Private health insurance: safety net or scam?

Private health insurance premiums are set to rise by 3.95 per cent from April this year. With more than 13 million Australians paying for private cover, we have to ask the question, is health insurance affordable and good value for money?

The Australian Government has stated that this year's premium rise is the lowest in almost two decades. However, this means very little considering wage growth, inflation, and the Age Pension only rose by around two per cent last year.

On average private health insurance rises much faster than a person's means of paying for it.

The Australian Competition and Consumer Commission reported that over time households have shifted to lower cost premiums in response to the rising cost of private health insurance.

The issue is that many low cost insurance policies are as good as 'junk'. An increasing number of low cost policies exclude treatment for common illnesses, leaving patients with high out-of-pocket medical costs and unaware of what they're actually covered for.

Other low cost policies only provide cover for public hospitals, so patients can choose their doctor but may, depending on the hospital, still have to join public waiting list.

The private health fund Bupa recently announced that from 1 July, more than 700,000 members with restricted cover will receive fewer hospital benefits. Patients will no longer be covered for hip and knee replacements, cataract eye surgery, pregnancy and other major procedures.

The story of private health insurance becomes even more confusing when we consider how much the Australian Government props up private health insurers.

Last year, $6.5 billion of the Budget was used to subsidise private health care.

Then there are the policies in place that penalise people who do not join a health fund, including the Medicare Levy and Life-Time Health Cover which inflates premium prices for people who aren't in a fund by the time they're 31.

The Government is essentially subsidising a product that many people are buying to avoid tax and penalising people who decide to rely on Australia's supposedly 'world class universal public health system'.

All considered, it doesn't come as much of a surprise that a survey by The Guardian found 48 per cent of people wanted the Government to stop subsidising private health and use the money to make dental care free on Medicare.

If you have a private health policy, make sure you know what you are and are not covered for.