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Choice launches 'Do I need health insurance' to cut through advertising campaigns

Esther Han

Consumer advocates are urging young Australians not to let "fear-laden" health insurance advertisements pressure them into taking out private health cover.

As the federal government reviews health funds' requests to raise premiums, Choice has warned young Australians of the problems with poor-value "junk" policies, low extras payout ratesĀ and the increasing number of complaints to the industry ombudsman.

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"Faced with so many issues, it's hard to see how insurers could reasonably expect consumers to pay another 5 per cent premium price hike this year and why many younger consumers would take out cover at all," Choice's Matt Levey said.

"Yet, if we get hit with another 5.6 per cent increase, we'll be paying $100 more a year on average for a standard hospital policy, with premiumĀ singles likely to jump from $1405 to around $1505, after the rebate is applied."

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The call comes as latest government figures show the proportion of Australians with hospital cover has fallen over the past two years by 0.4 percentage points to 46.8 per cent.

The government slaps two tax penalties on Australians who don't have hospital cover.

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First, those who earn more than $90,000 a year must pay the Medicare Levy Surcharge (MLS) of 1 to 1.5 per cent. Second, those who delay taking out cover must pay a 2 per cent Lifetime Health Cover (LHC) loading on top of their premium for every year they are aged over 30.

These are designed to increase the number of young people in health funds, and therefore keep premiums down for everyone. Health funds and comparison websites often use tax penalties as advertising lines.

Choice has launched as website called "Do I need health insurance?", which requires users to take a quiz before they receive a yes, no, or maybe answer.

It shows a 32-year-old single person with no children, earning $91,000 a year and living in NSW, should have hospital insurance because they'll be financially better off.

It also shows a 28-year-old single person with no children, earning $80,000 a year and living in NSW, should not buy insurance because he or she won't have to pay the surcharge.

"It's important to realise that every Australian already has health insurance through MedicareĀ and, if you're deciding to go private, it pays to be aware of exactly what you're getting in terms of cost, coverage and value for money," Mr Levey said.

Comparison website iSelect has had a 13 per cent decline in the number of inquiries from 25 to 31-year-olds in the past two years.

"It's important young people are fully aware of the implications of not taking out hospital cover by July 1 following their 31st birthday," said spokeswoman Laura Crowden.

"We speak to a lot of customers in their 40s and 50s who want private health insurance for their family but are priced out of the market due to LHC loading. They are forced to downgrade to a lower level of cover for their family or simply can't afford private health insurance."

Rachel David, head of lobby group Private Healthcare Australia, said hospital insurance meant young people were not delayed by increasing hospital waiting times and could get painful conditions treated quickly.

She also said the ability to choose a doctor was attractive among young people who, for example, might want to get pregnant. She said many young people were attracted to the value they received from extra cover, such as dental.

"In addition, health funds pay for 90 per cent of same day mental health care and 50 per cent of inpatient mental health admissions," she said. "Younger people can be uniquely susceptible to mental health conditions.

"For many of these, like eating disorders, it can be close to impossible for a younger person to get inpatient treatment in a public hospital."

Australians are expected be hit with another premium rise of 5 to 6 per cent in April this year. The health funds' applications to hike premiums will need to be approved by new Health Minister Greg Hunt.

Saving tips from Choice

  • Take the Do I need health insurance? health check
  • If you need cover, a top level hospital cover with an increased excess is often better value than reducing your cover
  • Pay your annual premium in March to avoid the April 1 price rise for now
  • Check if you can join a restricted membership health fund for your industry
  • Think of extras cover as a budgeting tool; if your annual payouts are less than the cost of your policy, it may not be worth the money