Health

Private health insurance literally saved my life after breast cancer

Thinking about dropping private health to save on costs? Read the stats (and personal story) you should know first.

By Nicole Pedersen-McKinnon

Almost exactly 3 years ago, I was diagnosed with breast cancer. 

I’ll be grateful every day that I had private health insurance – it allowed me to elect, shortly after, to have a double mastectomy and get on with my life without radiation, hormone blockers… or fear.

It’s a stark example of the unquantifiable benefits of private health insurance: the treatment you want, when you want it, with a doctor and at a hospital of your choice.

Sure, you can quantify my experience: I was out-of-pocket a not-insignificant $10,000 of the $55,000 cost of my hospital treatment (my 8 day, $29,000 hospital stay cost me just my $500 excess).

That means my breast cancer treatment was 82% free.

But, to my mind, being able to get healthy and well – basically overnight – makes my private cover priceless.

And I am mindful that I could get sick again.

However, incessantly escalating costs often see older Australians, in particular, drop their health cover right when they may need it most. 

So, let’s park that unknown and get to know the private health facts and figures.

How much private health funds pay out

Each year, the Private Health Insurance Ombudsman publishes the State of the Health Funds, a report card on the service delivery of Australia’s health insurers. 

Today, that will help us determine what you get back in return for what you fork out for private health.

The first thing you should note is that the latest 2022 report reveals comparatively few complaints. Indeed, complaints in 2021-22 decreased by 22.7% compared to 2020–21, to a total of 2704, continuing a trend from the previous year.

The report says: “Part of the reason for the decline appears to be the long-term positive impact of the private health insurance reforms that came into effect from 1 April 2020.

“The reforms aimed to address consumer sentiment that health insurance was too complex by implementing a system of product ‘tiers’ and clinical categories.”

But the $64,000 question is the proportion of premiums that insurers pay back to members as benefits.

The extent of cover, a la my experience above, is also key. For everything from surgery to speech therapy.  

So let’s dive in.

What health funds return to their members

The State of the Health Funds report explains: “Insurers will generally aim to set premium levels so that contribution income covers the expected costs of benefits plus the insurer’s administration costs.” 

At face value, that seems pretty good.

But it still can mean big gaps for members. How big?

Unfortunately, we only have averages of all the policies offered by each insurer, rather than figures for any single policy type. And remember, the range of treatments covered and to what extent, excesses or co-payment if you go to hospital, and prices and discounts will be different between funds and types of policies.

There are also wide variations between states.

The Ombudsman says: “In some states, insurers can cover gaps more effectively because doctors in that location charge less than the national average.

“In addition, where a doctor’s fee for an in-hospital service is at or below the Medicare Benefits Schedule fee, there will be no gap to the member.”

But the average across all states for the hospital-related charges covered is a possibly surprising 90.6%, says the report.

Don’t forget, Medicare rebates will usually top up what the health fund pays and can make the treatment no-gap. Read the Australian Government explainer about out-of-pocket health costs to find out more.

If paying no gap is a financial imperative for you, remember you can also get no-gap policies that protect you from out-of-pocket expenses. 

Offered by most health insurers, they are usually available in 3 levels: partial gap cover, known gap cover and full gap cover. Of course, the cost escalates as you go along that cover continuum.

Private health is not just about hospital cover, but also the extras cover you can buy to cover things like physio, fitness and podiatry.  

Private health insurance usually offers a range of different types of policies, but the most common distinction across all funds is ‘hospital’ and ‘extras’ or a combined ‘hospital and extras’ policy..

Sometimes it’s the extras that make private health insurance worthwhile - as I explain in Citro’s article on staying fit and healthy for a fraction of the price

And most Australians realise agree with me  – APRA figures show only 12,421 people have hospital cover only; more than 12 million combine it with extras benefits.

How to choose the highest-paying policy overall

Once again, when it comes to the proportion of general treatment costs covered, also known as extras or ancillary services, the data is per provider rather than specific to policy types, so it’s hard to find this out.  

But you can – and should – expect higher per-treatment payouts if you pay for a higher tier policy.

The report says: “Higher cost policies will generally cover a greater proportion of charges than indicated by this average, while cheaper policies may cover less.”

The average of all funds of extras charges covered is 52%, with the Ombudsman naming the most common categories as dental, optical, physiotherapy and non-Pharmaceutical Benefits Scheme prescription medicines.

(You can read more about the free medicines available through the Pharmaceutical Benefits Scheme, if you’re interested but there is limited coverage and more modern medicines require a co-payment to access. 

Indeed, if you use all the free dental checks and cleans, and mop up annual allowance for optical, and are a little bit injured and so require other treatment, you could even claim back in payouts all that you fork out in premiums.

Health funds paid out $6b for hospital-related services in the year to September 2023 and $3b for extras, say the latest APRA insurance statistics.

However, the private health industry is notoriously opaque and hard to understand – sign-up incentives, ongoing costs, cashbacks, waiting times, excesses, co-payments and exclusions can make the value proposition difficult to fathom.

So, in other articles for Citro, we will focus on specific claims categories and treatments, to aid your ‘cost-benefit analysis’ of keeping private health.

In the meantime, the Ombudsman’s official comparison website, privatehealth.gov.au, is an excellent, independent place to see if your health insurance policy remains good value. (Remember, mostly, you won’t have to re-serve waiting periods for conditions for which you have already qualified.) 

I am certainly glad I kept my private cover.

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