Is private health insurance worth the price tag?

Private health insurance premiums are set to rise yet again on April 1st, this time by an average of 2.92 per cent.

While it is the lowest increase in years, there’s no doubting that it still hurts the old hip pocket. Especially when you consider that premiums have risen by a staggering 61 per cent on average over the past decade [1].

The upcoming price rise will see the typical family policy increase by an average of $127 a year, couples by an additional $140 a year and singles to be slugged an extra $59 a year.

Keep in mind these figures are just the average increases, with some of the major health funds set to increase policies by more than this.

If you’ve been toing and froing about ditching your private health insurance for a while, now might be the perfect time to weigh up the pros and cons and figure out if it’s really worth it for you.

What to consider

According to iSelect, annual premiums for the average hospital and extras policy in 2019 for a family were $4,359, $4,780 for couples and $2,014 for singles (before any government rebate is applied).

That’s not exactly pocket change.  So if you’re considering whether private health is really worth it, start by asking yourself the following questions.

  • Can I benefit from Extras cover? A great way to make your health insurance work hard for you is to really take advantage of your Extras cover. Do you lead an active lifestyle and are often visiting the physio? Do you wear contacts or glasses?

    Or do you make a habit out of regular dental check-ups? If you answered yes to any of these questions then Extras cover could be well worth your while.

    If you’re confused about which Extras are worth having and which aren’t, take stock of your lifestyle and perhaps chat to a trained consultant about changing your Extras cover to a flexible limit, which will mean you can tailor your cover towards the benefits you’re likely to use the most.

  • Am I happy to pay the Medicare Levy Surcharge?  Make sure you consider that fact that completely ditching cover could mean paying extra in tax thanks to the Medicare Levy Surcharge (MLS).

    Those who earn over $90,000 as a single ($180,000 a household) can be stung at least $900 in extra tax if they don’t have an appropriate level of hospital cover.

    Think about whether you’d be okay with paying extra money to the taxman or would you prefer to invest that money back into yourself and your health – even if it is just purely for the peace of mind. And remember, having extras the only cover won’t exempt you from paying the MLS.

  • Would I like my own choice of doctor and hospital? A lot of Aussies opt for private health insurance because it allows them to choose their own doctor and hospital should they be admitted for a treatment or procedure.

    The benefits of this are consistent care from your chosen specialist and the freedom to be treated in a hospital close to home or one that you know has a great reputation.

  • Do I mind waiting longer for elective surgery? As a private patient, your doctor will generally be able to treat you much quicker for elective surgery than if you were in the public system.

    Elective surgery can include the removal of wisdom teeth in hospital, a knee replacement if you’ve injured yourself playing sport or perhaps a joint replacement if you’ve had an accident on the tools at work.

    The average waiting period for elective surgery in Australia is over three months in the public system and less than a month in the private system [2].

    Have a think about whether you’d be comfortable potentially waiting longer to be treated and how this might affect your income if an injury stopped you from working.

  • Am I paying for cover I don’t even need or use? Take time to review your policy to ensure that you’re not paying for things you don’t need.

    You’d be surprised how many people are paying top dollar for obstetrics cover when in reality, their family is well and truly complete or they’re not in the market for a bub anytime soon.

    Before you think about ditching your cover, speak to your health insurer or a third party comparator like iSelect to see if you could find a similar level of cover for a lower price.

  • What are my chances of being admitted to the hospital any time soon? A lot of young, fit and healthy Aussies struggle to justify the cost of hospital cover because they don’t think they’ll ever be likely to use it.

    And why would you want to pay for something you won’t see a return from anytime soon? Well when you think about it, that’s what all insurance is – protection against the unwanted, whether it be a car accident or a home break-in.

    So before you ditch your cover, weigh up whether you’re happy to forego the peace of mind that having health insurance brings.

    And if you do think you’re unlikely to wind up in hospital in the foreseeable future, you could opt to increase your excess in exchange for lower monthly premiums.

There’s a lot to consider when making the decision to keep or quit private health insurance. Do yourself and your health the due diligence by first reviewing your current policy to see if you are still getting value for money. If not, then it’s time to see if there may be another option out there that better meets both your needs and budget.

[1] Source: – industry weighted average premium increases by an insurer by year (1 April 2011 to 1 April 2020 inclusive). 

[2] Ipsos Healthcare and Insurance Australia Report (December 2019), Section 4.6. Datapoint:  On average, Australians waited 109 days (over 3 months) in the public system for elective surgery compared to less than a month privately – public wait times are 4.5 times longer/

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