Is Private Health Insurance / Extras cover worthwhile?

In any discussion around private health insurance, distinction needs to be made between Hospital cover and Extras cover. Dental benefits fall exclusively under Extras cover. Unlike Hospital cover, Extras cover is not required to avoid the additional medicare levy, so there is no financial penalty from the government if Extras cover is not purchased.

Extras cover is also the area where Private Health Insurance companies make the majority of their profit, with margins as high as 22 cents in the dollar. To make this high margin on Extras cover, insurance companies heavily promote it in advertising material whilst simultaneously limiting the benefits which are paid out to customers. With profit margins so high for the insurance companies, it means that the the large majority of people would be better off dropping their extras cover and paying the full cost of dental, physio and optical treatments out of pocket.

Some large health funds also promise their clients that they will get a bigger rebate if they leave their dentist of personal choice and go to one nominated by their fund as a preferred provider. This promotion is made with no regard to the relative experience or quality of the dentists and dental practices involved. Patients are also not made aware of the details of the preferred provider agreements and what impact these agreements may have on the quality of treatment that they are provided.

Most Private Health Insurance companies are big businesses generating big profits, at the expense of their customers. For example, in the 2015 financial year alone, Bupa generated $328.7 million in profit in Australia for its UK parent company. In the 2016 financial year, Medibank Private generated a profit of $417.6 million.

With health insurance premiums typically rising at well above the rate of inflation each year, we would encourage everyone to ensure they feel they are getting full value from the premiums that they are paying out for Extras cover. If Extras cover is considered a necessity, another option is to consider buying it from one of the smaller not-for-profit mutual providers (e.g. Defence Health, HPL). These providers typically pay out more of the premiums received, and do not practice discriminatory differential rebates.

[Source: ‘Dental patients exploited by large health insurance funds’ By Graham Middleton, BA, MBA – Australasian Dental Practice – September/October 2016]