Health insurance

Health insurance: do you need it or don’t you? It’s a classic $64,000 question. If you need a hip replacement, non-urgent heart surgery, or a hysterectomy you might well wish you had insurance. If you don’t, you’ll be glad you didn’t spend the money.

Premiums also increase as you age and as new more costly treatments come into common use. When you need it most – once you’re retired – health insurance is at its most expensive.

If you get sick or suffer from a chronic condition, the public health system will help you sooner or later. It’s the “later” bit that makes health insurance worthwhile for some people. They want the peace of mind they can get treatment when they need it and not have to wait.

If you’re considering taking out health insurance, you need to ask yourself:

• Can you afford to put aside savings earmarked just for medical bills? If the answer is yes, then you’re most likely better off without health insurance, providing you don’t need to pay for major elective medical treatment when you’re younger.

• Can you afford to pay for doctors’ visits? Then it’s probably not worth paying higher premiums for comprehensive cover. Likewise, if you can afford the premiums for budget policies that only cover GP visits and other primary healthcare, such as prescriptions, then you can probably afford to pay for doctors’ visits yourself.

• If you don’t make it on to a public hospital waiting list, can you afford to pay for surgery? A procedure like a knee replacement can cost $22,600 to $29,500, according to Southern Cross. Can you afford to pay that? If a condition could stop you working, how much income could you lose?

• Are you willing to take some of the financial risk? Some companies offer cost-sharing policies that only pay a percentage of the claim. The idea is if you have some skin in the claim you won’t want to be treated unnecessarily or have the cost of treatment balloon out of control. The other way of doing this is by taking out a higher policy excess in exchange for a lower premium.

• What are your chances of needing major surgery? Diet and exercise are vital factors in maintaining health and in reducing the risk that you’ll need medical treatment. Making lifestyle changes may do more for your health than health insurance.

If you do want to take out health insurance, make sure you’re comparing apples with apples when looking at policies.

If you’re searching for a health insurance policy, here are some key questions:

• Are relatively common procedures or medical conditions excluded by the policy?
• Are treatment limits per procedure or per year?
• How generous is the policy about scans and investigative procedures?
• Can you claim if these procedures don’t result in hospital treatment?
• What type of minor surgery will be covered?
• Will non-Pharmac funded drugs be paid for?
• Is there home-based nursing available for post-operative care?
• Will you be able to claim for post-operative physiotherapy?
• Will the insurer allow you to go overseas for treatment?
• Are your children covered from birth – and until what age?
• Are pre-existing conditions covered after a stand-down period?
• Can you cost-share or is there a good trade-off between taking a higher excess for each claim and premium reduction?

We’ve answered some of these questions in our policy database.

You’ll want to research your first health insurer thoroughly, as switching is more complicated compared with car or contents insurance. That’s because of cover for pre-existing medical conditions – every time you sign up with a health insurer, you need to declare these. If you don’t, even if it’s an inadvertent omission, you’re on your own.

The best way to avoid your new insurer refusing a claim due to non-disclosure is asking for your doctor’s advice on what to include in your application.

If the medical condition is assessed low risk, your insurer may provide cover. It may also accept other conditions if you join a workplace scheme. Sometimes this acceptance will be subject to an extra charge and/or stand-down period – some plans extend cover to lower-risk pre-existing conditions if you stick with the policy for a few years.

However, if you have a high-risk condition, your new insurer is likely to exclude cover. If you’re thinking about switching providers, consider whether the benefits of the new plan outweigh any limitations a new insurer will apply. Ask your potential new insurer plenty of questions about what it won’t pay for – the exclusions can be costly.

Be wary if you’re upgrading plans but sticking with the same insurer, as you’ll also need to disclose any diagnoses or symptoms developed since you signed up.

In a case handled by the Insurance and Financial Services Ombudsman, a family made a claim in 2018 for their daughter’s sinus surgery. They’d switched plan in 2013. The insurer believed the surgery was related to symptoms the child had experienced before the switch and said it would only pay the costs offered by the initial policy.

See your regular doctor first

If you need advicem ask your GP, not Doctor Google. Anyone can advertise themselves as a “specialist” online. Unless they’re a Medical Council-registered doctor, the appointment will be a waste of your time and money.

Check whether you must see insurer’s affiliated health provider

Some insurers, such as Southern Cross and Nib, have a list of clinics you need to visit if you want full coverage.

Ask for an estimate and apply for pre-approval

There’s nothing worse than a claim that’s unexpectedly refused, so play it safe by using your insurer’s pre-approval process. Keep in mind insurers will only pay “reasonable or customary” costs – ask the insurer if there’s a dollar limit for the type of consultation or procedure you have planned.

Re-read the policy terms

It’s a good idea to review the fine print to check what is and isn’t covered (for example, follow-up appointments).

A notable difference between the plans in our survey is the limit an insurer will pay for a set type of claim within a year. For example, Accuro’s SmartCare, Nib’s Standard Hospital and UniMed will pay a maximum of $300,000 for surgical treatment in one year, compared to Southern Cross’ Wellbeing Starter ($500,000) and Partners Life ($600,000). AIA Private Health and Southern Cross’ Wellbeing One plans put no cap on surgical expenses.

However, a limit of $300,000 should suffice as few operations cost more than $150,000. Based on Southern Cross data, here’s the most common claims and the procedures resulting in the insurer’s biggest bills each year:

Most common

1. Skin lesion destruction: $20 to $210
2. Skin surgery: $310 to $2470
3. Colonoscopy: $1700 to $3400
4. Eye injection: $600 to $1080
5. Throat test (nasendoscopy): $75 to $190

Highest yearly expenditure

1. Hip replacement: $20,900 to $27,600
2. Knee replacement: $22,600 to $29,500
3. Colonoscopy: $1700 to $3400
4. Skin surgery: $310 to $2470
5. Cataract removal: $2900 to $4400

Premium health insurance offers benefits such as extra travel and accommodation expenses or funeral costs. But these expenses aren’t as frequently claimed as surgical procedures, diagnostic tests or consultations – so weigh up if you’re better off squirrelling this extra money away for a rainy day.

Health insurance companies must belong to a financial dispute resolution scheme. All the companies in our survey are members of the Insurance and Financial Services Ombudsman scheme.

If you have a dispute you can’t resolve with your insurer, you can take the case to the ombudsman. However, the complaint must be “deadlocked” with the company before you can file a complaint.

The scheme can look at complaints about:

• policy and contract interpretations
• financial advice or services provided by the insurer
• the payout offered.

The ombudsman can’t look at complaints about premiums, excesses, underwriting decisions or claims above $200,000.