I bought private health insurance in the first year I came to Australia. As of now, nearly half of the Australian population has private health insurance of some sort. Similar to many other Australians who have private health insurance, my foremost reason to buy private health insurance was the peace of mind. Unfortunately, it’s a bit superficial when you look more closely. More on that later.
Wait I Heard There Is Something Called Medicare…
Yes, you heard right!
In Australia, there is a fantastic public health care system called Medicare.
If you are an Australian citizen or a permanent resident living in Australia, you get access to the world-class public hospitals in Australia under Medicare. Medicare covers almost everything including major and minor surgeries, ultrasound, pathology, doctor visits, maternity services and so on. Most of these things are either partially or completely free of charge under Medicare.
Why Do You Need Private Health Insurance Then?
Well, the answer is not straightforward. There are a few reasons why people choose private health insurance.
Public hospitals usually have longer wait times when it comes to elective (non-emergency) surgery. For example, the average wait time for knee replacement surgery in a public hospital is 195 days while heart bypass has 17 days of average waiting. Of course, the wait time differs by state, city and hospital. With private hospitals, however, there is less or no wait. With painful medical conditions, this could be a deal-breaker.
You can’t choose a hospital and doctor with Medicare. You can’t have appointments in a public hospital as per your convenience either. With a private hospital, however, you can do both. Things like pregnancy where you want to have the same obstetrician looking after you, some people might find private insurance helpful.
Private health insurance covers some of the things not covered by Medicare. These are called “Extras” in private insurance terminology. For example, most of the dental services are not covered by Medicare. Same is the case with prescription glasses or contact lenses. So people buy Extras cover to reduce the cost of these services.
The Australian government encourages you to buy private health insurance via a few “incentives”, number one being Medicare Levy Surcharge or MLS. In essence, the Australian government says that if you don’t buy private health insurance and you earn well, you need to pay an extra tax to fund the public healthcare system. Medicare levy Surcharge ranges from 0 to 1.5% depending on your income level.
There is another penalty called Lifetime Health Cover loading.
As per the rule, if I take private insurance after the first anniversary of Medicare enrolment, I will have to pay LHC loading of 2% for every year I didn’t buy health insurance after my 30th birthday. For example, if I buy private health insurance at the age of 40, I will have to pay – 10 years * 2% = 20% LHC loading every year on the insurance premiums I pay. So if my yearly insurance premium is $3000, I will have to pay $600 extra and it will increase by 2% every year thereafter.
Very compelling argument to buy insurance before you age 30!
Lastly, if you buy private health insurance, you get a rebate on the insurance premiums you pay. This means your insurance premium is reduced by a certain extent. Currently, the rebate percentage ranges from 25.059% to 0% depending on your income level. The higher the income, the lesser the rebate. Simple!
So Why Did I Cancel Private Health Insurance?
Those were some of the solid reasons for me to buy private health insurance in the first place. However, over the period, I found out that I am paying way too much and not getting much out of it.
Private Health Insurance Is Too Expensive
I was paying nearly $3300 per year for a medium family cover, after government rebate. If I pay Medicare levy surcharge of 1.5%, I will still pay significantly less than that. Plus, every year the premium for private health insurance increases by 2 to 5%. According to Choice, the leading consumer advocacy group, health insurance costs are growing faster than inflation. As a growing family, I cannot afford to spend so much on something that’s not worth it.
No Value For Money (Unless You Are A Shareholder Of The Insurance Company)
When an average person buys any kind of insurance, it’s to protect himself/herself against potential risk. Say, if I buy property insurance, I buy it because it protects me against possible damage from fire, earthquake, storm, flood etc. I expected the same when I paid the top dollar for private health insurance. Did I get what I want? No. Many of the common medical procedures were excluded from cover including maternity, eye surgery and joint replacement surgeries. The things which were included were capped by limits and sub-limits. Plus, there are other costs such as the excess i.e. amount you need to pay out of pocket and co-payment which means you share costs for certain services.
I Don’t Need Extras
In my opinion, a person who frequently avails services advertised in the Extras cover is most benefitted by it. For example, if you frequently need to change your glasses or visit a physiotherapist or get a remedial massage, you might like the Extras cover. However, in my case, I hardly used any of these services. So most of the extras were really “optional” for me.
High Out Of Pocket Costs
Private insurance comes with something called “gap payments”. Essentially, it means that insurance company will pay only a certain portion of the medical bill and whatever is in excess will come out of your pocket. Depending on the hospital, medical procedure and your policy, it can vary from a few hundred to a few thousands of dollars. Some of my friends had to pay 6-8K out of pocket despite having private health insurance for minor surgeries.
Plus, everything covered has a limit and sub-limit too. For example, fitting a dental crown might cost you around $800-$1000 but due to a cover limit, an insurance company is liable to pay only up to $200-$300. If I have to spend so much despite paying a 3K+ premium every year, thanks but no thanks!
Medicare Is Still My Number One Option
So far, my experience with the public healthcare system has been fabulous. In terms of facilities, the expertise of the doctors and the level of care, public hospitals are as great as private hospitals. Out of the past 3 years, never once was I asked about private insurance when I visited any hospital. Medicare card was good enough for all of my needs. I will happily pay Medicare Levy Surcharge of even 2% to contribute to the public healthcare system rather than filling the coffers of insurance companies.
I Am Still (relatively) Young
I am not Tom Cruise but hey, I am still fit and healthy. Instead of buying private health insurance to protect against health issues in the distant future, why not save that money and invest in something else? I can always buy health insurance later in life. Though it will be more costly then it will also be more useful. Let’s say I save 3K worth of premium money every year for 10 years and then I had to pay $600 to $800 extra each year towards LHC loading, I would still have saved significant amount.
Considering all these factors, I pulled the plug. I have 1094 days to opt for private health insurance again if I want. If I do, I will avoid LHC loading on the insurance premiums that I will pay in future. I have got plenty of time to reconsider my decision. Will I opt for it again? We will see.
Did you opt for private health insurance when you came to Australia? Did you find it useful? Please let me know in the comments below.