Is It Good For Your Wealth?

Sydney Morning Herald

Wednesday July 9, 2008

By Lesley Parker

Reviewing your health insurance and what it covers is just what the patient ordered.

A higher cut-in point for the Medicare levy surcharge means some people will be reviewing their need for private health insurance.

If you're single and earn less than $100,000 or your family's income is less than $150,000, you'll no longer be penalised with a 1.5 per cent surcharge on top of the standard 1 per cent Medicare levy.

Previously, the surcharge cut in at $50,000 and $100,000 respectively.

However, health sector analysts note the surcharge isn't the only Government incentive to consider.

There's also the 30 per cent rebate on private health insurance, which reduces the cost substantially - although a single person will still pay roughly $100 a month and a family double that for mid-level hospital cover and extras.

More importantly, says Charles Livingstone, a senior lecturer in the department of health and science at Monash University, there's the "lifetime health cover" measure, under which people have to pay an extra 2 per cent of premium for every year they delay joining a health fund above the age of 30.

That penalty remains in place and for that reason, Livingstone says, "my suspicion is that there won't be a massive drop-off" in private health insurance.

Consumer group Choice recommends people review their health insurance annually - your circumstances change, policies change and the prices go up every year, says its health policy officer, Michael Johnston.

The first question to ask is: do you need health insurance? Livingstone, a father of two, says he doesn't have health cover even though this means extra tax. That's partly a moral stand, based on studies showing that private health insurance, rather than relieving the burden on the public system, drains money and health professionals from it.

But it's also because his family has confidence in the care. "We had two children in the public system, we've had lots of kids' ailments and occasional hospital visits and we've always found it to work very well."

If you don't see the value in private health insurance, one option is to "self-insure" - saving or investing what would have been your premiums to build up an emergency fund.

"If you sat down and worked out how much money you'd save over your lifetime if you put the money away, you'd have quite a bit," Johnston says.

However, Sue Bowman, health insurance manager with fund comparison service iSelect, says families in particular often see health cover as a way to recoup costs they're incurring anyway. For those people, there are several points to be aware of when choosing a policy and ways to keep the cost down.

HOW TO SELECT A POLICY

First, know that there may be a "gap" to pay, even after any excess (the amount you agree to meet before your insurance kicks in). Johnston says there may be costs a fund doesn't cover or there may be a daily maximum it will pay for a hospital bed.

Before a procedure, talk to your specialists and to the hospital and get them to itemise every cost, then give that information to your fund, which should be able to tell you what your out-of-pocket expenses will be.

Bowman says you should check whether your policy gives full cover or has restrictions and exclusions. Restrictions mean you won't be covered in a private hospital but the fund will pay for treatment in a public hospital as a private patient. However, that means you'll at least have your choice of doctor. Exclusions mean certain services aren't covered at all.

You can volunteer for restrictions and exclusions as a way of saving money.

If you're 30 and healthy, you could save by excluding a procedure such as hip replacement; others might be OK with a public hospital as long as they can choose their doctor (arguably the most important benefit of private cover).

Just be careful you don't end up with a policy so cheap you'll never be able to claim on it, Johnston warns.

Be aware, Bowman says, of the way limits are structured. Some funds trumpet high annual limits but the benefit paid for each visit is small. "You might have an annual limit of $700 but you'd have to go to the dentist frequently to get that $700 back."

If you're a frequent user of a service such as physiotherapy, a high annual limit will suit you; if you're likely to use a service only a couple of times, a high payout for each visit is often better.

Check whether limits are "per person" or on a "family capping" basis, Bowman says. If they're per person and everyone in the family needs glasses, each person will get an amount towards specs. If there's family capping, two people might get a payout and the others nothing.

Johnston says some funds apply a daily hospital excess instead of per admission. For example, if the policy has an excess of $50 a day for a hospital bed and you're in for two days, your share comes to $100 instead of the full excess, which might be $250 per stay.

Don't feel stuck in a fund because of waiting periods, Bowman says. "If you've served a waiting period with one fund and you transfer to another fund with a comparable level of cover, you shouldn't be made to wait again," she says. But check first before you move.

Also, find out whether your entitlements are based on a calendar year (about two-thirds of funds) or the year ending June 30. Then check what entitlements you haven't used as the end of the year approaches and make the most of them.

© 2008 Sydney Morning Herald

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