Is private health insurance worth the cost?


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It's expensive, but it's better than nothing - that's a common attitude to private health cover. The Australian Prudential Regulation Authority reported the 10th consecutive period of growth for the private health industry in the December quarter of 2022.

A record 14.42 million Australians (55% of the population) now have private healthcare with membership growing by 2% over 2022.

Even younger Australians are realising the benefits of private health insurance, such as 25-year-old Hayden Lenord, who says he has had it consistently for the past two years.

is private health insurance worth the cost

"I initially got it because I had a few medical issues that needed attention and I didn't want to pay out of pocket," he says.

Lenord says he grew up without private health insurance, but when he became an adult he realised it was the little things that made a difference.

"It gives you peace of mind to know you can go to these appointments and not be out of pocket. It means I will go and get checked rather than delaying it, which could cost more down the line."

Not everyone is this enthusiastic as the cost-of-living crisis continues to bite.

Rising interest rates and inflation have meant Australia is now one of the most expensive places in the world, according to cost-of-living calculator Expatistan, which estimates the current monthly cost of living for a family of four to be $7688.

Health insurance costs are set to rise, too, with the federal government estimating an average 2.9% premium increase for policyholders this year, starting on April 1. Data from the personal finance marketplace Compare Club shows that families could see their premiums increase by $141 over the year, while retirees could see an average increase of $167. On average a single person will pay an extra $1.17 a week, and a family $2.58 extra a week.

Compare Club chief executive Andrew Davis points out not all funds are increasing their premiums on April 1. "Even those customers who are seeing premium rises deferred to later in the year will still be paying a lot more money for their cover than this time in 2022, and the amount they stand to save from a deferral is likely to be less than what they would save by reviewing and switching their policy," he says.

The cost is one of the reasons why healthcare worker Aaron Matthew, 32, has chosen to forgo private health insurance. "I didn't grow up with private health insurance and as I've continued to get older it's not something I've seen the value in," he says.

Matthew says that at his workplace he sees people from the private hospital come into the public section to get tests or check-ups, which further cements his position. "Anything life-saving is free, anything urgent is free. I see a lot of things working in a hospital that mean I just couldn't justify the costs of private care."

According to the comparison site Finder, Medibank is the nation's largest private health fund, with 27.3% of the market share, with Bupa, HCF and NIB rounding out the top four.

Medibank executive Milosh Milisavljevic says it has continued to increase its membership as health has become front of mind for people as a result of COVID-19. "Health is higher on the priority list following the pandemic as people's awareness of health and wellbeing has continued to rise, which has driven private healthcare participation," he says.

Milisavljevic says that many people, including Susanne Gervay (see case study, page 46), opt for private health insurance for the choices it gives them. "People take out cover for the ability to choose, so whether that's when they get the procedure, or the doctor or which hospital, it's about peace of mind."

In recent years, many Australians have been taking out cover to reduce the cost of accessing mental health services.

Milisavljevic says just five years ago the key reason for coverage was for people to start a family, but now mental health was a key priority. "The capacity just isn't there in the public sector to provide a broader level of service for mental health and it's going to be a long-running need for Australians," he says.

For people looking at private cover, Milisavljevic says the most important thing is to consider their health needs. "At the very root of why people take out coverage is the consideration of what are their health issues now and what issues do they think they will need to look at in the future."

how much does ambulance cover cost with private health insurance

Choose the right policy

Health insurance was simplified by the federal government in 2019, to help Australians find the cover that works best for them. It required all hospital insurance policies to be classified into tiers: Gold, Silver, Bronze or Basic.

What's included in these tiers is based on a minimum clinical category of treatment and can be found on the government website,

Insurers are required to send you a statement of what your policy does and doesn't cover at least once a year or when the policy changes.

Another change was the introduction of a discount of up to 10% of their private health insurance hospital premiums for people aged 18-29 years.

There are additional incentives to take out health insurance, including the lifetime health cover loading, and allowing people to stay on their parents' coverage until they are 31.

"The government has a website that lists all the insurers and what they offer, which can be much better than an aggregator that may only cover a few funds," says Milisavljevic. "What you need to look at is what is the best fit for you and then figure out the out-of-pocket costs and the benefits included in that plan."

Choice health insurance expert Uta Mihm says that while the process has been made much simpler, there are still ways to make sure you are getting the best deal. "The important thing is to not just have health insurance, but to make sure you have the cheapest possible policy for what you require."

The first thing to consider is that there are two types of insurance policies, hospital cover and extras.

If you have hospital cover you can get treatment at a private hospital, can choose your doctor and shorten your waiting time for elective surgeries.

Extras policies cover you for healthcare outside a hospital that is not covered by Medicare, such as dental, optical and physiotherapy.

Mihm says you should always look at your policy and whether you can downgrade to make it cheaper.

"The people who benefit the most are those having children or elective surgeries, but if you aren't in those categories then there are savings to be made."

Private health insurance is just like anything else, in that it pays to shop around and even look beyond the big names such as Medibank and Bupa.

"Eighty per cent of Australians are with one of the big ones, but we've found that they aren't the cheapest and there are a lot of cheaper options down the smaller end of town that are just as good," says Mihm.

Funds like AIA and even Qantas Health Insurance offer a range of benefits to entice new members.

AIA is perhaps best known for its Vitality program, which incentivises members to do regular health checks, move more and eat well.

Qantas Health, launched in 2015, is tied to the airline's frequent flyer membership, offering up to 130,000 points for joining (at the time of writing).

Like many insurers, both offer a range of products and memberships tiers, but Mihm says to be careful about purchasing a membership that sounds suitable but may not be.

"When it comes to couple's cover, it's often not beneficial to take it out, particularly as it could mean paying for a service that one party will never use."

Safety net comes in handy

Author Susanne Gervay has had a tough couple of years. In 2022, she had two brain tumours and a stroke that required urgent medical attention.

"Having private health insurance gave me options. I utilise both the private and public health system and that gives me comfort when it comes to my healthcare," she says.

Gervay grew up having private health insurance and says it helped with elective needs like dental and optical, but it was always about the safety net for her.

"I would be scared to not have private health insurance particularly later in life where I've had a number of emergencies happen," she says.

Even just having the option to get minor surgeries done faster can make all the difference to long-term health, she says. "I needed a back operation and going through the public system would have taken years, but due to my private cover I was able to have it done quickly so I could continue to walk."

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Patricia Westmacott
May 13, 2023 3.07pm

I've long held the belief that a business model for profit, should not exist in service models such as healthcare. It is inequitable crippling low to middle income earners and the knock on effect to public health care. Means testing and increasing Medicare levy for all, evens out the playing field and boosts the much needed public health funds and Medicare. A model that allows increased levies could afford people their choices as well. Do away with for profit private health care agencies. We would still enjoy a free enterprise market in other sectors and industries.

Mark Harmb
May 14, 2023 12.00pm

This article was remarkably disingenuous, as it failed to mention key aspects affecting the value proposition of private health insurance. It was more of an 'infomercial' by private health insurance than an assessment of the parameters for judging the of such insurance.

- Most insurers complicate the government's tiers with at least a 'Silver Plus' tier. The waiting periods for types of procedures vary between insurers, further complicating the comparison of tiers.

- Hospital insurance does not cover out-of-hospital attendances such as GP and specialist appointments in their rooms.

- No comparison of the premium cost versus the benefits paid, especially in the case studies advocating extras insurance.

- Many private hospitals do not have an accident department. Large public hospitals are the best trauma centres. What does 'accident-only' private health cover then?

- The article's table of the cheapest insurance in each state only included 'accident-only' policies. So most of the justifications presented in the article (choice, waiting times, elective surgery) for private health insurance are irrelevant.

- The immoral rip-off of new subscribers: waiting times - charging the full premium from day one for no cover, or only partial cover, for up to a year!

- Choice of a healthcare provider is constrained by many insurers, with preferential limits or gap fees with the insurer's contracted providers.

Bella Vine
May 15, 2023 3.22pm

You are right Private Hospitals often don't have EDs or ICUs, and if they do, they're rarely used or only opened in a state emergency.

I've had a look at the accident only cover with Frank Health, and it gives you the option of going into a public hospital as a private patient if you have had an accident.

It covers emergency ambulance too, but this only applies to States that don't have a state-based subscription service or scheme to cover ambulance transport. NSW is one state that has no subscription services or schemes for ambulance, and I think the other state is WA.

It covers Rehabilitation, Psychiatric Services and Palliative Care, but only on a restricted level, which means you are not fully covered and the benefits the Fund pays on your behalf are low, it covers you for nothing else.

Harry Wright
May 15, 2023 5.02pm

What this article doesn't cover unfortunately is the fact that private health - as expensive as it has become - is even MORE ridiculously expensive if you actually make a claim !

Let's be clear - private health covers the hospital stay (though these days they kick you out the same day for many procedures or overnight at worst) plus you still have to pay the excess.

But by far and away is the GAP fee where most doctors will try to roger you sideways. The gap will often be in the thousands for most procedures AND you need to factor in the Anesthetist as well. This is one truly despicable group of doctors who have no problem in ripping you off especially if required at short notice or in an emergency where you have to pay whatever they're charging and they damn well know it and that's why they charge what they charge. There is also usually NO CHOICE of doctor when it comes to Anesthetist's as you simply get the doctor on call at that hospital at the time and is usually not known well ahead of time so there is little chance to "shop around" for the best / cheapest one.

So using private health insurance to make a claim ain't all its cracked up to be after you pay thousands and thousands each year as a premium, then pay an excess, then pay the GAP for your doctor and then pay another GAP for the Anesthetist !

Unless something is done to regulate this industry in a massive way to stop the power of the AMA from ripping off patients - then everyone is doomed as there simply won't be a private health industry into the future. And all those greedy doctors and the AMA will suddenly wish they hadn't been driving up prices for decades as they will price themselves right out of a job and be forced to work for the low paying / high pressure public system !