Alexis Carey: ‘Why private health insurance is a waste of money’

Alexis Carey is convinced private health insurance is a big rip-off. And she’s far from alone, with Aussies abandoning policies in droves.

OPINION

When my 31st birthday was looming, I was bombarded with targeted ads warning that my life would be all but ruined if I didn’t take out private health insurance — pronto.

Those aggressive, doom-and-gloom ads were the result of the government’s lifetime health cover (LHC) initiative, which pushes Aussies into taking out insurance early — by punishing those who don’t.

In a nutshell, if you don’t sign up for private health cover from the year you turn 31, you’ll be slugged with a 2 per cent LHC loading on top of your premium for every year you are aged over 30, if and when you finally do sign up.

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It does sound scary, and it did make me stop and think — before I decided it was all a giant con.

Because the reason why the government pushes so hard for private health insurance for young people comes down to simple maths and statistics.

The fact is, the younger you are, the less likely you are to wind up in hospital.

That means you’ll be coughing up for a service you probably won’t be using — so you’re essentially subsidising other, older people.

The government’s own Australian Institute of Health and Welfare website backs this up, with stats showing an average of just 280 hospitalisations per 1000 people aged between 25 and 34.

It’s a different story for 55 to 64-year-olds, with 626 hospitalisations per 1000 Aussies — a figure that continues to rise sharply with age.

But even if you are one of the unlucky young people who do land in hospital, it will probably be the result of an accident — and in an emergency situation, you’ll be taken to the closest public hospital in the overwhelming majority of cases anyway.

And even if you do end up taking out private health insurance later in life — which means you’re stung by the loading — you’ll still end up paying less in the long run compared with someone who has been paying every year since their 31st birthday without claiming.

That’s why the mad rush to take out a policy in your early 30s just doesn’t add up.

WHY GET PRIVATE HEALTH?

There’s a lot of fearmongering that goes with the industry, and many Aussies sign up for cover because they worry that if they get hit by a truck or contract some terrible disease, they’ll be left out in the cold without it.

But that’s not true.

In Australia, private health insurance is not a matter of life or death, because in an emergency you’ll be taken to a public hospital where you’ll receive a high quality of care — for free.

The same goes for serious illnesses — if you’re diagnosed with one, you’re still going to be treated, whether you have private cover or not.

Of course, there are clear and obvious benefits of health insurance — you’re better able to choose your doctor for one, and you’ll also receive non-urgent treatment faster and at a more convenient time.

It also covers some services that Medicare doesn’t, like basic dental and optometry.

But a lot of people also don’t realise that even if you do have health insurance, it doesn’t mean 100 per cent of your medical costs will be covered — and as a result, many people end up shocked by the “gap” between their cover and their medical fees.

THE VERDICT

I’ve always found the concept of private health insurance to be a bit dodgy, especially for young people, and it turns out I’m not alone.

Late last month, figures released by the Australian Prudential Regulation Authority (APRA) revealed Aussies were turning their backs on private health in droves, with 65,000 fewer Australians having health insurance in December 2018 compared with the previous year.

Australia’s private health industry is in a “death spiral”. Picture: iStock

Grattan Institute health economist Stephen Duckett also released a paper in July which warned the industry was now in a “death spiral”, with premiums rising “much faster than wages or inflation” leaving Aussies “increasingly dissatisfied” — especially young, healthy people.

He told me there were two clear benefits of private health, especially having the “choice of doctor”, although he warned the public “don’t necessarily have good information about doctors” at their disposal anyway.

The second benefit came down to amenities like private rooms and food — although most public hospitals now have a “fairly high proportion” of single rooms — and the reduction in waiting times.

Dr Duckett said there was a widespread lack of understanding about how people’s private health insurance actually worked, which meant some people weren’t covered for things they expected to be, like maternity care, while others were left with “much bigger out of pocket bills” than they expected.

It’s obviously a personal choice at the end of the day, and I’d never begrudge someone for getting cover — for lots of people, the peace of mind it brings is absolutely worth the cost.

But I’d rather keep my cash in the bank and use it when I actually use it — and it seems more and more Aussies are agreeing with me.

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