Medibank is hosting its investor meeting on Wednesday, and the recent cyber attack impacting nearly 10 million people will be top of the agenda.
As hackers continue to release , consumer anger is growing, with two legal firms raising the prospect of a potential class action.
From rising premiums to concern over out-of-pocket costs, many Australians are now asking themselves whether private health cover is really worth it.
As continues, could this be a turning point for the private healthcare industry in Australia?
Is private health insurance worth it?
Around 55.2 per cent of Australia’s population is covered by private health insurance, according to Australian Prudential Regulation Authority (APRA) statistics for the year ending 30 June 2022.
The main reason for people to purchase health insurance is to access reduced waiting times for some elective surgeries that would otherwise result in a longer wait-time in the public system, said Professor Yuting Zhang, a health economics expert at the Melbourne Institute of Applied Economic and Social Research.
“That only applies for people who really have those conditions, like knee and hip replacements. That’s the major one that you normally wait a long time for, but the other ones are relatively okay,” Professor Zhang said.
People with mental health conditions who may wish to be admitted to a should also be aware that only some private health insurance plans provide full cover, and out-of-hospital services will not be covered.
“Before buying private health insurance, check carefully that you are covered for mental health conditions,” the Royal Australian and New Zealand College of Psychiatrists (RANZCP) advises on its
For urgent medical treatment, having private health insurance “doesn’t really matter”, Professor Zhang said.
“If it’s urgent, you can get treated right away in the public hospital, you really don’t need private insurance.”
Another key reason to consider private health insurance is to have a choice of doctors, Professor Zhang said.
“I don’t think that’s super useful. Because in the public system, public hospitals and doctor quality are very, very good,” she said.
However, for some patients, such as those giving birth who want to use their preferred obstetrician to deliver their baby, private health insurance may be an attractive option.
“Normally, in the public system, we don’t have those kinds of choices really, it’s sort of who’s on call, who’s on the shift. So that’s another reason. But I think that’s relatively minor. It’s not really for medical, clinical purposes. It’s more for people’s preference,” Professor Zhang said.
Elizabeth Deveny is CEO of the Consumers Health Forum of Australia (CHF), a national peak body representing the interests of Australian healthcare consumers.
“Private health insurance represents good value for some consumers, depending on their needs and financial situation, and we believe it plays a role in taking some of the pressure off the public hospital system,” Dr Deveny said.
However, the rising cost of living coupled with privacy concerns caused by the Medibank hack may cause Australians to reconsider whether their health insurance is worth it, she said.
“With the cost of living impacting many consumers they may be forced to reconsider the value they receive from their private health insurance,” Dr Deveny said.
“The recent Medibank data breach, and concerns about the security of private medical information, will only further raise consumer concerns.”
Growing concern over out-of-pocket costs
Many people who purchase private health cover are unaware that they are still on the hook for “out-of-pocket” fees for many services, Professor Zhang said.
“Say if you have a very basic plan, a lot of procedures are not covered. And even if they are covered, at the time of services you have to pay quite a lot of money because the insurance only covers a certain amount and the rest you have to pay,” she said.
“So that’s a very important factor, people have to look really carefully about how much out-of-pocket spending they have to pay, and what type of surgery is actually covered, a lot of surgeries might not be covered.”
Dr Deveny said health consumers have expressed growing concern about out-of-pocket costs.
“Many health consumers tell us they are increasingly worried about the out-of-pocket costs they incur when accessing private specialists and services,” she said.
Medicare levy surcharge: An incentive to buy private health cover
Australia has federal government policy interventions designed to encourage the uptake of private health insurance.
The must be paid “if you, your spouse and your dependent children do not have an appropriate level of private patient hospital cover and you earn above a certain income”, the Australian Tax Office (ATO) explains.
The base income threshold under which you are not liable to pay the MLS is:
- $90,000 for singles
- $180,000 (plus $1,500 for each after the first one) for families
The government also encourages younger people to purchase and maintain private patient hospital cover via its policy.
“If you have not taken out and maintained private patient hospital cover from the year you turn 31, you will pay a 2 per cent LHC loading on top of your premium for every year you are aged over 30, if you decide to take out hospital cover later in life,” the ATO explains.
While such policies do “give people the incentive to respond” to them and purchase private health insurance, Professor Zhang said it’s “not the most efficient way” for either the individual or for society.
“If someone buys private insurance, just purely to avoid that tax, I don’t think it’s the most efficient way, it’s definitely not benefiting people that much … But also it doesn’t really benefit the society as much, because some of that money is kind of wasted, it’s not going anywhere, it just sort of becomes a profit for the private insurer.”
In the year to 30 June 2022, the private health insurance industry posted net profits after tax of $1.1 billion, according to APRA.