of Health Insurance

With 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

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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.

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:

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:

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:

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:

  1. Understand your health insurance options and the policy types available to you.
  2. Consider your stage of life, your health, and what you can afford.
  3. Be sure to request and compare policies from various major health insurance companies.
  4. 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.
  5. 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.

Health Insurance Quotes

  • Reduce out-of-pocket expenses
  • Keep you family healthy
  • Easy and convenient
  • Free to use

Want to talk to a specialist? Call 1300 795 560

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