Safe Or Sorry?
Sydney Morning Herald
Thursday September 18, 2003
Love private cover or hate it, there are ways to get value for your money, writes Steve Dow.
Martyn Goddard recently dumped his private health insurance. The Sydneysider says he and his partner could no longer afford the premiums. Making a claim with his big insurer was also a ``nightmare" of bureaucracy. Goddard's decision is noteworthy, because he is the health spokesman for the Australian Consumers Association.
Goddard bought his insurance policy in 2000, when many Australians were stampeding for private health insurance, under threat of tax and financial penalties for those who refused to bow out of the stressed public health system.
The Federal Government is amending legislation on private health insurance. It intends making life easier for the funds, despite continuing complaints from consumers about sudden inflexible changes to policy conditions, landing them with higher premiums and unforeseen medical bills.
In a recent quarterly bulletin, the Private Health Insurance Ombudsman criticised the period of notice given to contributors of changes to fund rules often as little as two weeks as ``inadequate and unreasonable".
The Government intends to relax the rules to allow funds more flexibility to offer attractive health promotion packages possibly heart disease and diabetes prevention and smoking cessation programs but at the same time enhance their powers to change the conditions of policies at short, or even without any, notice. As well, under changes announced this month by the federal Health Minister, Kay Patterson, some consumers will lose attractive extras health fund rebates on gym memberships, runners and golf clubs. These were a political Achilles' heel for a government keen to have its health care reforms seen by the electorate as a serious long-term structural fix to growing pressure on finite health resources.
Meanwhile, the penalties for middle-class people who stick to public health will remain an extra 1 per cent tax penalty on those earning more than $50,000 a year; an income bracket an increasing number of Australians will find themselves creeping into. As well, the system known as ``lifetime health cover", a rising premium penalty for each year those aged over 30 fail to purchase a policy, will continue.
Yet Goddard says he now believes the public system is less vulnerable than earlier suggested by government, while the private health industry is shaky, in spite of its friends in Canberra. The funds are now addicted to and reliant on, he says, the $2.3 billion a year in taxpayer subsidy via the 30 per cent rebate to private health policyholders.
A University of Canberra public finance expert, Ian McAuley , suggests another reason Goddard, and hundreds of thousands of other Australians, have made a sound personal decision in giving private health the heave-ho. McAuley suggests that, at age 54, Goddard is still too young to bother being insured. Health insurance for many Australians, says McAuley, is only good value as a tax write-off provided you don't claim on it.
For those who claim, he says, ``if you're over about 55, then on average you'll claim more than you put in. On average, it's worth waiting until then even with lifetime cover".
``If you're young, with an income below $50,000, forget it. Stay fit and eat well." Plenty of Australians seem to be of a like mind. On McAuley's analysis of official figures, 384,000 Australians under 55 dumped their private cover between September 2000 and June this year. Over the same period, 234,000 people over 55 had joined health funds. Goddard says the people who still have private cover will pay for this worsening financial base the younger, fitter and profitable customers being replaced with the sicker and costly.
The health funds reject the McAuley-Goddard view of their industry. The Australian Health Insurance Association's chief executive, Russell Schneider , says McAuley's argument is ``stupid" and a line he has been ``peddling for years".
``Under Mr McAuley's argument, people needn't buy house insurance until the fire is coming over the hill, because until it burns down, you pay more than you get back," says Schneider.
``The fact is, no one can predict at what age ill health will strike them. Insurance is about the unexpected, and plenty of people have unexpected illnesses long before they turn 55.
``Health fund books are full of high claims by young people who have either injured themselves or suffered unexpected illness. Health insurance makes it possible for them to get back to work, or to look after their family, quicker."
Schneider says the highest claim funds paid out in the past two years was more than $490,000, for a person in their 30s who had cardiac surgery. The highest childbirth claim, which involved 125 days in hospital, was $104,000.
There had also been a ``number" of benefits of more than $40,000 paid to people in their 20s, and $71,000 to one 30-year-old who had a neurological disorder requiring a long hospital stay. ``These people were lucky they didn't wait until they were 55 to take out health cover," he says.
But the architect of Medicare, Professor John Deeble , counts himself among the critics of the way the Federal Government is handling private health. In a report to state and territory health ministers in January, Deeble said the 30 per cent rebate on private cover had failed to produce the results claimed for it, on either economic or health service criteria.
``The rebate itself played almost no role in the large increase in private insurance membership in June-July 2000, nor can the introduction of lifetime health cover alone explain it," wrote Deeble. ``Almost all of the increase came from the fear campaign associated with its implementation." So, whither the confused health consumer amid this debate? Goddard emphasises he has no problem with the existence of the private health industry provided it is cut loose from taxpayer largesse, which he says is helping create a two-tier medical system for the rich and poor.
Goddard is also critical of the media's role. Each year, he says, press, radio and television focus intensely on health fund premium rises, but rarely look at the hidden expenses: increased excesses and bigger co-payments for each day spent in hospital, for example. (A co-payment is payable on lower-premium health insurance and means a fund member pays an agreed amount for example, $50 a day per hospital stay on top of his or her premium.) Health funds confuse consumers over ``known gap" and ``no gap" insurance policies, says Goddard. The former can still leave patients with unforseen extra bills for a variety of reasons funds lacking contracts with particular hospitals, for example, and doctors raising their fees above the Medicare benefits schedule.
Given 8.6 million Australians are covered by private health insurance, Goddard says the Australian Consumers Association has put aside its differences with the Federal Government over its governance of the private health industry, and produced a list of ``best buys" among the health policies (see box at left). It has also produced a personal calculator that gives more specific advice according to an individual or family's needs (see box at right).
Choice, the association's monthly magazine, advises that some standard and limited cover policies offer different excess amounts, usually applied once per hospital stay, or a co-payment, usually a set amount per day in hospital. It advises checking the fine print for the following points. Policies may apply the excess once a year, or as often as five times a year.
Some policies apply a co-payment only for the cost of a private room. Others will apply a co-payment up to 10 times a year each time someone covered by the policy is admitted to hospital.
Check whether the excess or co-payment applies to treatment in a day hospital, or for treatment as a private patient in the public system.
Some policies with higher excess more than $500 for single people and $1000 for couples and families are excluded as a way of avoiding the extra Medicare surcharge on your income tax.
On the extras front, Choice advises determining whether your extras cover on items such as dental and optical represents value for money, by examining your ancillary premium over the past few years. Calculate how much your claims were worth over that time. Members who pay more money in premiums than they get in return should cancel or switch policies.
TOP HOSPITAL (NSW/ACT )
Australian Unity Comprehensive Hospital, $2197 per year.*
CBHS Hospital `a', $1836.
R&T Health Top Private Hospital, $1961.
Teachers Federation Health Top Private Hospital, $1706.
Navy Health Top Hospital, $2082.**
BUDGET
Medibank Private Blue Ribbon Excess $1220 ($1000 one-off excess) *.
CHEAPEST
HCF Hospital Advanced Savings $728 ($100 co-payment, maximum $800 per person per year). ***
ANCILLARY/EXTRAS
R&T Health, St Luke's , Health Partners , Defence Health and HBA .
* Limited benefits for psychiatric care and rehabilitation for the first year.
** Premiums apply to civilians; serving military members get a discount. Benefits limited to 100 days' hospitalisation at the insured level per person per year.
*** Limited benefits for assisted reproduction, cataract surgery, pregnancy, coronary artery surgery, hip/knee replacements, psychiatric care and cosmetic surgery.
Source: Australian Consumers Association, Choice magazine, July 2003
Finding a fund
The Australian Consumers Association recently launched its personal private health insurance calculator at www.choice.com.au .
For a one-off fee of $8.25, or $13.75 to join the association for three months, consumers can input some personal details along with the type of policy they are looking for to come up with the best deal.
The association's senior policy officer on health, Martyn Goddard, says consumers rarely shop around. The calculator will hopefully help.
As an example of the calculator, a family living in NSW that wants a policy without co-payments or a premium excess and without the 30 per cent tax rebate applied to the prices would be given specific policy recommendations from HBA, Health Partners and Australian Unity, among others.
Before switching policies, the association advises asking a new insurer whether any waiting periods will apply. These are usually 12 months for pre-existing conditions and pregnancy and two months for all other conditions. But the new policy might also have a benefit limit period of up to 36 months, limiting cover in that time to private treatment in a public hospital.
© 2003 Sydney Morning Herald
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