Private health premiums rise, so what should you do about extras?
A majority of Australians have private health extras cover, but some may be feeling the squeeze after premiums went up. Anthony Keane explains what’s at stake.
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Opinion: Private health insurance premiums jumped again last week for millions of Australians, no doubt prompting some to reconsider whether they should quit their cover.
For many, the cost of getting rid of hospital cover is more expensive than keeping the policy because the Federal Government imposes penalty taxes for Australians earning slightly above the average wage of about $1700 a week.
The Medicare Levy surcharge of up to 1.5 per cent on top of existing income tax payable applies to singles on $90,000-plus and couples on $180,000-plus, and is a big stick used to whack consumers into line for not having private health insurance.
However, the surcharge isn’t affected by private health extras policies, which are held by more Australians (53 per cent) than those who have private hospital insurance (44 per cent) and cover things such as dental, physiotherapy and optometry.
Ditching extras won’t cost you a tax penalty but could cost you cash if luck doesn’t go your way.
For me, luck hasn’t gone my way and Murphy’s Law has ruled my household health costs in recent years.
Since ditching extras in 2016 in protest over the small rebate paid for my oldest daughter’s orthodontics, I’ve personally had treatment for a dodgy elbow, dodgy foot and dodgy knee.
My youngest daughter is getting braces too next week, and three days ago I had some major dental work of my own costing almost $2000.
But before kicking myself for my lack of foresight, I checked the extras policy I previously had and discovered that even if I’d had its top extras cover, the gap would have been several thousand bucks for the braces and several hundred for my dental stuff.
Anyone with extras should not expect to be fully refunded. Data shows on average insurers rebate just over 50 per cent of the fee you pay to health providers.
For some people, that’s enough to justify it – particularly if they would be spending plenty on optometrists anyway.
But for others, it’s worth doing your sums to check whether you’re getting value for money or would be better off financially if you self-insured.
If extras cover still excites you, just make sure you don’t get caught out by:
• Not knowing the annual limits and item limits on individual claims.
• Not using an insurer’s preferred providers, which deliver higher rebates but can involve less choice for the patient.
• Not using the policy enough. Try to check what you’ve spent in the last year or two on health services covered by extras.
• Excesses you may have to pay for certain services.
Private health insurers pocket billions of dollars a year from extras going unused, so don’t throw money at something you rarely use.
But if you like peace of mind you can get from extras, and don’t want to play chicken with Murphy’s Law like I did and lost, perhaps searching for savings elsewhere in your household budget may be the way to cover the latest jump in private health premiums.