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Chapter 1: What are the basics of health insurance in Australia?
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Please remember that all of the information in this podcast episode is limited to general information only. That means the information is not specific to you, your needs, goals or objectives, so you should seek the advice of a licensed and trusted financial professional before acting on the information.
And before you acquire or apply for a financial product, please read the PDS or Product Disclosure Statement which should be available on the issuer's website. Lastly, please keep in mind that past performance is not indicative of future performance. Kate, the great, welcome to this episode of the Australian Finance Podcast.
It's good to be back, Owen, and talking about another thrilling topic today.
Yes, it's always a great day when you get to talk about insurance and specifically health insurance. And while we might jest a little bit, it actually is a really important topic for a lot of people and we really haven't covered it.
No, no, I think apart from that one topic, super speedy insurance episode we did back at the very beginning of the podcast. This is the only other time we've really mentioned it.
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Chapter 2: Why is it important to compare health insurance premiums?
No, but seriously, we're going to cover all of the, I guess the ins and outs, the need to know facts about health insurance. One thing we should say before we get into this is when it comes to insurance and particularly anything that's to do with your health, there's normally quite a few asterisks. The government's tried to tidy this sector up a bit, but
don't just go out off after this episode and just get the, you know, any insurance, take your time to consider your own personal circumstances and how, you know, existing medical conditions or, you know, how much you need to spend on insurance. Consider all those different things and make sure you read the PDS. Okay.
Now that we've got through that fun disclaimer, Kate, why are we talking about health insurance?
Well, I didn't actually know this until I started researching for the episode, but a lot of health funds are actually increasing their premiums on the 1st of October because they delayed it for a while because of COVID. So I think it's a good time to just go and if you do have private health insurance, go and compare it.
So hopefully this episode comes just in time to give you that reminder that you might be able to get a better deal. But also, I haven't thought about it too much as a young person because often you get to stay on your parents' plan until sort of the age of 23, 25, depending on what plan and if you're a student. So it's not something you often think about in your 20s.
And often you don't start thinking about into your 30s, as we'll discuss later, once you start getting a surcharge, which is probably what Owen's coming across at the moment.
Hey, whoa.
Age. Okay. Here we go. Age. Now he's a big old house owning adult. Yeah. So I think we have a great healthcare system in Australia with Medicare. And so you don't actually need private health insurance in Australia to have your medical costs covered, which is quite different to the American system.
And I'm very, another thing I'm very grateful for as an Australian that you can just, you can go to a bulk billing doctor. You can, if you go to the hospital, you can, I think the only the only exception to that is a lot of the extras and sorry, ambulance cover, which is not something that Medicare covers.
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Chapter 3: What types of health insurance coverage are available?
Obviously, we have a great public health care system in Australia, but we also have a private health care system, which includes private hospitals and the ability to get insurance to cover some of the costs when you go and use things like physios or dental or different types of things like that. So I guess just generally what is health insurance?
So private health insurance, and we might just call it health insurance by the way, but private health insurance is something that you pay for. You pay a premium just like you would for your home and contents. You pay either, you know, via installments or a yearly fee and it provides cover for for certain things throughout the year.
And some of those things which we've just talked about can be kind of put in this other bucket, which is extras, which is things like dental physio, all those different things that you might come across as a, I guess, elective kind of thing. Like you go and see the physio because you've got a niggle or something like that.
But then there's the other side of private health insurance and that's actually hospital cover. And it's important to differentiate between the two because most people think they're the same thing. Like when I started researching this many years ago, I thought, oh, it's all just the same thing. You've got to have extras if you've got hospital cover. You don't actually.
You can have extras from one health insurer and hospital cover from another health insurer. But the big driving force behind this is for most people with private health insurance is tax. There's a certain threshold, which I'll just get my numbers up here. So I'm not getting them wrong from the ATO website.
If you're a single and you earn more than $90,000 a year, or if you're part of a family or a couple and you're earning over $180,000 a year, you will pay more.
tax in the form of something called a medicare levy surcharge so this is different to the medicare levy which everyone pays the medicare levy surcharge is an additional tax that applies if you earn more and so it comes to a point kate where you should take out private health insurance for the full year not just you know for the last day of the tax year for the full year because it might actually save you money just to have the insurance even if you don't use it it's still going to save you money so it becomes a cost saving
So that's the kind of the bones of the health insurance system and how it works. Kate, how do health insurers decide who to insure or how risky someone is?
So if you go onto a health insurance website, they're going to ask you a whole lot of questions about your pre-existing medical history. They're going to look at your age, your demographic, and some clever actuary at the back is crunching all these numbers and working out
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Chapter 4: How does the Medicare levy surcharge affect health insurance decisions?
Yeah, and they actually often pass on those details across when you move insurers as well, because my family actually recently changed insurance and you don't just get to double up if you've already used all your optical in the... In the previous insurer, you don't just get a whole stack of new optical within the same insurance year.
But some health insurers, as we might discuss a bit later, are actually taking into account all of the healthier habits as well nowadays, like using a gym. I think some even you can connect your Fitbit to and sharing those healthier behaviours that hopefully mean you're not going to be needing your insurance as much.
Yeah, and that's the thing, right? What we've seen in the past is you make a really good point about this technology and actually rewarding people for being healthier is a new concept because we can use technology like wearable technology, like smart watches or what have you. But in the past, it was all about negative, like, I guess, inputs. So do you smoke?
Oh, well, that's going to cost you more. Do you have pre-existing conditions? Oh, that's going to cost you more. But now it's both those negative kind of things that make the thing more expensive for you, but also things that make it less expensive and make it a better deal for you.
And thanks to technology, a lot of these companies, these health insurers are embracing it and can use these devices to monitor you a bit more closely, but hopefully drive down your premium. So the really important insurances in Australia that people should know about, I think, and we've talked about this in the insurance episode early on,
is health insurance, life or death insurance, as I kind of call it, because it protects your family if you die, not if you're living, TBD, which is total permanent disability, and income protection. So there are four major types of insurances. There are others, but it's important to know the fundamental differences. So life or death insurance pays out a lump sum to your family if you die.
TPD is very similar if you're total and permanently disabled. So there's a definition for that, which you should be aware of. And income protection pays you an income if you injure yourself, if you...
I don't know, if just something happens, whether at work or otherwise, if typically if it's work, you should have work cover, but outside of work, if you injure yourself on the weekends, you can get income protection, which is just an ongoing fee and an ongoing income stream, I should say. And so health insurance is completely different from them.
You can have all of these insurances and there'll be no overlap. So I would encourage you to actively look at all of them. The key difference between health insurance and those three insurances is The health insurance you can't get inside your super fund. The other three you can't. So that's something to keep in mind too. The other insurances can come out of your super account.
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Chapter 5: What factors influence the cost of health insurance premiums?
Health insurance cannot. So you actively have to go out and buy health insurance. Kate, there are some really important nuances we know with all of the different policies. So it's important to read the PDS, of course. But even just higher level than that, there are things that people should know. For example, some states have different policies when it comes to ambulance cover.
So can you give us, I guess, a broad overview of what people need to know about the health insurance industry in Australia and how it operates?
Yeah, absolutely. So when I was doing some research, just a little bit of background, I actually saw that Medicare has been in operation since 1984 and actually covers the cost of all public hospital services, which is probably something that everyone knows. But you can also get Medicare covering services from GPs and specialists and some Some basic dental services for children as well.
So there's a lot of things that it won't cover those extra things like dental. If you don't have health insurance, you can be stung for a massive bill. And then also another key part of Medicare that I found was it's the pharmaceutical benefits scheme, which helps reduce the cost of quite a lot of medications in Australia.
Yeah.
Yeah. And so when I was having a look, you've got those three main types of cover. You've got ambulance cover, which is really basic. And I was having a look at the Ambulance Victoria website and it's actually, they say the basic level trip in an ambulance is $1,200 in Victoria. And that's just a base level road transport.
That's not having to get like an aircraft or one of those helicopter air transports. So, yeah, I actually didn't really know that much about ambulance cover, but it's actually, it's only about $50 a year as a single in Victoria to get ambulance cover with Ambulance Victoria, which is quite good considering most health insurances have a lot of fine prints about ambulance cover.
The thing is, and this is really important to note, you bring up the Victorian example, is that in other states, you get your health insurance a different way than you would in Victoria. So in Victoria, you go to Ambulance Cover Victoria and you get your cover. In other states, it is often provided by the private health insurer. And in some states it's free.
So in some of the really good states, I think it should be free in all states. In some states it's free. However, if you don't have ambulance cover, like you don't pay for it, you've got to ask yourself, am I covered if I'm outside my state? So let's say you're in New South Wales and you've got your health insurance and you've got your ambulance covered through your health insurance.
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Chapter 6: How can technology impact health insurance pricing?
And then you step over the border into Victoria and you injure yourself. Are you covered? And that's a good question to ask yourself. And sometimes it's just better to be safe than sorry. Honestly, it's really important to be safe and sorry. Like for example, at our footy club,
our club imposed a rule that everyone had to have ambulance cover because it was so important when people injure themselves to go and jump in an ambulance. It's just so important for everyone. So it's a little bit nuanced, Kate, and I would encourage people to check out the rules in your state and it's a hundred bucks or 50 bucks very well spent.
Yeah, I just I just didn't realize how much fine print there was with ambulance cover and health insurance. I presume that it was something that health insurance would just cover automatically, but that was definitely not the case. And there's
As Owen mentioned, the nuances on it, you might have private health insurance covering you for ambulances in Victoria, but not interstate or maybe not for air travel. And also there's also that other nuance where someone calls the ambulance on your behalf, but when it gets there, you don't actually need to go in the ambulance. And so that's not always covered as well.
So it was a lot of fine print that can catch you up there.
Another one is some health insurers say that they provide ambulance cover, right? But it's only for the ambulance to get you to the nearest hospital. But what happens if you need to be transferred because that hospital isn't a major hospital and you need to go to an emergency at a bigger hospital? Sometimes they won't cover that second trip. So, I mean, that's just not great. Let's be honest.
So you need to be aware of all of those things. Fortunately, when you actually do pay for it,
ambulance cover separately it's actually pretty straightforward the health insurance providers make it a bit more complicated if you ask me how about kate in earlier this year for those of us that actually pay attention to this stuff earlier this year the government rolled out some much needed changes to make it more transparent for us to buy insurance and to make sure we're getting covered for the things we want to be covered for they brought in a new tiered system can you explain that to us
Yeah, so there was all these private health insurance reforms because there was just absolutely no standardisation. And I think they came into place around April this year where the health insurers had to categorise their hospital cover and their extras cover by certain levels. And they had basic bronze, silver and gold.
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Chapter 7: What should young people consider when choosing health insurance?
But yeah, this is all sorts of things. I mean, I'll just have a look at it now, but if you're looking for different types of If you think you need coverage for different types of area, it's worth having a look. So bronze level might cover things like brain and nervous system or kidney and bladder, but it doesn't might not cover things like back, neck and spine.
So I think you've got to have a look at that chart and work out at my age. What do I think I need coverage for if I want that private hospital cover?
One thing that I want to throw out there for a lot of our listeners is getting covered for giving birth in a private hospital. There are a lot of people that will be listening to this thinking, I'll just get private health insurance so that I can pick my obstetrician. I can go to the hospital that I want. What's really important to understand is that there may be substantial waiting times.
So waiting times, for those of you that have never done this before, waiting times are that in instance where the health insurance says, yeah, we'll cover you for that, but you need to have your policy for at least a year before we'll pay you anything.
And so a really good example of that is typically speaking, giving birth and the coverage that that provides through private health is you typically need to have the insurance for at least a year. And it's quite expensive because let's be honest, you only want coverage for giving birth if you plan on giving birth.
And so the health insurers kind of know that they're going to have to be out of pocket. But there are benefits to that. There are pros and cons to having
coverage for that and your private health insurance policy for example if it's a really complicated birth the private hospital might actually just transfer you to a public hospital because they are better equipped to deal with emergencies so you know those are types of things you might want to consider before you go and get these extras but that's just an example of looking at the tiers like you say and then making an informed decision about what level you actually need
Yeah. Like I'm looking now, pregnancy and birth only has to be included in a gold level cover. So it could be included in the others. They can choose to include that, but it's only in the minimum levels for gold levels. So you definitely got to have to look through. And obviously with these levels, it goes up in price.
So the basics, the cheapest one, and that's sort of your base level hospital emergency admission. But if you're thinking you might need any type of surgery or elective surgery, then you're going to be having to look at the other tiers as well.
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Chapter 8: How can you effectively manage and review your health insurance?
If so, how much? What does it cover? Those are important questions to ask too, and that can be another cost on top of your insurance, or you may have to just choose a basic policy and pay out of pocket for those types of really expensive items. So, Kate's provided the link and I'm looking at it now just like Kate is and it's super easy to understand.
This is a massive change for the health insurance industry. When I was trying to wrap my head around this, I had to rely on Choice, who are probably the best source I've found, as well as the privatehealth.gov.au website, but Choice was the best for me to find out more about. health insurance.
So Kate, probably the big question is, if we're directing people to this, is how do you research and choose a policy? Like what are some simple steps people can take?
Yeah. So one of the first things is thinking about who the cover's for. And most health insurers will provide couple packages and family packages. And families can often actually get a pretty good deal if they've got dependents that are under the age of somewhere between 20 to 25 depending.
But if you've got any dependents, have a look at the family packages because it often doesn't cost that much more when you have a dependent and not have a dependent. So it can often be the same cost as just a couple package. So actually have a talk to the health insurer and see what the costs are and whether they can provide you a better deal for having two people on the same plan or
multiple people as well so and often often the health insurers provide quite good coverage I know as a young person growing up I remember sort of primary secondary most of the health private health insurance covered all your dental treatments so they can often be a little bit more generous to young children in the coverage they provide and some insurers as well
I think poop is one I've seen in the city, but they actually have their own dental clinic for their people. So I haven't tried that myself.
So this is the thing that really annoyed me, Kate, is let's say, you know, we're here in Victoria, we're looking for health insurance. And we run through some comparisons and it turns out that Phoenix Health Cover is a really good one or PeopleCare is really good if we just want basic hospital care. Those are just examples. But if you go to New South Wales, it might be that Bupa's better.
Or if you go to WA, it might be that NIB's the best. And the reason why that changes is because the insurers have agreements with certain hospitals and with certain doctors, which is crazy to me, that enable them to provide cheaper, better policies. So they might say, we've serviced all hospitals in New South Wales, but none in Victoria.
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