An interesting article appeared in Fairfax newspapers that suggested that people do not need private health insurance.
If you are considering cancelling your health insurance policy on the back of this bold advice, it is worth considering a few very important points.
Australia is incredibly lucky to have a strong public health system that protects those in need. Does that mean that there is no place for the private system? Of course not. Both systems play a very important role in spreading the demand for medical services across two systems and ensuring that those who need free healthcare the most are able to access it. Conversely, those who are wealthy enough to afford to pay for healthcare, can and should do so.

The fundamental reason that the private health system exists is to take the burden off the already overcrowded public system. If you are wealthy enough to pay for private health, is it really fair to clog up waiting lists and beds when there are people much more needy who cannot afford private health? Having an effective blend of public and private healthcare is a sensible way to balance the needs of the lower income earners and efficiency of services.

The argument that you should refrain from paying insurance and keep the savings under a bed for the day when you need to pay for an expensive service is all well and good unless you believe in managing risk.  And it is important to understand the fine print for all insurance policies, whether it is for your health, your car, your travel, your pet or your life. To imply that health insurance products are inferior to other insurance products is simplistic at best and misleading at worst. The best way to find out if you are covered for a particular service, or if the hospital you want to go has an agreement with your health fund, or if there will be a medical gap payment when in hospital, is to speak to an expert from your fund or a comparator.
The article implores us not pity health funds because their actuarial team ensures they make a profit. To look at this from another angle, would you really expect – or even want for that matter – your insurer to be making large losses? If they were haemorrhaging cash and about to fold, would you feel confident in them being able to cover you when they need to?  The vast majority of health funds are not for profit anyway, which means that profits are returned to members.

Now, let’s discuss the concept of the policies out there to avoid tax. The article suggests that a morally responsible person should donate extra taxes to the Government in the form of the Medicare Levy Surcharge (MLS), rather than try to get something like a policy for their money.  The other point to note is that the Medicare Levy Surcharge contributes to Federal Government Consolidated Revenue; “roads, schools and hospitals” are actually controlled by State Governments, not the Federal Government.  In any case, if you had the choice to pay the MLS or receive a health insurance policy for the same or even less money, what would you do? Someone who earns $150,000 a year will be liable for $2,250 in extra tax payments to the government if they fail to take out a private hospital policy. You could instead choose to purchase a health insurance policy and get something in return.

 

Think of this example for instance: HCF’s Mid Plus Hospital Policy with a $500 Excess would cost you only $1,692.60 (for a Victorian Single), so you could purchase that policy, have coverage for thousands of medical procedures in a private hospital and still have cash left over.
You could even bundle an extras policy alongside your hospital policy and receive coverage for all sorts of ancillaries. Take Silver Plus Extras for instance – this will set you back (as a Victorian Single) another $450, and you will receive two free check-ups and cleans at HCF preferred provider dentists and receive no gap eyeware at HCF’s network of optical providers, in addition to a whole range of other ancillaries benefits under the policy. You also wouldn’t have to worry about the Federal Government going and spending your money on the latest poorly thought out spending spree that’s aimed at winning your vote. The best car insurance policy you ever have is one you never have to claim on. Private health insurance is the same for at least the hospital component – we would all love never needing to go to hospital. Extras at least allows you to benefit without necessarily being sick. If you focus only how much you get back from your braces, you will never be satisfied with an extras policy. But if you need dental, optical, physio, chiro and remedial massage (just to name a few!) you will probably start to see some reasonable return for your money.

 

The last point we should examine is that of waiting lists. If you choose to cancel your private health insurance policy, you should keep in mind that you cannot waltz into a public hospital when you require elective surgery and demand to be treated immediately on your terms. This is because hospitals are already overcrowded and there is a pecking order of need that dictates who is treated first. If you have a coronary emergency, you will naturally be treated before someone who has a broken wrist. But if you need an arthroscopy on your knee to repair a torn ligament, do you really want to wait around for potentially months or a year, while your quality of life suffers in the meantime? Private hospitals are there for people that can afford it, so they do not have to worry about these sorts of waiting lists. And if you can afford it, is it morally responsible to deny someone a bed in a public hospital if they are needier than you?

All of these issues are thought provoking, and the important thing is to ensure that you engage appropriate levels of research, speak to a financial adviser about your financial implications, and speak to a health insurance expert to compare the policies available, before rushing to cancel your policy on the back of advice that you don’t need your policy when in all likelihood, you probably do. If you would like discuss what policies might save you money, please call us on 1300 369 399.