‘You always think nothing will happen’: Warnings over health insurance

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Health insurance may be the ultimate “grudge” purchase. Many people think they will not need it and those who have it usually wince at paying the price.

But with premiums at many large private health funds increasing this month, Australians with health insurance are being reminded to shop around, and those without to think carefully about what sort of cover they may need.

Jorja Larkin, 29, received a cancer diagnosis last year. Following extensive treatment, she is in recovery. She wishes she had not only hospital cover, but extras cover too, as she has used the services of many health professionals.

Jorja Larkin wishes she had had hospital and extras insurance after being left out of pocket.Credit: Dominic Lorrimer

“I went through chemotherapy, radiation therapy and surgeries – I’m trying to get back on track and to get healthy,” she says.

The Sydneysider is majorly out of pocket for her medical expenses, as only so much is covered by Medicare. That is particularly the case with the costs incurred by seeing physiotherapists and psychologists, among others.

“It’s been expensive, and I definitely regret not getting private insurance – you always think nothing will happen to you, until you need it,” Larkin says.

Health funds usually increase the premiums of their policies on April 1 each year, but many funds delayed their increases until later this year because of cost-of-living pressures. Some of the biggest funds, with combined market share of about 40 per cent, increased their premiums on October 1.

Kate Browne, head of research at comparison site Compare Club, says: “We get fixated on our premiums going up, but it is often the value – what you are covered for and for how much – that’s more important.”

Those who have had their policy for some time are urged to shop around, as sometimes those who are new to your fund get a better deal, while your policy is no longer available to new members, she says.

That is particularly the case with extras policies. They are hard to compare as they have fewer government-imposed restrictions than hospital cover, where the policies are tiered into “gold”, “silver”, “bronze” and “basic”, to make them easier to compare.

Each tier specifies services and treatments that must be included. The higher the tier, the greater the number of categories covered.

With extras cover, which includes treatments by dentists and optometrists, the health fund rebates a portion of the cost of treatment that is capped, either by a dollar amount or, more commonly, as a percentage of the cost.

“It’s astonishing to see that people can be with the same provider yet older, loyal customers are getting half the value back because they are on old and out-of-date policies,” Browne says.

She says there are funds whose extras policies pay rebates that are up to twice that of their older equivalent policies that have been closed to new members.

The biggest claims for many of those with extra policies are for dental treatments, yet one policy gives $60 back for a root canal, compared to $105 for customers who are with the insurer’s newer, equivalent, extras policy, Browne says.

You will usually be better off with a policy where the rebate is a percentage of the cost rather than a fixed dollar amount, as it better protects against inflation, she says.

The Commonwealth Ombudsman for Private Health Insurance says most will not have a waiting a period for the benefits you had on your previous policy, but you should always check before switching, including extras cover.

However, on transfer, insurers can reduce any annual benefit limits by the amount of benefit already paid to you under your previous policy during that year.

Tim Bennett, health insurance expert at comparison site Finder, agrees it is good idea to shop around to see if you can get a better deal, particularly if you have had your policy for some time.

One way to save on hospital cover is to switch to a lower tier of coverage if your circumstances have changed, such as you no longer need pregnancy cover. You could also consider opting for a higher excess on hospital cover, Bennett says.

That is the amount you pay out of your pocket before the insurance kicks in, and can help reduce the cost of the premium while maintaining the same coverage.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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