Are health funds worth it?
With all the political talk about governments removing funding for health funds with 'means testing' and with the second largest Australian fund being brought out by a UK fund the question that we are being asked a lot is - with the proposed 30% increase in cost will they actually be worth it?
Would You Let an Accountant Direct Your Health Care?
Health funds seem like a good idea - when you get sick you get money back for seeking appropriate medical care. Preventive measures such as going to a chiropractor or a dentist also carry a financial incentive.
What could be better? At first glance taking proper care of yourself comes with a financial gain!
A look at the details shows that you might not get as good a deal as it sounds.
Health funds offer you a rebate for your care based not on what you need, but on what is most cost-effective for them. As they are often a private businesses their main concern is to maximise their profits for the benefit of their shareholders. The way they do this is to have a difference between the rebates paid to each member compared to the premiums received. This difference can add up where some funds have enough money left over to sponsor the Australian Tennis Open and Summer Test Cricket Series - how that helps you see a 'healthier you' is a bit of a mystery.
According to a statement by Australian Dental Association, 'Health Funds set their rebates at a level that suits their commercial needs. Those rebates are not related to any recognized fee scale or cost of care.'
Since rebates tend to drive the type of care that is sought and given, it's actually the accountants that end up directing the type of care you receive, how often you are allowed to access it and sometimes even from who you can access it from. These accountants don't know teeth, and they certainly don't know you.
But You Save on Tax!!
With the current Medicare rebate the price of basic health insurance can often be the same as what you save in tax. Private health insurers are posting massive profits (average of $1b in 2009-2010) but with the other hand claiming a payout from the government to keep them solvent. This is really what the government is crying foul over - and in a way rightly so. The argument is that this tax revenue would be better off making the public health system stronger and more efficient and more accessible for every Australian. Not just the ones with health insurance.
Ok, so they make money off me, but what if I get sick?
Well if your name is Clive Palmer a single knee replacement at $15,000 is just spare change. But the majority of us get a little concerned over this figure. The maximum amount paid out by Medibank Private last year was almost $500,000 for a premature baby that required a lot of care. That's more than the average house price in Brisbane. So for hospital care some would argue it's a very good investment.
But what about extras cover?
The ACCC reported that the average rebate for extras dropped from 54% to 48% last year while premiums increased by 8% and this is where health funds don't add up. The extra cover received for the premiums outlaid in most policies will actually leave you short changed. Add to this the rules and regulations like 'only one visit per year' and you often are better off not having extras insurance in the first place.
Most Australians will spend up to $1000 per year on health - glasses, couple dental visits and a few chiropractic or physio appointments. Add to this the $1500 you pay for extras insurance so you can claim 'something towards this cost' and 'extras' health care really does become expensive - even before the 30% increase in fees.
So what can I do?
Every family or person is different so get some advice before making changes. Speak to your accountant and see if the savings in tax are still available for you. Also give a health insurance broker a call and discuss the cover you are on and if it suits what you need for you and/or your family. Ask yourself the question - do I get value for money from this policy and does it cover what I need for my health.