Experts say having ‘extras’ private health insurance doesn’t make financial sense

HAVING “extras” private health insurance doesn’t make financial sense, and people would be better off paying for dental, optical and other general treatments out of their own pocket, the industry regulator says.

In an extraordinarily candid assessment for a top bureaucrat, Private Health Insurance Administration Council CEO Shaun Gath told News Corp Australia extras cover was an “irrational” purchase for most people because the premium paid was more than the benefits derived.

“In a world of fiscal purity that (buying extras insurance) probably doesn’t make sense,” Mr Gath said.

Supporting this assessment, the nation’s leading consumer group said people who anticipate having difficulty with the average 6.2 per cent premium jump that takes effect this week should look at dumping their extras cover altogether, noting that doing so would not bring the Medicare Levy Surcharge into play.

Axing basic or mid-level extras cover from a standard family private health insurance policy can save $500 to $1000 a year, comparisons by News Corp Australia show.

The percentage of the Australian population with extras insurance is eight per cent higher than for hospital cover — 55 per cent to 47 per cent, PHIAC data shows. Mr Gath said that 20 years ago, extras trailed hospital protection by 10 per cent. Its rise in popularity was inexplicable. However, he observed that funds “spend a lot of money advertising it”.

Asked whether he had extras cover for his family, Mr Gath said: “Yes.” But why?

“It’s a very good question. Why do I have extras cover?” With no children at home, the only claims being made were for glasses and a once-a-year visit to the dentist.

Choice spokesman Tom Godfrey said: “If you are struggling with the (April 1) price hike consider dropping your extras cover and go on the highest possible excess for your hospital cover.

“Before you renew extras cover, ask your insurer for a claims statement. If you have paid out more in premiums than has been paid for treatments, you’re not getting a great deal,” Mr Godfrey said.

“If this is the case and you’re not planning any major treatments in the next 12 months, consider dropping your extras cover and putting the money aside in a savings account.

“It’s comforting for consumers to know they can drop extras without incurring a tax penalty,” Mr Godfrey said.

Michael Armitage, CEO of the funds’ lobby group Private Healthcare Australia, said” “people who buy general treatment policies are often those who are interested in maintaining good health and they take care of their health”.

Dr Armitage said they are “younger, fitter, healthier members — we think — so they actually subsidise older, less healthy members and this leads to cheaper policies across the board”.

http://www.adelaidenow.com.au/lifestyle/health/experts-say-having-extras-private-health-insurance-doesnt-make-financial-sense/story-fni0dguy-1227283386056