Barefoot Investor reveals his money-saving health insurance tips

There are 26,000 different policies and it’s almost impossible to work out how to get a good deal … which is exactly how the health funds like it, says Barefoot Investor.

Federal Health Minister Mark Butler wants you to know that he has balls of steel.

You see, each year private health insurers must go cap in hand to him to increase their prices. And this year they wanted to deliver their biggest premium hike in six years – but he rejected it.

Bam!

Instead he’ll soon announce that he’s allowing a much smaller increase in your annual private health insurance premium.

Pow!

The truth?

The truth is the Minister doesn’t have the balls to tell you it’s a total farce.

But I do. So let me tell you how the game is really played … and how you are getting robbed: While it’s technically true that private health insurers can only increase their prices once a year, and that old Steely Balls has to sign off on it, it’s also true that health insurers can close down existing policies and simultaneously release new, much more expensive policies at any time.

Health minister Mark Butler. Picture: NCA NewsWire / Ben Clark

Let me give you a very personal example:

My family has gold-level, hospital-only cover with insurer Health Partners. (I don’t pay for extras or combined cover, because it’s generally a rip-off for most people.)

Ten years ago, this was one of the best-value products on the market. Actually it was too good – Health Partners have now closed this product to new customers.

And here’s the rub: today, if a new customer wants the same cover as me it would cost them $2,360 more than I’m currently paying per year.

And it’s not just Health Partners that are engaging in this shifty practice. CHOICE recently found that insurers have increased their gold hospital cover by about 31.5 per cent in the past three years, much more than the Government-mandated increases.

Look, private health insurance is intentionally confusing.

There are 26,000 different policies, and so many exclusions and out-of-pocket gotchas that it makes it almost impossible to work out how to get a good deal … which is exactly how the health funds like it.

This explains how they were able to lift their profits by more than 110 per cent in the last financial year (to $2.2bn) while their customers lived through a cost of living crisis!

So what can you do?

Health funds lifted their profits by more than 110 per cent in the last financial year.

Well, think about whether you actually need private health insurance, for one.

That being said, the Government has a gun to our head and effectively forces 11 million of us to take it out, or smashes us with an extra tax. (And if we wait too long to sign up, we’re slugged with a further penalty based on our age.)

So your only option to save a buck is to consider downgrading your cover. CHOICE did the numbers and found that you could save up to $1,870 by switching your hospital insurance to a cheaper gold, silver or bronze policy – which admittedly limits or totally excludes coverage for childbirth (snip, snip!), knee or hip replacements (no limbo dancing!) or mental illness (stay happy!), among other things.

And when you’re comparing, avoid the churn-and-burn bucket shops like Comparethemarket and iSelect, which only show you policies they get a kickback from. Instead, head to the Government’s search engine Privatehealth.gov.au, which lets you compare every policy on the market.

If Mark Butler really had balls of steel, he’d stop playing political theatre with the health funds and do some serious surgery on the entire industry, because it’s an absolute disgrace.

Tread Your Own Path!

The Poor Little Rich Girl

Hi Scott,

My parents are self-made millionaires. They support my lifestyle by providing a car and house and paying for the odd large unexpected bill. But since I was a kid I’ve been petrified at the thought of inheriting this wealth, because they worked all their lives to build it up. It’s like an iceberg that has chipped off my entire shoulder.

I don’t live to excess, and I work and invest my savings. My trouble is, there’s all sorts of support for people in any other kind of situation, but there’s nothing except the odd depressing Reddit thread for children of wealthy parents. I feel so alone.

I know better than anyone that money does not buy happiness. It just sits there like a security blanket that keeps on growing and growing. I truly hope that I, my kids, your kids, or anyone’s kids are not screwed up by their parent’s wealth. What would you do in my position?

Poor little rich kid

Barefoot says Prada-wearing, BMW-driving trustafarians are cliche.

Hey Poor Little Rich Kid,

You don’t sound screwed up to me at all.

Trust me, I’ve had many, many infuriating discussions with trust fund kids, and many of them mistakenly see money as love – because growing up that’s what they saw their parents loved most.

You are wise enough to know that’s bulldust. So, the smartest thing you could do is not follow in your parents’ footsteps. Use your money to buy yourself time, not just things: spend your time (and some of your fortune) helping people other than yourself. Find a cause that energises you.

Yes, that sounds trite and clichéd – but it’s not nearly as clichéd as being a Prada-wearing, BMW-driving trustafarian with a daddy hangup that no amount of cocaine can blow away.

Wine-O Needs Help

Hi Scott,

I have a dream. I want to start my own vineyard. I love wine! We live on 20 acres in Gippsland (Victoria) and I want to add 10 acres of vines. I always thought it was a pipe dream but last year I got an inheritance of $250,000 from my grandmother. I want to use that money to create something. I want to bottle my own wine, it’s very profitable. My wife is not so sure, and wants to pay it off the mortgage. Is this a good idea?

Craig

A vineyard costs up to $50,000 an acre to set up, says Ben Ranken from Wilimee Winery.

Hi Craig

I know nothing about wine, so I asked the best winemaker I know, Ben Ranken.

Ben won the ‘Young Gun of Wine’ award from his industry peers, so he knows what he’s talking about.

Over to Ben:

“I see a lot of doctors and lawyers and wealthy people who fall in love with the idea of owning a vineyard, but they never think about who they’re going to sell their wine to.

“So my advice to Craig is to work backwards: have a wine with a local winery and ask them about their experience, how much they’re selling their wine for, and to who, and how much money they’re making.

Because it can be a tough slog. A vineyard costs between $30,000 and $50,000 a hectare (irrigation, posts, vines) to set up, and then you’ve got three years before you have a crop.

So you’re basically working for free, and you’ve got all the risk. As you know all too well, Scott, there are bushfires, floods, kangaroos, rabbits, hailstorms …”

Thanks Ben. I’d go with paying down the mortgage, Craig (and buying a case of your favourite plonk).

Speaking of which, I famously don’t drink anymore, but back when I did it was Ben’s wine that was my rolled-gold favourite. In fact I used to give away his plonk to hoity-toity wine snobs, and they’d often tell me it ‘tasted like $200 wine’ (check out Ben’s wines out at www.wilimeewines.com.au). I don’t get paid anything to say that … other than to see my readers get to drink amazing good wine.

Tell him Barefoot sent you!

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.

Originally published as Barefoot Investor reveals his money-saving health insurance tips