Get a 'Health Check' on your Private Health cover
Updated: Jun 25, 2020
A lot of people hold Private Health cover and have done so for many years - but how many actually know the benefits their cover provides? And are the costs of cover and the rebates received actually worth it?
There's a certain peace of mind that comes with knowing that you have options when it comes to the hospital and medical care for you and your family. In addition, the Extra's cover such as dental, optical, chiro, physio and rebates on sporting accessories which help to offset the costs of maintaining a healthy and preventative lifestyle are nice to to have too. It's this peace of mind and 'feel-good' factor that keeps people hanging on to their Private Health cover - even when the costs increase and will continue to increase over time.
I ask my clients about their Private Health cover all the time. I keep hearing from them that they haven't reviewed their cover for some time - if ever. This means that they're probably not on the best package for their current situation and probably paying too much. There may be other options more suitable for their current needs and that instead of blindly paying for features and benefits in their current cover that may now not be as beneficial, they should get a 'health check' done on their Private Health cover. But they don't - here are some reasons why;
Reasons why people don't review their Private Health cover
Too lazy to look into it. Full stop.
They like what they already have. As they say 'If it ain't broke - don't fix it'. And it 'could' be - but they don't really know.
It's all a bit confusing. They're just not sure what they have or what they need and there's so much out there and to try and understand it themselves is too hard.
They've been badgered by 'super-salesy' reps from the Private Health companies before and don't want to go there again. Sound familiar?
There's probably a few more reasons but these are the main ones I keep hearing. It's kind of crazy to think considering the cost of the Private Health premiums they pay each month. But, that's human nature for you - bury our heads in the sand and ignore the problem.
Get someone to help you
If someone could help them to solve this problem and arrange for them to get a 'health check' done on their current Private Health cover - they would do it I'm sure. I reckon there's a pretty logical outcome to it - they'll either be able to confirm that the cover they hold is still appropriate and the costs are competitive - or - that there are better options available for them at lower costs.
A final thought on Tax and your Private Health cover
Here's the clincher. Besides the obvious reason of having the hospital, medical and Extra's care you want for you and your family, the ATO gives you an attractive reason to hold Private Health cover - or an additional tax for not holding the appropriate cover. Here's what the ATO has to say about it;
In addition to the Medicare levy, you may have to pay the Medicare levy surcharge (MLS) if you don’t have an appropriate level of private patient hospital cover and your income is above a certain amount. If you have an appropriate level of private patient hospital cover, you won't have to pay the MLS, and depending on your income, you may be eligible for the private health insurance rebate. This rebate is an amount the government contributes towards the cost of your private health insurance premiums.
The Medicare Levy Surcharge (MLS) is an additional tax imposed on those who earn over certain thresholds and who don't hold an appropriate level of private patient hospital cover.
Here's a couple of thoughts to consider on this...
If you don't currently have any Private Health cover, and you are required to pay the MLS, then consider that the cost of appropriate cover could be offset by your tax savings (ie. by not having to pay the MLS). You should speak with your tax adviser to see the direct tax impact or advantage to your specific situation.
If you currently hold Private Health cover but are considering cancelling this, then you should also speak with your tax adviser. The decision to cancel your cover may save you on the ongoing monthly premiums - but will increase the rate of overall tax you and your family will pay when you add in the extra tax impact when the MLS is applied.
Many Australian's hold Private Health cover and enjoy the benefits and peace of mind that it provides. There are also those who get to appreciate the tax incentives that come from holding the appropriate cover. But most people haven't reviewed their Private Health cover in quite some time - if ever. They have their reasons for this, but mostly it's because they don't have anyone to help them to do it. Get someone to help you arrange for a 'health check' on your Private Health cover so you can confirm that the cover you hold is right for your situation.
Shaun O'Keefeis a fee-based financial planner serving the families of the Peregian community. He specialises in retirement planning advice, SMSF, superannuation and life insurance along with strategies for UK QROPS pension transfer and estate planning. His major focus is helping his clients set themselves up to build and successfully transfer their wealth between the generations. Subscribe