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Kate Browne:
Hi and welcome back to Pocket Money. I'm Kate. Today I have Alex Holderness in the studio. She's our health insurance expert. Health insurance, for me, is personally one of the most complicated products out there. I've always wondered, am I getting ripped off? How does it work? What even is it? When is it useful? When is it not? And I know, particularly for people who are a bit younger and they're hearing this great threat, "You've got to get this sorted out by the time you turn 31!" there's extra pressure and you're probably hearing a lot of ads at the moment around getting health insurance, sorting it out, so you don't get slugged with this tax. So I'm going to talk to Alex today about all of that, keeping it really simple and really useful, to get some good tips about what we all can do better when it comes to health insurance. Welcome, Alex!
Alex Holderness:
Thank you. Excited to be here. Love talking about health insurance. Genuinely. It's quite sad.
Kate Browne:
So seeing as you love insurance so much, the most exciting time of the year is coming! What happens on April 1, apart from bad practical jokes?
Alex Holderness:
It's not good news. The prices go up, basically, for health insurance. So the cost of hospital treatments on the whole, insurers are having to pay out a bit more every year, a couple of percent extra it's actually costing them. So, unfortunately, as a result of that, they put their premiums up for everybody's health insurance policy. So this happens to everyone, all funds, by slightly different percentages, and this year is a lower percentage compared to usual, but it's still a 2.93% average increase. So it doesn't seem like a whole lot of money, but yeah, according to Greg Hunt, who is Australia's health minister, it works out around $103 a year. So yeah, slight change in prices from April 1. And generally, just, we see a lot of people coming and starting to review their cover, trying to save a bit cash.
Kate Browne:
So this means, for those of us that don't really understand the word "premiums", this is literally what you're gonna pay every month or collectively every year. They're gonna put those prices up for what you pay, I'm assuming for the same service that you had last year, but the prices have gone up.
Alex Holderness:
Yeah, that's right. They could do, like, small policy tweaks, so what you're actually paying for might change slightly, not always for the better, so always worth keeping an eye out on those letters. But yeah, your premium is exactly that, your monthly bill or your yearly bill, however you pay. Yeah, unless you pay before April 1, you're going to be paying a little bit extra for the rest of the year.
Kate Browne:
Right. Can we go through some really common myths and misconceptions with health insurance? Like I said in the intro, it's, I think, in my opinion, it's one of the most complicated areas, and we work in an organisation that specialises in it, and I know more than, I think, the average bear, but I still get really confused and a bit caught out. So just a bit of a rapid-fire round to see if you can clear things up for us.
Alex Holderness:
Yeah, I've been working in health insurance for about two years, I think I've only just worked these things out. So I totally get it.
Kate Browne:
Yeah, there you go, you're living and breathing it every day. Alright, first one: We hear about hospital and extras cover. Do you have to take them out together or can you take them out separately?
Alex Holderness:
Yeah, so, hospital cover is what it says on the tin. It covers you for something inside the hospital, so your surgeries, your treatments, conditions that require you to go into a hospital. Extras – a bit like a kind of discount coupon book for health things that happen outside of the hospital. So dental, optical, physio, sometimes the gym. But when you take them out together, what can happen is, you might pick a high level of one or the other. So you might pick like a high hospital or a high extras for dental, say. And they'll package it up and give you quite an expensive combined policy, if that makes sense. But what you can actually do is take them out separately, both either with the same insurer – you could still get one top hospital, one basic extras – or you can take them out with two different insurers.
Kate Browne:
No way! So you can actually do that?
Alex Holderness:
Yeah, it often works out heaps better, because your dentist might only work with certain funds, but you might want the hospital cover offered by one fund. So, definitely try and look at the two things separately. You won't lose any money.
Kate Browne:
Yeah, they're not mutually exclusive. That's really interesting.
Alex Holderness:
Speed date them away.
Kate Browne:
And it is pretty easy, isn't it? Like, sometimes the thought of doing this makes me want to lie on the floor.
Alex Holderness:
Yeah, it can be complicated to think about, but when you actually know what you're looking for, which is essentially, like, your hospital treatments that you're paying for and then your extras treatments, you actually look at it at that level, it can actually be really easy. You just pick the things that are important to you. You can do a quick search, quick comparison, whatever it takes, and just select a new option. And quite often, the new fund that you choose will actually help you leave the old fund as well.
Kate Browne:
Oh, so they'll do a lot of the heavy lifting with sorting out a lot of the paperwork or the toing and froing. Because I think that's often what stops people, they're just like, "Oh, it's too hard!"
Alex Holderness:
Yeah, and look, you'll probably get some calls. They'll be desperate to keep you, but that's okay too. You might get some extra limits or something. But yeah, it's not as hard as people think.
Kate Browne:
Yeah, or as time consuming, potentially.
Alex Holderness:
No, 10 minutes.
Kate Browne:
Tell me about hospital cover. So in what instances would you use that? Would that be for just a private hospital?
Alex Holderness:
Yeah, so private hospitals, but you can get public and private cover. Public cover, it's not really worth it unless it's just for saving on your tax, which, we'll get into in a bit. But in terms of the private hospital cover, yeah, it generally helps you either A) get into a private hospital – so for certain treatments, they'll elect you to go to a private hospital, or in a public hospital, you can choose a private doctor, your own doctor, and sometimes get a private room, not always, it depends, kind of, on availability. But the biggest thing about the private stuff, yeah, is that you can choose your own doctor, you often skip a lot of the elective waitlists.
Kate Browne:
Which are pretty long, right?
Alex Holderness:
Very long. Especially for common treatments that aren't super urgent, say, if you need – I'm trying to think of a random one – like, a colonoscopy. Always a good one. You need a colonoscopy. You're probably waiting about six months on the public list, but on private, you can normally get seen a lot faster.
Kate Browne:
A couple of weeks. With the public, as well, I think you, kind of, just get called up at the last minute. It's like, "Clear the decks. This is your day."
Alex Holderness:
Yeah, you can't choose the day at all, you can't choose the time, you can't choose the hospital. Which is okay for some people, but if you want that, kind of, freedom of choice, and you want to get the thing done faster then, you know, private can still be worth it.
Kate Browne:
Yeah. Here is another one. We always hear about couples policies – are they worth it?
Alex Holderness:
Well, if you don't like admin, they're probably worth it, because you can just palm the job off to your other half and get on with your day. But in terms of actual money savings, not really, no. You don't actually save any money by going onto a couples policy. There are actually instances when you could lose out on money. So, say, for example, if you're trying to get pregnant, and you want to go on private pregnancy cover, you're both paying for gold hospital cover – which is very expensive, it's the highest you can get – when in reality, only one of you is pregnant.
Kate Browne:
Only one of you is going to be going to hospital. Unless you're like my dad, who, like, fainted in the labour room and cracked his head open and then was also in hospital. But that was a special case.
Alex Holderness:
Yeah, and your extras limits, so the dental and stuff like that, they're not combined either. So you would get a separate limit still, even with a couple. So, yeah, it's a big one, we see it a lot here. But yeah, couples policies, if you just can't be bothered with setting up the insurance then sure, go ahead and do it. But you definitely won't save any money and you could even be paying more money.
Kate Browne:
Yeah, that's really interesting, because you would just assume it was all bundled in and there might be some advantages to having two of you in the mix.
Alex Holderness:
Yeah, it works out okay by the time that you're looking to have kids because kids are covered for free. Family policies, couples policies, they'll add children on for free. But if you're not quite at the stage yet, or you don't have kids, then yeah, two singles policies. Because, say, if you know, your partner played a lot of sports or something like that, they might want cover for more knee surgeries, all that sort of stuff.
Kate Browne:
Or one of you might have, like, tricky teeth.
Alex Holderness:
Tricky teeth. Yeah! You got tricky teeth. I like it. The insurers should use that. Or one of you wears glasses, the other doesn't. You know, you get an optical limit, which costs slightly more. So little tweaks like that.
Kate Browne:
That's a really good point. Okay, great. If you are looking at getting health insurance or you already have it, what's the most important thing out of all the different elements that you need to look at?
Alex Holderness:
Yeah, so the way that your bills are generally made up, if you've got a hospital and extras, sometimes it'll be called like a package or a combined policy, these, like, strange labels, but they just mean hospital and extras. Hospital is the more expensive part of the two, so, a very, very basic hospital policy probably costs you about $80 a month. A very basic extras policy costs around $12 a month. So quite a big difference.
Kate Browne:
Oh, okay, interesting. So I've heard people say, "Oh, to save money, I'm gonna get rid of my extras", but in reality, that's not gonna make a huge difference to your bill.
Alex Holderness:
Yeah, probably not. It depends what level you're paying for. If you've got one of those top packages that is top for both, then you might save a bit, you know, extras can get up to about $80 a month. But I think the thing with saving on extras is, you don't have to keep them, so definitely add up how much you've spent on your extras over the last year and compare that to how much you've claimed. So, if you've only claimed $100 from your extras and you're paying $600 a year for your extras part of your health insurance, then absolutely, maybe think about cancelling it, or being a bit more proactive at the dentist or the optician or whatever it is.
Kate Browne:
Can you pick up and drop your extras?
Alex Holderness:
You can pick them up, you can use them and you can drop them when you're ready to. No one really does, everyone stays with it. But you don't have to stay with the insurer.
Kate Browne:
You don't have to stay and you can continue with your hospital cover, which is definitely the more important part.
Alex Holderness:
It's quite a challenge seeing how much you can get back from your extras. I see it as the place that you can really start to get the money back that you're putting into health insurance. If you're smart and you use all the limits, you can actually make back nearly as much as you're paying.
Kate Browne:
That's really cool. And, so, I know when I've chatted to you before, you've said, like, "Get in there and have a look, because most of these places have good apps or sites where they can show what you've got." I think you told me you're quite proactive at just making sure you use them or – what would you say to that? What do you do?
Alex Holderness:
It's kind of sad.
Kate Browne:
It's not sad, it's savvy! What's sad is me paying for it and not using them.
Alex Holderness:
Okay, now I feel smug. So, I guess a few key things: I guess be aware of when your limits reset as well, because then you can really take advantage of getting both.
Kate Browne:
Does that differ between insurers?
Alex Holderness:
Yeah, most are end of December, a couple are June, like AHM is June, but the rest are December. But in terms of getting your money back, a few really easy ones: So, if you just have like a couple of scale and cleans at the dentist each year, even if you've got good teeth, you can get them cleaned twice a year, normally pretty much zero out of pocket if you're going to the right dentist. Your glasses, yeah, your optical, not just your normal glasses, but you can also get prescription sunglasses as well. So, you know, use them both. One year, get your normal glasses. I've got about eight pairs. Unnecessary, completely, but –
Kate Browne:
Hey, at the rate I lose glasses, I think that's really smart.
Alex Holderness:
Yeah, to be fair, my dog has crushed like three pairs of my glasses, so, it's necessary. Physiotherapy, massage are easy ones, but there's a couple of others that people don't always think about. Nicotine replacement therapy a lot of people do, hypnotherapy. And a popular one is gym membership. So it's a little bit harder because you actually have to have like a note signed off from the doctor. So say you've had an injury, or it could also be mental health related, or if you're slightly overweight, the doctor can sign a form that's available on the health insurance website and you can often get some money back. So I got $250 back for that last year when I was recovering from a back injury, so, it can make a big difference.
Kate Browne:
Okay, so it's definitely worth getting in there and using those up before the end of the period, or, you know, being aware that, you know, if you are buying prescription sunglasses, check your policy and see if you're covered.
Alex Holderness:
Absolutely. There's another one as well. There's like this program called AIA, which some health insurers use, and if you're particularly active, like that gym example, they actually give you 50% off Virgin and Fitness First gyms.
Kate Browne:
So that's like a preventative, almost, like they're encouraging people to, kind of, stay fit and healthy.
Alex Holderness:
I think so, yeah, keep you young and healthy. Stay out of the hospital.
Kate Browne:
All right, Alex, turning 31. I swear to god, every time I turn on the radio, I see an ad online, something apocalyptic apparently is going to happen to people when they turn 31, according to health insurers. What happens?
Alex Holderness:
Yeah, look, it's a bit of a weird one. People get these two things confused all the time. Two very separate initiatives. So the first is turning 31, which isn't an initiative, it's just something that happens in life.
Kate Browne:
It does happen, unfortunately.
Alex Holderness:
So if you don't have private hospital cover by the time that you turn 31 – so they actually give you until the day before your 31st birthday – if you don't have cover in place by then, for every year that you don't have health insurance from then on, you have to pay an additional 2% on top of that monthly bill. So, say you get to 40 and you haven't had private health insurance, it will cost you 16% – that was fast maths, eight times two – but yeah, 16% more on your bills. So say everyone else is paying $100 a month, you'd be paying $116 a month.
Kate Browne:
Ouch! Plus, you're gonna get those premium increases, which just happen normally. Double ouch.
Alex Holderness:
Yeah, so if you're never going to take out private health insurance ever, it's okay, it doesn't really matter to you. But if you are, it's like an incentive to take it out then. Now, with the other one, which is more around your earnings, and this is at any age. So if, you know, you're super successful and you earn over $90,000 by the time you're 22, you will still have to consider this because it's based on your salary alone. It's also directly connected to your taxes, so for this one, yeah, if you earn over $90,000 in a year – the financial year, so June to June – you will get charged extra on your tax return unless you have private hospital cover. It's called the Medicare Levy Surcharge, it's about 1.5%, so at least $1,000.
Kate Browne:
So in plenty of instances, it's gonna be cheaper to take out private health care than to not have it, because if you're earning over %90,000, you're going to get slugged anyway.
Alex Holderness:
That's right. So if you took a basic hospital tier – so there's basic, bronze, silver and gold hospital tiers – if you took out a basic one, you won't be covered for much at all, but it will be far cheaper than the, kind of, tax penalty. And then you can get cover for maybe some minor things.
Kate Browne:
Because I think a lot of people confuse the two, or don't understand, all they know, like, I joked, but it was sort of like, I remember thinking, "My god, what's gonna happen when I turned 31? Like, something's gonna explode?"
Alex Holderness:
"I'm gonna get fined in my taxes because I'm 31."
Kate Browne:
Yeah, because the ads and the way it's positioned don't help. So that's really good to know. So, take out your cover before you turn 31 if you're ever gonna do it, otherwise, you're gonna get penalised, and if you're earning over $90,000, do the maths, but you're probably gonna be better off taking out private health cover.
Alex Holderness:
Exactly.
Kate Browne:
Last little question. What are some other things that you reckon most people aren't necessarily aware of or clear on? What are some big ones?
Alex Holderness:
The easiest ones that most people say, they think that ambulances are free. They're not.
Kate Browne:
How much?
Alex Holderness:
So in New South Wales, you're looking probably over $300 if you called out an ambulance.
Kate Browne:
Wow, okay, if you don't have private health cover.
Alex Holderness:
Yeah, and it's often in extras as well, the cheaper part of the component. So it's worth looking out for that. Another thing is, yeah, always consider your out-of-pocket costs with private. People think that if they've got a top hospital cover, they'll have no out-of-pocket costs to pay, which is not true. Most private treatments come with out-of-pocket costs, unfortunately.
Kate Browne:
Yes. I learned that the hard way last year. Was out of pocket by a couple of grand actually.
Alex Holderness
Yeah, it's quite a murky area, there's some calls for people to be a bit clearer. But yeah, definitely, always ask about that stuff upfront. And finally, I guess, that you can switch however often you like, and you should switch because you don't have to re-serve any of your hospital waiting periods, you probably won't have to serve your extras, but check that with your new fund. And quite often you can get sign-up deals for new customers. So at the moment, because it's peak season, some people are offering, like, six weeks free, some are offering $300 gift cards. So, it's a little bit of admin, I know it's not fun, but you can actually save a lot of money by switching regularly basically.
Kate Browne:
I've heard this great phrase, which is "sleeping beauties", which are customers that just stay with the one provider.
Alex Holderness:
Yeah, over seven years apparently.
Kate Browne:
Yeah, like, that's longer than plenty of relationships.
Alex Holderness:
Yeah, I think we actually checked. People get divorced more often than they change their health insurance.
Kate Browne:
You know, I did joke about wanting to lie on the floor to do it, but you've reassured me, it's actually not that hard. So a little bit of short term pain is worth a whole lot of gain. Thank you so much for explaining it. I feel armed with all this new knowledge.
Alex Holderness:
Yeah, happy to.
Kate Browne:
Thanks for listening. Check out all our health insurance info at finder.com.au. Alex is in charge of most of it, so I can assure you that it's fabulous. There'll be links in the show notes and get on there and check, April 1 is coming soon, and don't be a wuss like me. Happy shopping around!
Sally McMullen:
Thanks for listening to Pocket Money from Finder. Head over to finder.com.au/podcast for the show notes for this episode. The Finder podcast is intended to provide you with tips, tools and strategies that will help you make better decisions. Although we're licenced and authorised, we don't provide financial advice. So please consider your own situation or get advice before making any decisions based on anything in our show. Thanks for listening.
