Nick Bruining: Premiums are going up, so here’s how to put your health insurance policy to the test

As arguably one of our biggest household expenses, health insurance is again under the surgical spotlight with annual premiums set to rise by an average of 3.03 per cent on April 1.

The big question always asked by families at this time of year is: “Is it still worth it?” There’s no simple answer.

Because we’re all different, unravelling a health insurance policy is a bit like trying to understand the social security system.

The two main components are hospital cover and “extras” cover.

Hospital cover is self-explanatory, but the options are significant. The government-mandated rating system of basic, bronze, silver and gold — introduced in 2019 — gives you an idea of what things are covered.

Basic policies typically offer very little and are typically used to simply escape the cost of the Medicare levy surcharge.

Bronze policies must cover things ranging from digestive issues through to pain management and eye problems requiring hospitalisation. But things like rehabilitation, psychiatric and palliative care — while they must be provided — might still land you with out-of-pocket expenses.

According to the Federal Government’s privatehealth.gov.au website, the average bronze policy costs about $122 a month. For that, you’ll be up for the first $750 of claims each year. A bit like an excess on your car insurance.

A bronze policy usually won’t cover cardiovascular issues, medically required plastic or reconstructive surgery, dental surgery or even back, neck and spine surgery. For these, you’ll need to upgrade to a silver-ranked policy which will set you back on average $186 a month.

Cover for joint replacements, birth, dialysis, weight loss surgery, IVF treatment and sleep studies will require you to upgrade to a top-of-the-range gold policy. That will set you back, on average, a whopping $272 a month. But compare that to the cost of some relatively common procedures without insurance.

One Perth GP, who asked not to be named, said for younger people who weren’t planning on starting a family soon or didn’t have existing medical conditions likely to require hospitalisation, the need for hospital cover under the age of 30 was not crucial.

“Most younger people only end up in hospital after a trauma such as an accident and that’s in the emergency department,” he said.

“There, you will be triaged based on your medical condition and the treatment you receive then is not going to depend on whether you’re private or public.”

Extras cover is where things get more complicated. Extras includes things like dental, optical, physiotherapy, psychology and, in some cases, natural medicine therapy.

While there’s no government rating system, many insurers’ extras policies are combined with hospital cover which can make it difficult to compare costs.

One way to identify what your extras insurance is actually costing you is to deduct the hospital cover-only premium cost from the combined policy total costs with the same insurer.

For example, your fund might charge you $4500 a year for top-of-the-range hospital and extras cover, including the discount provided by the government rebate. If the same hospital-only cover costs $3000 a year, the extras policy is costing you $1500.

In spite of having extras cover, you’ll find that in almost all cases you’ll still be required to top-up the gap between what your medical or health practitioner charges and the amount you can claim.

This gap varies between the service provider you select and the benefit paid by the insurer.

Consumer group Choice suggests that one way to check the economic viability of a health insurance policy is to log into your health fund’s website and download all of the claims you have made in the past 12 months.

“If the amount you received back is more than the premiums paid, then you’re ahead,” Choice said.

Financial product research house Canstar recommends that if you have the money on hand, paying upfront each year could save you about 4 per cent on your premium.

Similarly, increasing the excess can help. But if the excess is more than $750, you risk losing government concessions.

Another way to save, if it’s not already available to you, is to see if your employer would consider setting up an employer scheme, with significant premium discounts available.

And while health insurance comparison sites are one way of getting a more accurate picture, beware that many will only show funds which pay them money to have them associated with the site.

Canstar.com.au and choice.com.au both include non-associated providers on their listings, though Choice requires you to be a subscriber. For that, you get a more bespoke interactive fit-for-purpose algorithm that selects an appropriate policy more in-line with your specific needs.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association