Private Health Insurance Shopping Sucks

I’m at that point in my financial life where I’m getting slugged the Medicare Levy Surcharge (MLS) for the first time. This is an extra 1% - 1.5% tax on my income above $90,000 or $180,000 for couples, which my wife and I exceed (low-key fire flex fam).

This works out to around $1,200 for the financial year just passed and will be even higher ($1,400 - $1,700 depending on how much work I get) this financial year. I can avoid paying this surcharge by purchasing a private health insurance policy.

I’ve got three options:

  1. Get the absolute cheapest hospital insurance that’s practically useless and hopefully less than what I’d pay for the MLS and save a bit of money.

  2. Get some hospital insurance that’s actually kinda useful and think of it as a discount for insurance that would come in handy if I ever need elective surgery on some parts of my body.

  3. Get some hospital insurance and some extras cover at the same time because I do go to the dentist regularly to prevent larger issues and I wear glasses and I could possibly save some money on that.

Junk Insurance For Tax Purposes

For scenario one, it’s quite easy to work out - just go to every health insurer’s website and get a quote for their most basic of hospital only insurance.

The cheapest I could find is Bupa’s Basic Accident Only Hospital plan, for $1,356 a year. All this insurance covers me for is accidents, but the type of accidents they cover are ones that the public system would treat me for pretty quickly, for free(-ish), anyways. Weirdly, I would be covered for some Lung and Chest conditions, including COVID-19.

I guess it’s better than absolutely nothing, but hardly useful and all it means is Bupa gets the money instead of the government who would arguably do more with it than Bupa’s shareholders in the UK.

Useful Insurance That Costs A Little More

For scenario two, things get a little more tricky. Even though the government has set out standard levels of cover - Basic, Bronze, Silver and Gold - many of the insurers offer additional things on top of that minimum level. Luckily there is a government website that does a semi-decent job of comparing all the policies on the market.

For example, RT Health’s “Bronze Plus Essential Hospital” costs $129.44/m (before rebates & loading) and includes the standard Bronze level stuff they have to by law, as well as coverage for a range of extra things, whereas Frank or AHM’s Bronze insurance costs more yet just meets the bare minimum of Bronze level coverage.

It gets even more confusing when compared to HCF’s “Hospital Bronze Plus” which is only $1.60/m more, but gives you coverage for plastic and reconstructive surgery, but takes away coverage for hearing implants and pain management with device compared to RT Health. Sure, there’s fewer items covered, but what would be more useful to me - hearing devices & pain management, or plastic reconstructive surgery??! But then Medibank give me coverage for back, neck and spine surgery and at the expense of pain management, plastics and podiatric and HBF will do back neck and spine but not insulin pumps, hearing implants and podiatrics.

It makes comparing all these plans a total mess as you’ve got to decide what’s the best mix of hospital services you might actually use versus saving a bit of cash. I have no idea how people make an informed decision here without hours of research.

I boiled it down to HBF’s Bronze Hospital Plus, as it’s $1660.50/yr and covers a significant amount of items I would possibly use, compared to the others under $150/m.

Compared to the basic junk insurance, it’s only $304/yr more, but way more useful. I mean, fingers crossed I never have to use it, but if I did it’ll allow me to skip any public hospital waiting lists and get treatment much sooner with minimal cash outlay versus paying for it myself - as long as the thing I need done is one of these items:

Extras - Dental & Optical

Extras are even worse. The government doesn’t have a prescribed level set like they do for hospital cover, so it’s basically a free for all when it comes to things like dental and optical.

Personally, I get the following dental work done yearly:

  • 012 “Periodic Oral Examination” - at least once a year ($57)
  • 114 “Removal of Calculus” - three times a year ($561)

With a high chance of fillings and crown (adjustment, replacement) work.

I usually spend around $350 on glasses every 2 years (used to be yearly but my prescription has settled lately), so the more I can get back there, the better.

If I was to get back $200 on glasses and 50% of my dental spend, that’s $509, so if the extras cover is less than that, I’m ahead without even trying.

HBF have two extras cover options that are under $509/yr - Basic Extras & Flex 50. The vast majority of this stuff I have never used and am unlikely to use even if it was free.

Many health insurers provide different rates of benefits depending if the dentist or optometrist is in their network. HBF for example call it “Members Plus”. Bupa and Medibank even have their own clinics where they’ll give you back 100% up to your yearly limit depending on your level of cover.

If your dentist isn’t in the insurer’s network, they either refund you a specific amount per treatment or a percentage (usually 50% - 70%). Unfortunately some insurers won’t even tell you the amount you get back for dental stuff unless you contact them or are already a member, like Australian Unity, Medibank and RT Health.

HBF Basic Extras - $253.36
$37 for the exam and $73 per clean - $256 all up for dental. Optical $160/yr. Combine that with the dental and I’m claiming $416 a year. That gives me a total saving of $162.64/yr.

HBF Flex 50 - $471.47
50% back on dental up to $800/yr ($309 for my regular checkup & cleans) and $200 on glasses - $509 of claims but I’m spending $471.47, so I’m really only saving $38. Not worth it.

NIB Core Extras - $489.26
$370 back on dental, $250 on optical. $620 in claims, $130.74 in savings after the premium costs.

Bupa Starter Extras - $307.89
$183 dental, $150 optical. $333 in claims, only a $25.11 saving.

HCF Starter Extras (With Optical) - $261.60
Only one clean per year, $55. Only one checkup per year, $60. $100 optical. $215 in claims all up but it costs $261.60. No point.

I could keep looking at more providers, but anything more than “basics” extras appear to not be worth it unless you plan on using the wide range of other stuff like massages, physio, chiro, etc - or the accompanying hospital plan sucks in return.

Many of these extras also include ambulance cover, but with a lot of caveats like not via air ambulance and/or only if an emergency, not patient transport unless that’s necessary and so on. I pay $50/yr to be an Ambulance Victoria member and it covers everything, so yeah, not much point paying extra (even if it’s less than $50) for the private health insurance ambulance stuff considering the very specific range of coverage they provide in Victoria.

Other Perks Not Worth The Effort

There’s also other things to think of on top of this, like the little perks each health insurer hands out. The bigger ones like HCF, Medibank and Bupa have cool rewards programs that sell discounted gift cards (OzBargain has a comparison). Qantas will even give you bonus Frequent Flyer points if you get their health insurance.

Many insurers have promos on the extras too, like 6 weeks free, no waiting period, or a bonus gift card.

I took a look at these offers and perks but none of them were that interesting enough to justify the extra costs or worse coverage. In the case of the promotions, they often make you go on a monthly payment plan instead of yearly, which costs more and erodes the benefits the promotions bring in.

Is Health Insurance Worth It?

After an entire precious weekend of research, I settled on HBF’s Bronze Hospital Plus & Basic Extras for $1,913.86/yr, which includes 16% LHC loading and an 8.202% rebate from the government.

HBF also has a promotion going where you get 4 weeks free extras cover and a $100 gift card - but I need to pay monthly instead of yearly. This costs more than paying yearly ($164.93/month x 12 = $1,979.16 vs $1,913.86), but I save $152.24 saving on the policy thanks to the free 4 weeks ($1979.16 / 52 = $38.06/wk) and get a $100 gift card for a total of $252.24 of savings, bringing the total yearly cost down to $1,726.92.

This will mean I don’t have to pay around $1300 for the Medicare Levy Surcharge. I don’t know for sure until July next year, as my income varies, but I’ll be surprised if it’s less than this year. The real cost of the hospital insurance is only $108.26 a year, which in an ideal world I wouldn’t have to pay, but it is decent peace of mind to know if something does happen to me I at least won’t have to dig into my savings too deeply or hit the credit card hard to get quick treatment.

The extras cover (as explained earlier) should allow me to claim $256 of dental expenses in the year, so that alone makes the extras cover effectively $0/yr, along with a free pair of glasses worth up to $160. I could save even more money if I go to one of HBF’s in-network dentists.

Summary - yes, it’s worth it, but fuck me dead there’s a lot of effort involved to make sure you don’t get ripped off.