Private health insurance can be difficult to navigate and it's tricky for everyday Australians to compare policies to ensure they make the best choice for them and their family. And it's also possible that you don't need private health insurance at all.
With premiums set to increase again on 1 April, it's important to check if you actually need health insurance. (Still confused? We've demystified health insurance with our health insurance buying guide.)
1. It's very expensive
The COVID-19 pandemic saw many insurers delay their increases last year until October 2020, but this year health insurance premiums are set to increase again on 1 April. For some people, this will be the second increase to their premiums in six months.
With the amount of money Australians are spending on private health cover, you'd hope we'd receive cover we can rely on without unexpected added costs. But this often just isn't the case, especially for people who might need elective surgery such as a hip replacement and now are charged large out-of-pocket costs when they can least afford it.
"Increases in premiums mean Australians with private health cover have been hit by a 57% cumulative price hike since 2011, forcing many to downgrade or drop their private health insurance," says CHOICE health insurance expert, Uta Mihm.
"In reality, it's just unaffordable for many people."
2. It's confusing and difficult to compare policies
In 2019, the government introduced an overhaul of health insurance policies that was supposed to make the system fairer, easier to understand and more affordable for Australians. But it didn't.
The new system introduced tiers for hospital cover – Gold, Silver, Bronze and Basic – with each product tier covering a specific number of treatment categories in a private hospital.
"In theory, this should make the system simpler and easier for Australians to compare health insurance," says Uta.
However, insurers were then permitted to label their products as 'Plus', which created seven categories instead of four. There are thousands of versions of potential policies and many rip-off 'Silver Plus' policies with restrictions that cost more than the best Gold policies without restrictions.
You shouldn't have to spend hours combing through policies and analysing exclusions – the system should be fair and transparent… but it just isn'tDean Price, CHOICE health insurance campaigner
CHOICE health insurance campaigner, Dean Price, says the average Australian barely stands a chance: "In addition to rip-off tactics from insurers, another problem is commercial comparison sites that don't show you all available options," he says.
"Unfortunately, price isn't an indicator of quality, and different providers charge vastly different rates for similar coverage, so that's why it's really important to shop around to ensure you get the right cover for you.
"You shouldn't have to spend hours combing through policies and analysing exclusions – the system should be fair and transparent, and easy for everyday people to find the best cover, but it just isn't."
3. You might not even need it
As the pandemic has shown us, health insurance isn't going to get you any special treatment if you get the coronavirus. And if you get a serious illness such as cancer, you can get the best care in world-class public hospitals.
Some people will save money based on their age or income by buying health insurance: this is because of the Medicare Levy Surcharge (MLS), which means you'll pay additional tax if you don't have cover, depending on how much you earn. And the government's Lifetime Health Cover (LHC) means that you pay a loading if you don't take out cover by age 31.
But CHOICE's expert analysts have crunched the numbers and worked out that some may be better off not taking cover out at all. Find out if health insurance will save you tax.
4. You could be paying for extras you don't use or need
There are two types of health insurance policies: ones that offer hospital cover (if you're admitted for surgery, for example) and extras cover, which will usually pay you a portion of the fee on services such as dental, optical or physio. See our buying guide for health insurance for more info.
CHOICE health insurance expert, Daniel Graham, says: "A lot of people waste good money on health insurance they don't use. Extras insurance (sometimes called 'ancillary care' or 'general treatment') is often misunderstood. It doesn't affect your tax, and you don't need to even purchase extras from the same provider you have hospital cover with."
You should only consider top-shelf extras if you anticipate you'll need expensive treatments such as major dental work
Many people automatically sign up for an extras policy when they take out hospital cover. But make sure you do the maths: will you really get more money back than you're outlaying each month?
Cheaper policies are easier to get value from – you should only consider top-shelf extras if you anticipate you'll need expensive treatments such as major dental work, orthodontics or hearing aids. And keep in mind that extras will usually not cover your whole bill – you might get back just 50–80% from your fund.
5. You're likely to be hit with unexpected extra costs
Even after paying thousands for private health insurance, you can still be slugged with unexpected large costs if you go to hospital – otherwise known as 'bill shock'.
First up, be aware that whatever excess you have opted in for (perhaps $500 or $750) is the amount you'll pay up to twice a year on a couple or family policy when you're admitted to hospital, or there could be a daily charge such as $70 per night.
On top of that, there could be certain procedures or tests your policy doesn't cover you for, or other restrictions on treatments that can be buried in contracts between health insurers and hospitals that you don't have access to.
Unexpected gap fees
One of the things that's touted as an advantage of private health cover is that you're able to choose your own doctor and a private hospital. In practice, there are many things that limit the choice and availability of your preferred doctor.
You could also have to pay a 'gap fee', which is the difference between what your doctor charges you and what your health fund will pay
You could also have to pay a 'gap fee', which is the difference between what your doctor charges you and what your health fund will pay towards the services.
There could also be a 'hospital gap fee' which is the difference between what the hospital charges for an overnight stay versus what your health insurer has agreed to pay. So your choice of hospital is limited to the ones your health fund has an agreement with, otherwise you have to pay the gap fees.