5 reasons I'm keeping my private health insurance

Private health insurance premiums have gone up … again.

If you have private health cover (like almost 50% of Australians), you’re probably already feeling the pain of the April 1 increase, which saw the average premium rise by about 4% – or approximately $200 per year.

The premium increase coincided with the release of a survey by the Consumers Health Forum of Australian, which found that out-of-pocket bills exceeding $10,000 are not uncommon for patients with breast cancer and certain chronic health conditions.

Not surprisingly, many of us are starting to ask the question: Is private health insurance really worth it?

Before we can answer that, here’s a quick reminder on what private health insurance actually covers.

First of all, it allows you to be treated as a private patient in a public or private hospital. This enables you to do everything from choosing the doctor or hospital you are treated in, to skipping the public patient queues to access treatment sooner. Your premium will pay for some, or all, of the in-patient costs of being treated in hospital, depending on the level of cover selected.

If you elect to take out extras as well as hospital cover, your private health insurance pays a portion of the fees when you access services not covered by Medicare, such as ambulance, physiotherapy, optometry, general dental and podiatry services (although the services and level covered depends on the policy you select).

Of course, every policy also has caps on total rebate you receive and restrictions on the types of procedures and level of cost it will cover, which regularly leaves patients paying “the gap”, or out-of-pocket costs, which aren’t covered by either Medicare or your private health insurance.

Like many people, I’ve been weighing up the value of forking out hundreds of dollars for premiums each month, especially following my own recent experience with the health system.

After putting up with ongoing sinus and breathing issues I was referred to a specialist, who recommended an operation on my nose to correct the problem.

A few months on, and the surgery was a success – but I was left thousands of dollars out of pocket, despite having private hospital cover.

Despite this expense and after weighing up the pros and cons, I’m of the opinion my cover still provided value. Here’s why:

Choice

After putting the surgery off for months, I finally made a decision to have the operation. Having found a surgeon I felt comfortable with, I was given a list of potential hospitals and times where the operation could be performed, allowing me to book a time that suited my schedule, with minimal interruption to work and family life.

Public hospital waiting lists

While emergency treatments are provided promptly at public hospitals, “non-urgent” or elective surgery is often subject to long waiting lists.

While these will vary depending on the hospital and type of surgery required, in 2016/17 the median waiting time in NSW for elective surgery overall was 54 days, with 10 per cent of patients waiting more than 327 days for their operation.

With governments encouraging us to take out private health insurance, and Australian society as a whole creeping slowly towards a user-pays mentality, this situation is unlikely to change any time soon.

The cost of “self-funding” cover

One of the arguments against private health insurance is that you’d be better off saving and investing the money you would have spent on the premium.

This may be mathematically correct, particularly for younger people unlikely to claim on extras or cover for elective surgery.

However, human beings are emotional rather than rational. Given the extra funds available, most of us will adjust our lifestyle and find a way to spend it.

I have had this conversation with many people and clients over the years – but so far I have not met too many who have actually put this strategy into practice.

For those who do, they’ll need to make sure they set aside a fair chunk of cash.

According to figures provided by health fund nib, some of the most common procedures and their average associated costs (based on nib’s Standard Hospital Family cover) can range from $1,558 for dental surgery, to $3,099 for a tonsillectomy and up to a hefty $4,750 for certain gynaecological services (not including pregnancy related procedures).

Coronary bypass surgery would cost around $45,000 if performed in a private hospital without health insurance.

One of the biggest risks, even for those disciplined enough to save, is that you cannot guarantee you will not suffer two major health events back-to-back, or a chronic illness that requires ongoing medical attention (and funding). If your “rainy day” fund is exhausted on a major health event, you would be financially vulnerable should a second or ongoing health event(s) occur.

Peace of mind

Daniel P Egan recently wrote that … “True wealth is not money. It’s the option to buy what you truly need. If money can’t buy what you need, you’re on even footing with the poorest person out there.”

We’ve all heard the tragic stories of families dealing with unexpected health events, or having to set up a Go Fund Me page to offset the cost of medical care.

As a father of three young children, there is peace of mind that comes from my family having access to health cover over and above what may be available under Medicare. Sure, it’s a luxury, but while it is affordable and I perceive it to provide value, I will pay the price.

Medicare Levy Surcharge (MLS)

With the population – and the cost of providing the Medicare system – constantly moving upwards, the Federal Government has been trying to lessen this burden for years by “encouraging” more people to take out private health insurance and reduce the demand on the public health service.

This encouragement however comes in the form of a penalty for taxpayers who earn over a certain amount and don’t at least have an appropriate level of private hospital cover.

The Medicare Levy Surcharge is currently calculated at a rate of between 1% and 1.5% of a taxpayer’s total income each year if they earn over $90,000 for individuals or $180,000 for couples or families.

It is charged in addition to the Medicare Levy of 2%, which is paid by most Australian taxpayers, so you’re still likely to end up paying something, even if you elect to stick with the “free” public health system.

Private health insurance can feel like a burden or act as a blessing, depending on your circumstances.

Regardless of whether you decide to like it or lump it, make sure you do your homework first to ensure you make the right choice for both your medical – and financial – well being.