Return to Author Return to Main PageThis article will explore health funds and resisting handing over good money for somewhat little benefit all in the hope to appease a fear. It should go without saying, this article is not advising you to do anything, I am not a tax specialist nor am I a health insurance policy specialists. In fact with respect to health insurance policies I don't claim to know anything at all, the only thing I do know is what I have listened to other people discuss about their experiences with private health cover and my own personal experiences with having top health cover. In fact Ill go an extra step and say this article is not even considering external factors which may occur if one were to cease a health insurance policy. Therefore, if you read this article and make a decision based on what you have read here and such a decision impacts you negatively, I say it is your sole responsibility to reconsider any decision you make and I advise you to talk to the relevant people regarding your decision. So now that I have basically told you to accept responsibility for your own decisions, lets continue with the article.
Insurance is a tricky game, I call it a game because it consists of a set of rules and players just like a board game. And just like the Monopoly game, health insurance can have their own trap doors just like the infamous “Do not pass go, do not collect $200”. Simply put, the entity who sets the rules for the game are the “insurance companies” and the players being you and me, “the customer”. However in this game the stakes are high because the harsh reality is insurance is a business which is solely based on calculated risk and to maximize their own profit. Regardless how the advertising is conveyed, an insurance company is not a charity and no they don’ t care about you only the fact you continue to pay the premium and continue with the policy.
Just like that dreaded AAMI insurance TV commercial where the phone receptionists apparently gives a big friendly smile. I've always tended to imagine that smile represents a expression which masks the truth i.e a insurance company does not care for you. That smile is actually an evil grin silently laughing at you no different to that conman that is telling you your purchase is an original items when in fact its actually a copy. Marketing loves to entice as many suckers they can, especially anyone who will fork out wads of cash to appease their own fears and other insecurities. Making you think you will always be covered when in some cases your left standing alone in the cold wind because of the many ways an insurance company may try to offload responsibility paying out on a claim. With the advent of technology, data collection and manipulation where the game has turned to favor the insurance company, not you. An insurance company will have at their disposal many things you do not, such as statisticians, AI, researchers, legal professions and yes even the marketer to design a package that on the surface appears to be a very good deal. Yet hidden underneath is a well calculated, well researched, minimal risk cost to the company and the likelihood of certain circumstances not being covered to only serve to maximise business profit.
I had been in a top health cover health insurance policy for at least 11 years, and in recent years I decided to forfeit the policy due to having several bad experiences. Quite frankly, I just could no longer see the point paying money only to be denied a claim or be limited to how much I could claim. In stead of paying money to an insurance company, I decided to open a bank account and place monthly payments into that account just as if I was making payments to a insurance company. To be honest, since I made this decision I have not looked back, in fact my biggest regret is I wished I started my health account when I was younger so a larger pot of money would be available for medical costs in the future.
As a young person who signed up to a health cover because of government policy changes, all I knew at the time was for those who didn’t sign up to private health funds may be adversely affected due to higher taxation or future private health policies. So I basically went along with signing up to a private health cover not really understanding how it all works or how to claim. In fact, back then I thought it was the same as insuring a car i.e full disclosure prior to signing a policy, pay the money, when something goes wrong get the other persons details and then make a claim. Although I later discovered for me it didn't work that way. So just like a spoiled kid that doesn’t like to loose, I too like many other Australians have over turned the board game in a dejected manner and decided “I''m not playing any more!”.
Lets start with the disadvantages, first we have the issue when we initially start saving their is only a small pot of money to dip into should an emergency occur. Obviously if you get sick often this is not the strategy for you because your costs are going to easily outweigh your savings leaving your self in a bit of a pickle. So yes it is a gamble but hey all insurance is anyway, however the odds I would say are pretty good to save enough money in time to cover medical expenses providing you start at a younger age and of course minimise risky activities. Another disadvantage depends of your income tax bracket where not having a private health cover insurance may add extra costs to your end of financial tax bill I.e: MLS, and of course don't forget the LHC increases of 2% each year you don't hold a private health cover policy. Which brings me to another disadvantage which is if your a person who likes to spend money and cant save or budget, then having large amounts of money sitting in an account untouched will be difficult to maintain and perhaps having a health cover is better for you so its always paid.
However the advantages of having your own health savings bank account are many, firstly over a longer period of time 10 ‐ 20 years you will have access to a large safety net of money to address your health issues. Secondly the fact your saving money which is siting in the account untouched just waiting for health issues to arrive means you are earning compound interest on your savings. Thirdly, there are no limits or other restrictions regarding what you spend your money on which generally occurs in private health cover. This means that if I have $20k in the bank and I break a leg the full $20K could be focused solely on the treatment and other associated costs, where private health covers generally have limits of how much you can claim per condition. Fourth, in times of dire need (while not recommended) you could theoretically have cash available for other life style issues to prevent yourself reaching into a high payday loans etc.
It is an additional levy which is added to a private health cover cost which is at the moment 2% (at the time of writing this article) for each year you do not have private health cover from age 31 onwards.
So whats the real issue here? Ultimately the main issues is this, firstly even if you don't have private health cover as an Australian citizen your still entitled to free medical treatment. Secondly If you never intend on purchasing private health cover in the future, the LHC will not affect you, it just means for each year you don’t have private health cover add an extra 2% LHC will accrue ready for you should you decide to join at a later date. For example, if I have not had private health cover for 10 years the simple math is 2% x 10 years = total LHC 20%. Thirdly, any LHC that had been accrued is slapped upon your health insurance premiums for a 10 year period of continuous payment. I tend to think this is counter productive because this just prevents people that may later want to rejoin to say “stuff it I wont join”. Finally, according to health insurer NIB, the LHC “ Lifetime Health Cover loading only applies to the hospital portion of your premiums on a combined cover and does not apply to Extras cover or Ambulance only cover.”
So what does the Australian government say about those who do not have private health insurance? Under the title ' I can’t afford hospital cover', It says “All Australians are entitled to receive free public hospital treatment under Medicare. This means that you do not have to take out private hospital cover in order to have access to high quality hospital services. The decision to purchase private health insurance is a personal choice. People who cannot afford the premiums for private health insurance or do not wish to take out private health insurance for any other reason, continue to have the right to access the public hospital system through Medicare on the basis of clinical need.”
Ok so lets say that you have decided not to have private health cover, how will this affect you other than the (LHC)? A short trip to the Australian Tax Office (ATO) website tells us if we don't have private health cover we need to refer to the table below to see if we will have to pay the Medicare Levy Surcharge (MLS). So in the event your single and earning under 90K or a couple earning under 180K there is no surcharge to pay. So why be afraid?
| Base Tier | Teir 1 | Tier 2 | Tier 3 | |
|---|---|---|---|---|
| Single Threashold | $90,000 or less | $90,001-$105,000 | $105,001-$140,000 | $140,001-more |
| Family Threashold | $180,000 or less | $180,001-$210.000 | $210,001-$280,000 | $280,001 or more |
| Medicare Surchage | 0% | 1% | 1.25% | 1.5% |
Go right ahead, don’t let me stop you because at the end of the day I do not know your circumstances. However lets say your a person who has great fears that something might go wrong and having a private health cover will appease your concerns, how much might this cost? For this I decided to go to a NIB health cover website and do a random quote for the highest cover possible. In this example I had selected single, top cover and top cover extras which gives me a range of cover to all sorts of horrible things that may happen to me. Putting your mind at ease is costly and may cost the following: Total cost: Monthly Top hospital = $38.37 + Monthly Top Extras = $23.71, Total cost = $62.08 per week, per month = $248.32 or per year $3228.16. Dont forget the excess charge = $500 and the out of pocket expenses = 75% money back on all out of pocket expenses (for the limit). In the event you had LHC, remember the LHC only applies to the hospital not extras so that 2% LHC only applies to the 38.37 per week cost. This attracts the total (76 cents each week) for 1 year LHC @ 2%. a total of $39.90 a year extra.
Health insurance just like any other form of insurance is a gamble. Do you decide to cover your self or not? if you do cover yourself and you claim that’s great, however if you do cover yourself and don’t claim then you have just wasted your money, however at least you can say you had peace of mind. It’s even worse if you cover yourself and need to make a claim that gets refused for what ever reason and then your left feeling dejected and ripped off like I felt. Speak to anyone who is covered now with health cover or has been in the past and you will hear a myriad of stories where people had paid good money to be covered and some how or another ended up either not being covered for what ever reason or even ended up receiving some of the treatment or reimbursement via the public sector anyway. I tend to think policies should be made much simpler, more uniform to understand, cheaper if your not claiming and above all a private health insurer should pay all the costs, not delegate which costs they will pay and which costs Medicare will pay. After all, the private health sector is already subsided by the government so why should the tax payer need to pay any more.
I initially became disenchanted when I went to get an MRI of my knee and was charged $350 for the scan. Because I had never in my 11 year private health cover history made any health claims, I phoned my health insurer to see what I needed to do to make a claim. I was advised because I didn't consult them prior to the scan and I had not been treated in a hospital I could not make a claim. However I had consulted a doctor which agreed that it would be helpful to get such a scan done, so its not like I was trying to rort the system. I was then informed to ring Medicare for the claim. Being quite shocked to hear my health cover wasn’t paying me, I recall even saying to the call centre person “Whats the point of paying for a top health cover if your not going to make good on a claim?”. I phoned Medicare only to be told they would not pay either. To cut a long story short, I was left paying the $350 myself without any reimbursements and low and behold a week later was the next monthly private health insurance payment. Let’s just say at that time the word disenchantment didn’t even come close to how I now felt about my health insurer.
Feeling quiet dejected with the failure to cover my MRI scan, I still decided to maintain the cover “Because you just never know what will happen”. Ultimately that line of the unknown is a fear which the marketers love to push because it creates a divided thought process, it causes doubt and most people don’t like uncertainty. Which brings me to my second issue the yearly increases, which every 1st April (April Fools Day) the government tends to permit the insurance companies to increase the costs %5 here, 6% their maybe 4% either way the costs are increased. But I started to think for what? Insurances companies love to claim the under dog “we are poor” mentality, yet they wouldn’t even pay a messily $350 for a person who had paid for 11 years? Governments love to preach about how they understand how the public are “under pressure with raised costs”, but yet they still continue to grant the increased premiums totally ignoring each year mega profits!. Did I say mega profits? CHA CHING! How about NIB Profits 71.1 million or Medibank Private a cool 231.9 million for example. This leads me to my third issue which is still needing to pay an “excess” even if you do need to make a claim. So lets get this right as of today lets say you have a NIB top cover as mentioned above $3228.16 a year, and you wish to make a claim you will have to add an excess charge of either $500 or $250 depending on which you nominated when you started the policy. So your not really paying $3228.16, your actually paying between $3478.16 to $3728.16 a year if you make one claim.
My fifth issue is when I finally did get sick about 4 years ago, it so happens at the time I was nearing the end of the policy year period, which is to say lets say 1st Jan 2017 your policy starts, the time by 1st Jan 2018 arrives even if you stay with the company it is considered a new policy setting. I had never even considered this because I initially thought all I did was pay each month and saw it as a continuous line of cover. Yes this was my error at at the time, although it wasn't something I ever considered before being ill. So when the company says you only have to pay one excess a year when making a claim for the same procedure. It actually means you can only do it between 1st Jan 2017 till 1st Jan 2018. So in my case I was told my next procedure if after this date I would have to pay yet another $500 excess fee. Again I just felt the insurance cover was a scam, however at least during this illness they covered some of the costs and the specialist was kind enough to address the same condition the second time not long before start of the next policy year. Had I not have been so lucky I would have been hit with another $500 excess fee.
Which brings me to my 6th issue. At the time of my illness the health cover covered a medical procedure, however all of my other costs e.g follow up visits were covered by Medicare. I couldn't understand how is it that I had paid so much money over the years to be covered by health insurance and yet I am still needing to trundle down to the Medicare office to get refunds for out of pocket expenses. My last gripe regarding health insurance is you don't even get 100% of your money back when you claim, well it certainly wasn't the case in my top health cover at the time I was only receiving a max of 75% of out of pocket expenses.
So naturally around about 2-3 years ago when their was another “rise we had to have” for health insurance policies, I decided to email the health insurance and inform them they had two options 1) not increase the cover costs and keep me as a client or 2) increase the health cover cost and I will leave and not return. The health cover wrote back and said all health cover organisations were increasing the costs and therefore my cost would also increase. BAAAAH I’m sorry wrong answer! So I wrote back to the health insurance company and informed them I wished to cease all payments, and terminate my account. In the same letter I advised them I felt they were greedy and I wished them well explaining to their shareholders the reason why they just lost a membership valued at 2.5K because they were greedy trying to squeeze an extra $150 or so from a member who had been with them for so long and on only 2 occasions sought a claim (1 one successfully claimed). So naturally I received a phone call asking me instead of leaving the health insurance company, perhaps I would prefer to down grade the policy to make the costs more affordable. In which my response was “if you didn't cover me for a MRI to a knee when I was on your highest possible policy, why would I even bother with a lower grade policy”. So I hang up the phone and to date have never looked back because in a short period of time I have already saved 7K in my own bank account. Each time I see my bank statement and see that money their I always have a grin, just knowing that 7K is money that greedy bastard health insurer and shareholders didn’t get from me. Never again!
But here is the sweetener, it is not all bad to decide not to have any health cover. Not only do you still get free health care treatment via Medicare, recently my mother had a serious medical procedure which required a complete shoulder replacement all done via Medicare. The actual procedure was covered by Medicare and did not require any out of pocket expenses and above all she ended up having her own hospital recovery room to her self. I found this quite comical actually, because I have listened to people in the past who told me they were disappointed with having full private health cover to only be sat in a shared hospital room in a public hospital. Any appointments specifically to the specialist is an out of pocket expense I.E $150, which she has had perhaps four or five visits so far. My Mother will also have to pay for rehabilitation costs which is expected to be for 2 ‐ 3 months. Rehabilitation will be attendance twice weekly physiotherapy costing about $75 a visit. Yes their is a cost, however if you recall what I said earlier about starting your own health cover bank account at an early age, these costs would easily be absorbed by the savings in health account and not even affect the person.
Just so that we are perfectly clear, I am more than happy to pay for a health insurance policy, although only on the proviso that I am 100% covered, there are no loop holes which prevents a legitimate claim and health care costs are not passed to and fro like someone passing me around as if to be playing the parcel the parcel game. Health insurance should be similar to a car insurance, I.e if you hit a car your whole car is covered, not just a bumper or one wheel.
Justifying value for money is an independent concept, which means how you justify value is likely to be different to the way I justify value. When I look back on the 11 years of being in a private health cover I ask myself one question, did I get value for money? To save a long winded explanation, my answer is no. No because I didn't appreciate the ongoing price rises when I was not making claims, no because when the time came to make a claim I was either denied or there were conditions applied which always saw me paying more money around the time of making a claim. While I definitely did not appreciate waiting 20 minutes on hold each time when trying to phone to ask a question.
The Australian Department of Health estimated the rebate subsidies to private health cover is approximately 6 million dollars. In my opinion that is 6 million dollars too much and would be better served being placed into the public health system. Perhaps the inspiration of this article is the fact that I believe the government should permit each person who may not wish to have a private health insurance policy but willing to save for their own health cover to be allowed to start up a bank account, and insert a nominated monthly amount into the bank account tax free. Having said this I also believe their are some conditions that should be placed on this concept to prevent tax evasion.
This article discussed some of my pet peeves regarding private health cover and some negative experiences of dealing with such organisations. One must always consider the fact insurance is a numbers game and the odds are stacked against you. The insurance companies know this and will “Value add” using psychological warfare such as guilt, fear or even use minority cases in order to build a reason for the necessity of such insurances. Am I telling you to stop taking health insurance? The answer is no. Am I telling you to reassess what your actually paying for and for the reasons you have chosen to do so, then the answer is yes. And above all, read the policy before signing up and just don’t be surprised when you actually do try to claim if for some reason your not covered.
Granted that any type of insurance is a calculated risk game to maximise profit, however their is nothing to stop us from using our own basic calculations to determine the gravity of how much we are potentially being manipulated and shafted. It is always difficult to get a grip on reality when entities used psychological fear mongering tactics to manipulate individuals so we dip into our pockets for wads of cash to appease a fear. A business can only remain viable as long as their are customers, its a basic fact. If more people removed themselves from policies the businesses would only have two options, 1) go out of business or 2) make policies more fairer and have better rates without the ongoing yearly hikes.
Every minute of the day we are faced with a danger and yet a large proportion of society tend not to see this, instead will fixate on single bigger events which causes great angst. The most effective things to put fear at ease is understanding of the true risks and preparation. For those who are lucky enough to live in Australia no matter what happens to you, you will receive treatment. Often is the case their is no difference between public and private health care workers, and often is the case depending on the day they are actually the same worker. Just on one day they are working in a hospital, while the next day they may be working in their private practice. Australian health care prides itself on not judging the quality type of health care to the size of your pay packet, so relax, it is o.k
Until next time...
Darren Hamburger
Page Last update:21/08/2017
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