Prior to my wife and I getting married together we had never seriously looked at getting health insurance before. We knew it was something important for us to consider now as we readied for marriage, because there was a strong possibility we were going to have children. So with a little foresight we both signed up for individual health plans with one of Australia’s largest private health insurers. I signed up thinking I was minimising my tax and paid for the lowest coverage possible, whereas my fiance took out the policy with kitchen sink.
My wife was made fully aware of the 12 month waiting period for child birth and thankfully this wasn’t a problem as our first born son ended up arriving 18 months later (ok, so it was a little too close!).
Unfortunately I was quite naive on what our health insurance would cover and I soon learned that there were several things we had to pay out of pocket, and these things included:
- Obstetrician
- Anaesthetist
Now I understand you don’t necessarily need both of those services to deliver a child, and this was our choice in how we wanted our first born delivered.
The only thing we did notice that was covered was the surgery costs incurred by supporting nurses (we had to pay the obstetrician separately) and staff in the theatre (besides the anaesthetist) and the private room along with all the care by support staff.
Looking back I’d be curious on what the costs for all this would have been, considering we had to pay premiums during those 18 months of just under $2,500.
We continued to keep our private insurance over the coming years and here’s how our costs grew over each of the calendar years (same provider, same cover):
| Year | Cost | Increase |
| 2010 | $820.67 (started June) | |
| 2011 | $1,632.36 | |
| 2012 | $1,910.63 | 17% |
| 2013 | $2,338.35 | 22.4% |
| 2014 | $2,610.90 | 11.6% |
| 2015 | $2,956.65 | 13.2% |
| 2016 | $3,285.71 | 11.1% |
| 2017 | $3,243.22 | -1.3% |
| 2018 | $3,144.80 | -3.0% |
| 2019 | $3,496.35 (projected) | 11.1% |
The Smartest Thing We Did… and I Only Wish Someone Had Told Us Sooner
You’ll notice in 2017 we did something that made our premium’s decrease a little for the entire year. What was it? My wife and I actually combined our individual private health insurances into one family cover.
#foreheadSlap
I don’t know why we didn’t think of it sooner, like in 2010 when we married – as a family is considered to be an adult with one child OR a married couple. So for some strange reason we didn’t look too deeply into our private health cover and just assumed we were on the best cover for us.
Asking Yourself the Question
However, as we’re beginning to realise now that we are no longer planning for any more children, we’re asking:
Do we really need private health insurance?
There are two things that my wife and I have both considered when determining whether or not we need private health insurance:
- It covers a need; and
- It is cost effective (and minimises tax)
Does it Cover a Need?
Thankfully our children are healthy and even if services are needed we are not far from a public children’s hospital.
As I look through our current private health insurance cover I see that most of the things “covered” have limits that are less than a few months of premium cover.
Could we not just have our own medical emergency bank account and put our own premiums in that?
But obviously there’s a risk.
The risk would be paying for expenses incurred in admission to a public hospital that wouldn’t be covered. Maybe like the anaesthetist or the drugs or something. Or having to wait in line for treatment (if you didn’t have the money to pay for it privately).
But this is obviously the purpose of the medical emergency fund – it should protect you from these emergencies that will happen, and will hopefully lessen the blow financially.
Cost Effective & Minimises Tax
Another incentive for Australians is that by holding private health insurance you can reduce your tax burden by not incurring the Medicare Levy Surcharge ( source ATO ).
This only applies if your family (or individual) gross taxable income (among other things) exceeds the threshold. For 2018-2019 tax year this threshold currently sits at $90,000 for individuals or $180,000 for families.
The threshold does increase depending on how many children you have. We have 3 therefore the threshold increases to $3,000 ($1,500 by 2 as the first child doesn’t count). Therefore, in total both my wife and I with our combined incomes would have to earn above $183,000 for us to pay the Medicare Levy Surcharge.
If we did have to pay the surcharge then we would be paying 1% on your total gross earnings, therefore, a combined income of $183,001 would incur a liability of $1,830.
To minimise this liability a family could take out private health insurance to offset against this liability.
Currently, one such insurer in New South Wales which provides cost effective cover is Frank and upon entering our families’ details for basic hospital cover we would be paying $1,562.40 if electing to pay our premiums annually (generally the cheapest option).
Therefore, by taking our a very limited form of private health insurance our family could save $267.60 every year. And we would still need to build up a medical emergency fund to help cover incidental medical costs that our limited health cover would provide.
Conclusion
When determining your private health insurance needs there are two main aspects you should add to your considerations: does it meet a need ? And does it provide a benefit ?
Once you have decided that you do need health cover then to help reduce your premium cover, consider the following to help minimise the costs even further:
- If you have a spouse or a child – get family cover (rather than having 2 individual coverages); and
- If possible pay your premiums annually.
In the meantime continue to save up your pennies in your medical emergency fund.
