Private Health Insurance or Self Insurance?

April 12, 2011 11:23 PM

I'm being kicked off my parents health insurance, so I'm trying to decide whether to take out my own policy or "self insure". Is there something major that I'm overlooking? (In Australia)

My sister and I are currently covered under an extension to my parents policy that accommodates non-student adult-children. In May my sister will turn 25 and not be eligible for this - the additional premium won't be reduced so it makes no sense for me to remain on this plan.

I'm 22, single, fit and have no health issues apart from wearing orthotics for flat feet. I have an annual dental check-up but that's about it.

For me to be covered under an equivalent level to the family plan I would be ~$90/month - and I'd be covered for a whole lot of unnecessary stuff. The absolute basic hospital and extras cover will probably cost me$40-50/month, won't cover my orthotics ($300 every two years), and will probably have a $500 excess. For this reason, I'm considering self-insuring - ie. opening a savings account where I deposit $40-50 a month to cover my dentist bill, my bi-annual orthotic replacement and any unexpected things like physio if I injure myself.

Things I have considered:
1. I'm in Australia so if, god forbid, I am in a serious accident, Medicare will cover my hospitalisation if I'm not privately insured. My current GP bulk bills and I also don't plan on starting a family any time soon.
2. I have 7 years before the Lifetime Health cover loading applies to me I earn well under the threshold for the additional 1% Medicare surcharge - so tax wise I don't think I will be worse off without insurance.
3. I won't have to re-serve waiting periods if I switch my cover now, but will have to when I join a fund in the future.

At this stage, self-insuring seems to make the most sense - at least for the next few years. I'm pretty good with saving - so I know that I will have no problems leaving my "health account" untouched.

Is there anything that I'm overlooking?

posted by cholly to health & fitness (11 answers total)

Only ambulance. But in the worst case scenario and you need one, they're pretty reasonable about waiting to be paid. I'd do the same thing in your situation, and I once worked for the Health Insurance Commission....so I have some idea of your situation.
posted by taff at 11:27 PM on April 12, 2011 [1 favorite]

Most people in your position will probably just rely on Medicare – I certainly did when I was your age. Dentistry is, of course, the big thing that doesn't cover, but unless you're up for a couple of root-canals, it shouldn't be too much trouble in itself (and even if you are, most non-comprehensive health insurance doesn't cover that anyway).

Getting something very basic so you can get in under the lifetime health cover thing is a good thing, but it sounds like you don't need to worry about that yet.

Are you factoring in the private health insurance rebate in your calculations? There is talk of that going away, but probably wont happen in the near future.

Unless you can find some dirt cheap cover that includes dentistry, I'd probably just stick with Medicare and ride out the dentistry and orthotics expenses when they happen. And, as taff notes, ambulance. In Victoria you could become an ambulance subscriber for a very small amount of money annually - not sure what the equivalent is in Sydney.
posted by damonism at 11:33 PM on April 12, 2011

I thought like daemonism but my brother just had to undergo an expensive dental procedure and I re-chipped my tooth and it looks like I'll need to pay for private health insurance in order to get it fixed cheaply.
posted by Lovecraft In Brooklyn at 11:41 PM on April 12, 2011

Shop around for an extras only policy. Most insurers will carry across your pre-served waiting periods when changing from one insurer to another. I find that my $400 per year extras cover more than pays for itself with two dental checkups, a few massages, and yoga class vouchers each year, and then there is heaps more should I need it. I shopped around here.

In regards to the excess, usually that only applies to the hospital part of the coverage not the extras.
posted by Kerasia at 11:53 PM on April 12, 2011

Wisdom teeth?
posted by Ahab at 12:20 AM on April 13, 2011

Used to be that you could pay $150 or so a year to take out ambulance cover in Queensland (before it started to come automatically out of our electricity bills) so do check to see if that's the case in your state.

As a non-under 30 year old, healthy, with glasses and teeth of course, I find it cheaper to pay for items as they crop up, rather than paying for health insurance. (but this also means I choose not to undergo root canals because it's out of my budget). My wisdom teeth came out at around $750, but that was a few years ago.

However, I agree with you, certainly review in 7 years whether the Lifetime health cover loading is an issue.
posted by b33j at 1:20 AM on April 13, 2011

Depends how much your dentist is.

I go twice a year, and it'd be ~$130 each time, which is 100% covered by my policy. I figure I'm paying the difference (of a $550/yr plan) for all the other health insurance benefits.
posted by trialex at 1:40 AM on April 13, 2011

Yes, you are missing something.

If you are earn over the Medicare levy surcharge threshold and don't hold hospital cover, you will have to pay an additional 1% tax. This is in addition to the Medicare levy that most people pay (which is 1.5%). This financial year, the threshold for single person is $77,000. For many people, this means they can find hospital cover for less than the cost of the additional tax, so even if you didn't want to use the insurance, you would overall pay less out by having it.

However, if you are earning this at 22, this is probably the least of your problems!! The threshold does include net investment losses etc etc though, but if you are getting that fancy, you'd probably have an accountant who would have given you this advice.
posted by AnnaRat at 2:24 AM on April 13, 2011 [1 favorite]

Throughout my 20s I had no health insurance and just relied on medicare. I think most of my friends were in the same boat.

I had a grand or two stashed away and my parents to fall back on IF something serious had have happened.

it wasn't until i started earning over the medicare levy threshold that I worried about insurance. Cause then its often actually 'cheaper' to take out insurance.
posted by mary8nne at 6:18 AM on April 13, 2011

AnnaRat: "Yes, you are missing something."

No, the poster stated in the question I earn well under the threshold for the additional 1% Medicare surcharge - so tax wise I don't think I will be worse off without insurance

Cholly, not being able to read your future, but going from your age & other information that you provided above, I'm with most of the above responses that say you ought be fine with your own savings plan until you hit 31 or start earning above the threshold and need to take the surcharges into account. That's pretty much what I did in my 20's, and even forking out for the things that did crop up, I think it was cheaper to pay out of pocket than to have had insurance over those years. And in the end, if you end up with extra savings, then YAY!

Your main concern is probably accidents that might land you in hospital, and whether you're happy to be a public patient. Bear in mind that often all your expenses will be covered as a public patient, but there'll likely be out of pocket gap expenses if you go private.
If you do skip insurance, definitely look into your options re: ambulance-only cover in your state, as if you don't have insurance or hold a health care card, a short ride in an ambulance may cost you close to $1000, and probably much more.

I've also used iselect as Kerasia mentioned above & found them very helpful in choosing appropriate cover. You can pick & choose which items are important to you (dental? optical? pregnancy? psychiatric? single? couple? etc) and play around with your options. There seems to be very little consistency between providers and the packages/benefits they provide, so I would even recommend giving iselect a call and telling them what you've told us & see that they say. Check out what your options are now, and then in a few years as you near 31 or your body starts to surprise you in new interesting ways you'll have something to compare to when your circumstances change..
posted by goshling at 7:25 AM on April 13, 2011

Thanks all so much. I hadn't thought if the ambulance cover-up but it looks like I can take care of that for $40/year. Self insurance it is!
posted by cholly at 4:21 PM on April 15, 2011