Beware of wasting your money on junk insurance. Uta Mihm and Daniel Graham explore four smart ways to save

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1 26 Beware of wasting your money on junk insurance. Uta Mihm and Daniel Graham explore four smart ways to save ealth insurance should give you peace of mind, but in recent years the costs have gone through the roof. It s time to take stock and go back to basics. Do I need health insurance? There s really no such thing as private health insurance. There s private hospital insurance and there s private extras insurance, and a lot of people waste good money on one of these insurance types without using it. Hospital insurance is especially useful if you need treatment that has a long public hospital waiting list such as cataract surgery or orthopaedic surgery like a knee or hip replacement. In addition Extras insurance helps with the cost of glasses, dentistry and other treatments but it won t help you save on tax to letting you avoid these long waiting lists, it allows you to use private hospitals, which may be more comfortable. And you can choose your own doctor or specialist which may give you more continuity of care, for example, when you are pregnant. And there are tax reasons: Your income if you earn more than $90,000 (single) or $180,000 (couple, family, single parent) then taking out hospital insurance means you won t have to pay the Hospital insurance can reduce your wait time for certain surgeries Medicare Levy Surcharge or MLS (between 1% and 1.5% of your income) at tax time. Your age taking out hospital insurance before 1 July following your 31st birthday means you won t have to pay the Lifetime Health Cover (LHC) surcharges that apply if you take out hospital insurance later in life. Find our recommended hospital policies on p28. What about extras? If you just want to save on tax, you don t need extras insurance, because LHC and the MLS only apply to hospital insurance. Extras cover works differently to other types of insurance. Most other insurance products, once you pay the excess, give you unlimited cover for the unexpected, such as car insurance for a car accident or home insurance for a bushfire. With extras insurance, the health fund pays a limited amount towards a dental check-up, a new pair of glasses, physio, podiatry, chiropractic, non-pbs medication and other treatments not covered by Medicare, but you have to cover any further costs. Check CHOICE July 2016 for this year s recommended extras policies. 26 /// JUNE 2016 CHOICE

2 HEALTH INSURANCE IMAGE: SHUTTERSTOCK 4 ways to save There are four ways to save on health insurance: 1. Check if you can join a restricted membership fund. 2. Make use of discounts. 3. Take out an excess or co-payment. 4. Downgrade your cover. The first two steps are easy to check out: Can you join a restricted membership fund? Their top cover policies in particular can be substantially cheaper than the offers from open funds. They re open to Australians working in many industries, from police, soldiers, reservist and defence contractors, to transport employees, forestry, electricity and steel workers. Bank employees, health practitioners, teachers and workers of associated industries are also covered. Families (sometimes even sisters and brothers) and former employees are also eligible. We ll publish recommended policies from restricted membership funds in our next issue of CHOICE. Prepay or pay by direct debit for a discount Many funds give you a discount on your premium if you pay via direct debit or prepay your premium for six months or a year. The other trick is to prepay your next annual premium in March, as that means you ll also delay the next premium increase by 12 months. Take out an excess or co-payment Switching to a policy with an annual excess of up to $1000 (families and couples) or $500 (singles) can be a smart move if you think it s unlikely that you ll be making a trip to hospital this year. Policies with an excess are substantially cheaper than policies without. Normally the discount is so large that even if you needed go to hospital once every three years you d still come out on top. Don t waste your money on junk insurance Junk policies only cover about one percent of treatments in hospital, and some will only cover you for an accident. They usually don t cover treatments for the most common serious diseases, like cancer, stroke or heart disease and won t give you access to private psychiatric facilities in case of a mental illness. At first look, if you re young and healthy, accident cover sounds like it makes sense. It gives you the option to use the emergency departments of private hospitals, but Medicare fully covers your treatment in the emergency departments of public hospitals anyway. Check the fine print you may get less cover than you think. Some policies only cover you if you go to emergency within 24 hours, so if, after a sports accident, you go to bed hoping it will get better or get an appointment at your GP first, you may miss the deadline, explains Richard Glenn, Deputy Commonwealth Ombudsman. Subsequent treatment can be restricted to 90 days, so if you break your leg and get pins and screws inserted allowing it to heal, you might not be covered if they get taken out six months later. We consider these to be junk hospital insurance policies: AHM White Starter, AHM White Lite and AHM White Lite Saver Australian Unity Basic Hospital Defence Health Essentials Hospital 200 HBF Super Saver Hospital Cover and HBF Super Saver Hospital With Gap Saver HCF Accident Hospital Only Cover HIF GoldVital Hospital Medibank Private Accident Cover NIB Basic Hospital (and Qantas Basic Hospital)

3 BASIC COVER FOR HEALTHY COUPLES RECOMMENDED POLICIES (PREMIUMS, $)* TREATMENTS Excess applies to* ACT/NSW NT QLD SA TAS VIC AHM Budget Hospital $ $ $ HBF Saver Hospital $ $ (E) HCF Basic Hospital $ 0 HIF GoldStarter Hospital (A) (C) $ $ $ (F) Peoplecare Basic Hospital (D) $ MEDIUM COVER FOR HEALTHY COUPLES RECOMMENDED POLICIES (PREMIUMS, $)* BUPA Standard Hospital 174 (B) $ $ (G) Budget Direct Mid Hospital (GMHBA) $100/day, $700/stay 0 $ $ for private room Frank Better Hospital (GMHBA) $100/day, $700/stay for private room $ $ $ (F) USING THE TABLE Score Made up of 70% for cover of a range of often-restricted treatments (as listed in the table) and 30% for out-of-pocket costs for excess, co-payment and gaps. A policy with good podiatrists, spinal fusion and other uncommon procedures for which often no Medicare rebate applies. (A) Two single policies would work out slighty cheaper than the couple premium we used (B) Top cover with (E) Air ambulance excluded. (F) No ambulance cover in NT, SA, Vic, WA. (G) Only one ambulance transport per year for single; two for family or couple policy. WA Good gap cover* Annual max. excess ($)* Co-payment ($)* Kids Day surgery Accidents Ambulance* Heart surgery TOP HOSPITAL FOR FAMILIES NO EXCESS RECOMMENDED POLICIES (PREMIUMS, $)* ACT/NSW NT QLD SA TAS VIC WA Good gap cover* Annual max excess ($)* Co-payment ($)* Excess applies to* Kids Day surgery Accidents Ambulance* HBF Top Hospital 432 None 0 na na na (D) HCF Premium Hospital None 0 na na na Health Care Insurance Premier Hospital None 0 na na na (E) Health Partners Gold Hospital (A) None 0 na na na HIF Goldstar Hospital (A) None 0 na na na (E) Peoplecare Premium Hospital None 0 na na na Phoenix Health Fund Top Hospital (A) None 0 na na na (E) TOP HOSPITAL FOR FAMILIES WITH EXCESS RECOMMENDED POLICIES (PREMIUMS, $)* AHM Top Hospital $ 0 BUPA Top Hospital** $ $ (F) HCF Premium Hospital** $ 0 Health Partners Silver Hospital** /day, 250/stay, 500/year 0 $ $ HIF Gold Hospital ** (A) /day (B) 0 0 $ (E) HIF Goldstar Hospital** (A) $ (E) Medibank Top Hospital** $ $ Queensland Country Top Hospital** (C) $ $ (E) USING THE TABLE Score Made up of 70% for cover of a range of often-restricted treatments (as listed in the tables) and 30% for out-of-pocket costs for excess, co-payment and gaps. A policy with good gap Medicare will score 100%. TABLE NOTES * See How to Read the Table. ** These policies are also recommended for an annual excess of up to $500 per year for families and couples (up to $250 for singles) in First five days in private room free for maternity. (C) Children aged 12 and under don`t pay the excess. (D) Air ambulance excluded. (E) No ambulance cover in NT, SA, VIC, WA. (F) Only one ambulance transport a public hospital. (H) Benefit Limitation Period (BLP) for hip or knee replacements, gastric banding and psychiatric treatment, see Jargon Buster. na Not applicable 28 /// JUNE 2016 CHOICE

4 HEALTH INSURANCE Cataract and eye surgery Pregnancy IVF Hip/knees Dialysis Gastric banding Sterilisation Plastic surgery Rehabilitation Psychiatric Palliative care Everything else covered in private hospital?** Premium discounts Score Website Public Public Public Public Public 42 ahm.com.au Public Public Direct debit, prepay 40 hbf.com.au Public Public 45 hcf.com.au Public Public Public Prepay 53 (WA 48) hif.com.au Public Public Public 34 peoplecare.com.au Public Public Public Public 77 bupa.com.au BLP Direct debit 48 budgetdirect.com.au BLP Direct debit 48 frankhealthinsurance.com.au gap cover, no excess, no co-payment and full cover in private hospital for all conditions will score 100%. TABLE NOTES * See How to Read the Table. **Many budget and medium policies exclude surgery by excess options are only slightly more expensive and therefore the better value option in this state. (C) No for WA, all other states listed Yes. (D) Only half the excess for day surgery and public hospital admission. Everything else covered in private hospital? Premium discounts Score Website (G) Direct debit, prepay 100 hbf.com.au (G) 100 hcf.com.au 100 hciltd.com.au Direct debit, prepay 100 (WA 95) healthpartners.com.au (G) Prepay 100 (WA 95) hif.com.au 100 peoplecare.com.au 100 (WA 95) phoenixhealthfund.com.au 87 ahm.com.au NT 88, WA 81 bupa.com.au (G) 94 hcf.com.au Direct debit, prepay 89 healthpartners.com.au (G) Prepay 90 (WA 85) hif.com.au (G) Prepay 94 (WA 89) hif.com.au 86 medibank.com.au (H) 88 qldcountryhealth.com.au cover, no excess, no co-payment and full cover in private hospital for all conditions covered by some states. (A) No for WA, all other states listed Yes. (B) Co-payment for private room only. per year for single, two for family or couple policy. (G) Surgery by podiatrists restricted to cover in HOW TO READ THE TABLE Recommended policies We select two to five policies in each state based on cover and premium. We only include premiums in states where the policy is recommended; however, policies are available in all states. We use monthly premiums for couples/families, singles pay half. Gap cover Funds have payment agreements with specialists resulting in no out-of-pocket costs for members (no gap) or capped out-of-pocket costs such as $500 (known gap). A tick means the fund scores above average for no gap and known gap. Excess Applies once per hospital stay, usually twice per year for family/couple policies. We print the maximum annual excess. Excess may apply ($) or be waived (0) for children, accidents or day surgery. Co-payment Applies per day of hospital stay, usually capped by number of days per visit or annual maximum. Ambulance Most funds only pay for emergency ambulance which results in an admission to hospital; transport between hospitals and treatment at the scene may not be covered. In ACT and NSW you re covered for ambulance if you have hospital insurance; in Qld and Tas all residents are covered by their state government. Treatments A tick means it s covered in a private hospital; public indicates cover is restricted to a public hospital (you cannot jump waiting lists); blank means no cover. Benefit limitation period (BLP) is an additional waiting period, on top of those usually served when you take out or upgrade cover, when cover is restricted to a public hospital, usually for two years.

5 Downgrade your cover The final way to save money on health insurance is to downgrade your level of cover. But it s risky to downgrade to medium or even basic cover as that could mean when you fall sick and really need health insurance you ll be left out in the cold. The thousands of dollars you ve paid in premiums over the years will be very bad value. There are five different types of hospital cover: Top cover with nil excess This is the premium option. It covers nearly all conditions in a private hospital. It suits you if you ll need to go to hospital in the near future, for example, if you have a health condition or are planning a family. We recommend selecting policies with no co-payments and better-than-average gap charges protection (out-of-pocket expenses that arise if your doctor charges more than the Medicare schedule fee). Top cover with an excess This is our best-value insurance option. It covers nearly all conditions in a private hospital after paying an annual excess up to $1000 (families and couples) or up to $500 (singles). It suits you if you want peace of mind but you re unlikely to go to hospital in the near future. Basic cover A risky cover option as it usually excludes some conditions and restricts others to cover as a private patient in a public hospital, so you need to be really sure you don t need those treatments. There are usually restrictions on pregnancy, heart and eye surgery, hip/ knee replacements, dialysis, rehabilitation, medically necessary plastic surgery, palliative and psychiatric care. However, the policies we selected still cover thousands of other treatments in a private hospital. Junk insurance This is a relatively new type of cover. Like other hospital cover it lets you avoid extra tax and surcharges, but it covers only a handful of treatments and gives you limited cover for an accident. You re unlikely to be able to use it. However, some of these policies can be cheaper than basic cover if tax avoidance is your only priority. See Don t Waste Your Money on Junk Insurance (p27). Medium cover Designed for healthy people, this option provides less cover than top cover. For example, you usually wouldn t be fully covered for pregnancy, IVF, dialysis, eye surgery or hip/knee replacements. However, medium cover fully covers heart surgery, medically necessary plastic surgery, rehabilitation, palliative care, psychiatric care and thousands of other treatments in a private hospital. This means if you fall seriously ill unexpectedly, perhaps because of an accident, stroke, heart attack, cancer or mental illness, you d usually be covered. However, very few medium policies are substantially cheaper than top cover with an excess. 30 /// JUNE 2016 CHOICE