Our health is the most valuable thing we have and eventually it will fail us at one stage or another. Choosing whether to have private health insurance comes down to risk management and risk has a value.

According to the Australian Prudential Regulation Authority, 46% of the Australian population had some form of private hospital cover with 55% having some form of private general medical cover.

What can I get cover for?

Cover can be basic or full, with various inclusions (i.e. hip replacements or prenatal/postnatal care). It’s normally divided between hospital and general (visits to your GP) and will vary widely across many service providers. Inclusions attract a corresponding level of premium.

Those of a younger age often take their health for granted, and certainly statistics show that those aged 20 to 40 years of age are the least like to make a medical insurance claim. It is important you consider family cover in the case of having young children, who can be amongst the highest cases of health insurance claims. Likewise, pregnancy cover may be an option worth having if you are opting for a birth in a private hospital. Private insurance will offset the cost of an obstetrician and private hospital fees, which can cost as much as five figures.

What happens if I’m not covered?

Medicare enables you to use the public health system however it’s likely you’ll encounter longer waiting periods for treatment, without the comforts that a private health stay can provide. Depending on your treatment, you also run the risk of receiving medical bills that may be more than you can afford out of pocket.

Also keep in mind the Lifetime Health Cover Loading AND the Medicare Levy surcharge, which combined could cost more than an annual private health insurance premium. The Lifetime Health Cover Loading affects anyone over the age of 30, attracting a 2% loading (of the cost of your premium) for every year that you don’t have private health cover in place. For example a 40-year-old taking up cover for the first time would pay an additional 20% on their annual premium. The Medicare levy surcharge is applied if you don’t have private health cover and your income is more than the government threshold (currently $90,000 for individuals or $180000 for couples). Both charges are intended to incentivise people who can afford private health cover to get private health cover, so as to free up the public system for those less fortunate.

What if I cancel my cover?

You may be exempt from the health cover loading if taking a hiatus from your private health cover for a defined period, however a permanent cancellation may set you back long term. You would need to have ten years of continuous private health cover to avoid facing a loading again. If a 37-year-old who has had cover in place for seven years decides to cancel they will have to restart their ten-year period of continuous cover all over again before they can be free from loading consequences. If you’re healthy it’s understandable that you’re starting to question whether or not you need private health cover. However, it may be prudent to try and reduce your premium by reviewing what your current cover includes (do you need naturopathy?). Also shop around – there’s plenty of online comparison sites to help you find a better deal.

Private health cover is a big decision to make so shop around, shop around, shop around. Consider the type of cover you’re likely to need, what you can afford, and the consequences, both financially and from a health perspective, of not having good cover in place.

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The information in this article is general in nature and does not take into consideration your personal situation or circumstances. You should consider whether the information contained in this article is suitable to your needs and where appropriate, seek professional advice from a financial adviser or other finance professional.

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