01.Is extras health insurance worth paying for?
This year health insurance premiums have gone up on average by 6.2%. Worse, the premium hikes come hot on the heels of reduced health insurance rebates for high-income earners.
If your current cover includes extras, or ancillary, health insurance and you want to reduce the health insurance premium pain, take a close look at whether the benefits for health services such as going the dentist or the chiropractor and a new pair of glasses or contact lenses outweigh the costs. While dropping private hospital insurance can mean paying extra tax and higher premiums should you take it up again, Lifetime Health Cover and the Medicare Levy Surcharge penalties don’t apply to extras cover.
Extras health insurance works differently to other types of insurance. Whereas hospital, home and car insurance cover you for unexpected events that may otherwise cost you thousands, extras health insurance works more like a budgeting tool. It’s meant to help with smaller ongoing costs, such as a dental check-up, pharmacy costs, physiotherapy, going to the osteopath or a new pair of spectacles. But how much does it really help?
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Value for money?
Australian extras cover rarely covers the full cost of your treatment. On average, health funds pay about
- half the cost for the dentist and spectacles,
- a third for medicines not covered by the Pharmaceutical Benefits Scheme,
- a quarter for hearing aids.
And there are wide variations between funds and policies, too. The most generous health insurance fund for dental (for example) refunded 60% on average in 2011/12, while the most miserly health fund covered just 32%.
Compare your health insurance fund.
So does extras cover offer value for money? The 1000-plus respondents to a health insurance survey we conducted late last year were divided on this question.
- 43% considered extras cover good or very good value for money,
- about a third were undecided
- 26% thought extras cover was a poor or very poor deal.
The essentials of extras
There are two groups of people who benefit most from extras insurance.
- Families pay the same health insurance premium as couples – or double the singles premium – so children are insured for free. Tip: Some health funds offer no-gap cover for kids, for example for dental.
- People aged 55-74 Of all the age groups, this one makes the most use of their extras cover benefits and receives an average benefit per person of about $500 – almost 10 times more than for children under five.
- Couples health insurance policies can be bad value: A couples policy normally costs exactly the same as two single policies. So if a basic policy suits you best and a medium policy suits your partner best, go for two different extras cover policies rather than a medium-cover couple policy.
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