Originally published by TJ Ryan on March 9, 2017.
Do I need private health insurance?
Private health insurance gives you the peace of mind of knowing that you and your family will be covered, should any health problems crop up that need treatment in the private system.
People take out private health insurance for a number of reasons – to avoid the Medicare levy surcharge, to opt into lifetime cover and save money long-term, or just to have the peace of mind that comes with circumventing public hospital waiting lists.
Advantages of private health insurance
As mentioned above, private health insurance has many benefits, some of which can include reduced public hospital waiting list times, private hospital rooms, dental cover and the ability to choose your doctor or surgeon. We will explain these advantages, plus many of following in more detail below:
- Avoid public hospital waiting lists and patient priority order
- Stay in a private hospital room when available
- Claim money back on non-Medicare health services
- Dental cover
- Select your doctor or surgeon
- Claim the private health insurance rebate
- Avoid the Medicare Levy Surcharge
- Save long-term on Lifetime Health Cover
Private vs public health insurance
The public health system in Australia is generally covered by the Government’s Medicare scheme for most residents. While Medicare does subsidise a number of treatments, private health insurance can reduce hospital waiting list times, and cover any specialist treatments such as physiotherapy, advanced dental and optometry.
The comparison table below with a snapshot of the current market offerings with links directly to the providers website. Please note that this table has been formulated based on the policy holder being a single male, based in NSW looking for hospital cover, sorted by monthly premiums (lowest to highest).
1. Skip the waiting list
Private health insurance is particularly helpful for elective surgery, because of waiting lists and priority patient order.
Elective surgery is any surgery classed as “not immediately medically necessary”, and can include anything from the most common (cataract removal), to joint replacements or gallstone removal. Even the tonsillectomy that is necessary for those who have debilitating tonsillitis several times per year is classed as an “elective surgery” under the public system definitions.
According to the Australian Institute of Health and Welfare (AIHW), the waiting list for an elective surgery in the public hospital system can be more than a year for many surgeries. The overall average waiting time in 2016-17, according to AIHW, was 38 days, while the percentage of people who have had to wait for more than a year has actually dropped from 2.7% to 1.7%.
Nationally, it was Cardiothoracic (heart and chest) surgery that had the lowest average waiting time at 16 days. Ophthalmology surgery (eyes) had waiting lists as high as 196 days in New South Wales. Private health members enjoy a waiting period that is substantially less – usually no longer than a month – and can sometimes be treated immediately.
In addition to this waiting period, priority patient order in the public system means that a patient may wait several months for their scheduled operation date, only to be told that it has been pushed back so that the surgeon can operate on a more critical patient.
In contrast, those with private health insurance also have the security of a ‘locked-in date’, meaning that their operation will not be pushed back due to another patient needing their surgery more urgently.
2. Private hospital rooms
Another obvious benefit of private health insurance is the option of a private room. In a public hospital, you are often placed in a room with four to six other people who are suffering various conditions. Private health members are able to request a private room, which is usually subject to availability.
Research shows that being in a private room – preferably one with a view or easy access to a garden – helps patients to recover faster after surgery.
3. Claim money back on non-Medicare health services
Many people sign up for private health insurance to get money back (a “rebate”) on health services that are not covered by Medicare. Without private health insurance, some services can be extremely expensive. Examples of common inclusions in Extras Cover insurance policies include dental, optical, chiropractic, and physiotherapy services.
4. Dental covered by private health insurance
Around 45% of Australians don’t have private health insurance, and that’s fine if you need to see a GP, have surgery in a public hospital, or buy PBS medications. But don’t get a toothache!
While a visit to your local GP might be covered by Medicare, a simple visit to your dentist is not. Even the most basic of treatments such as a check-up or clean and scale is not covered unless you are a teen or have a chronic condition that is affecting your general health.
If you don’t have private dental insurance, you have two options: pay in full, or visit a state-run public dental clinic. You may find, however, that the public dental clinics are only available to pension or concession card holders.
Even if you get into a public dental clinic, the waiting list for dental treatment is in excess of 2 years in rural and remote areas, and can be up to 3.5 years in some parts of Australia (National Oral Health Alliance). As a direct result of this, oral disease and related health problems are more common among people who have to wait for public dental care (ABS, 2016).
And with the Federal Government cutting funding in 2017 for public dental treatment, it is now more important than ever that everyone who can afford dental insurance makes sure they and their family are covered.
5. Select your doctor or surgeon
With private health insurance, you can select your preferred doctor or surgeon to carry out an operation. In a public hospital, your doctor will be the one on duty at the time of your operation.
Of course, as with the availability of a private room, your preferred doctor or surgeon is still a matter of availability in the private system. So for example, if you go into labour at 3am and your preferred obstetrician can’t make it in time for the birth, the on-call doctor is the one who will deliver your baby.
6. Get the Private Health Insurance Rebate
The private health insurance rebate (PHIR) is a rebate that applies to Australians who have private health insurance. It was introduced in 1999 and is now means tested (as of July 2012), meaning that those who have a higher income receive a lower rebate.
The rebate is available to be claimed through your health insurer directly, meaning that the premium that you pay already includes the government rebate. It can also be claimed on your tax return at the end of the financial year, boosting your refund. If you claim the rebate in the wrong tier, however, you may need to repay the amount that you weren’t entitled to.
The rebate is calculated based on the annual income of the policyholder. The current rebates are outlined below:
|Tier||Singles Annual Income||Couples/Families Annual Income||Premium Rebate Persons aged <65||Premium Rebate Persons aged 65-69||Premium Rebate Persons aged 70+|
|Base Tier||Up to $90,000||Up to $180,000||25.934%||30.256%||34.579%|
|Tier 1||$90,001 to $105,000||$180,001 to $210,000||17.289%||21.612%||25.934%|
|Tier 2||$105,001 to $140,000||$210,001 to $280,000||8.644%||12.966%||17.289%|
|Tier 3||More than $140,001||More than $280,001||0%||0%||0%|
|Source: PrivateHealth.gov.au Table last updated March 2018.|
7. Avoid the Medicare Levy Surcharge
The Medicare Levy Surcharge was introduced to encourage those with higher levels of income to take out private health insurance policies and take pressure off the public health system.
If your income is over $90,000/year as a single, or $180,000/year as a couple, you may be subject to a surcharge of over 1% of your income. That’s at least $900 out of your pocket! This number rises t0 1.25% and 1.5% as you go through the income brackets listed above.
Taking out Hospital Cover with an excess of $500 or less for individuals, or $1,000 or less for couples and families will ensure you avoid paying the surcharge.
8. Save long-term with Lifetime Health Cover
Lifetime Health Cover (LHC) encourages young people to purchase a private health insurance policy to ease the dependence on the public health system. A loading charge of 2% will be put on top of your private health insurance premium for each year after you turn 30 years of age and are not a member of a private health fund.
For example, if you are 40 years old and have never taken out a private health insurance policy until now, your additional LHC loading would be an extra 20%! (2% x 10 years.) This can only be removed once you have been covered by private health insurance over a 10-year period.
Canstar regularly researches and rates health insurance for different profiles such as young singles, couples, older singles, families, and more. We compare different health insurance policies and providers for price and value for money, coverage and benefits, and terms and conditions of coverage. Compare your options today: