Friday, 22 March 2013
Looking at Private Health
Over the past several weeks we have been spending a lot of time and effort examining which private health insurance fund should be robbing us of our money. I thought I would share some of our insight here as it may help other prospective victims.
Before we start, why go down the private health insurance path in the first place?
The immediate answer is that the Australian tax system forces you to join one.
The less immediate answer is that having the private health option allows you to jump the queue when in need of medical assistance, which usually happens to be a time when one is desperate to receive medical assistance. (Note, however, that private health is next to useless when it comes to using the facilities of emergency rooms; it only kicks in once one is properly admitted to the hospital.) I will leave the ethics question in relation to queue jumping out of the scope of this discussion; I just thought it is important to lay all cards on the table. On the positive side, private health means you do not have to think too badly about the damage to your wallet when you need to get yourself admitted to the hospital for non urgent treatment.
The third and last reason is that private health can help in cutting down the cost of extras, which is the title commonly associated with non hospital and non GP health related costs. That is, things like dentistry, physio and such (sadly, this list includes lots of voodoo treatments such as chiropractic).
Next, why have we been on the lookout for a new health insurer?
We have been Medibank Private customers for many years now, choosing to go with a government owned private health fund under the assumption its non private nature would lead to us getting a better product. In earlier years that assumption seems to have been correct, but this past few years the tide has changed. More and more receptionists processing my health insurance refunds sneaked in a crude sarcastic joke at the sight of my Medibank card. Others have been openly saying it is the worst provider around. Most importantly, we have seen the way our refunds have been dwindling over time.
To put it into measurable figures, a routine dental visit for inspection and clean-up, the type of thing we are all recommended to do twice a year, used to be covered in its entirety. That is, Medibank would pay for it all. However, with time two things have happened: the providers holding special relationships with Medibank of the type that provides full cover have deteriorated; their clinics are more like production lines where one receives minimal attention and an abnormal number of recommendations to come back for some five minute long fillings.
In parallel, Medibank kept its scheduled fees unchanged, or not changed as much as fees have changed. For example (don't quote me on the exact figures), if in the past Medibank would pay $50 back for a dentist check-up at the time dentists charged $50 for that item, then today Medibank still seems to pay the same amount while the dentists have moved to charge north of $100. The bottom line? This week’s routine dentist visit cost me roughly $250, out of which Medibank redeemed only $100 or so. Not the no out of pocket expenses experience I fondly remember.
Clearly, we can do better than a company that relies on past glory.
With the need to replace our private health provider clear and present, the question turned into how to identify potential replacements.
My first port of call was iSelect, about whom I heard from many. That website does seem to have its PR done well, because it is this name that people default to when the question of choice in private health is raised. However, that perception seems not too well based. When I did my search for providers with iSelect I received recommendations for rather obscure providers. On its own, obscurity is no deal breaker; however, none of the options offered to me seemed to bear much relation to my needs. I moved on.
Our next port of call was to check out the corporate health plans offered to us through our employers. That turned out to be a wise course of action, as I soon learned significant discounts and bonuses can be thus achieved. We ended up comparing three private health funds, respectively the 2nd, 3rd and 4th biggest in Australia: Bupa, HCF and NIB.
Each of these funds offers similar cover levels to allegedly suit "every Australian". The main difference, I have found, is in the way they pay back benefits for extras. Bupa, being the biggest of this lot, seems to go down the course of establishing its own network of providers; costs are minimal if you use these, but again – our experience indicates these services tend to be of lower quality.
HCF is similar but different. Its own provider list seems much smaller, so they thus rely on establishing a list of services they’d pay you back for. Next to each such service they have their scheduled fee. (Bupa, by the way, works along similar lines; it’s just that its highlight is its own network of providers, where better conditions apply.) Thus, for example, if a dentist does you a filling and charges you $150, but HCF’s scheduled fee is $100, you would get the $100 or a fixed percentage of those $100. The differences are better highlighted with major dental operations, where the scheduled fees can be less than half of what dentists normally charge, thus requiring hundreds of out of pocket dollars. Note all paybacks are limited per year per category per person: there is only so many fillings a year that any insurer will pay you back for.
Scheduled fees can bite in various ways. For example, HCF’s physio benefits tend to come at less than half of what my physio charges me. Worse, the benefits go down the more I visit the physio. Thus HCF is telling me, in effect, to avoid visiting the physio; and if I do, to make as fewer visits as possible.
NIB’s policy is different. They don’t have scheduled fees and they don’t have much of a network, especially not in Victoria. Instead, they repay a fixed percentage of the cost up to a certain yearly limit per category (dental, physio, etc.). I have found NIB’s approach to best suit me for two reasons: first, it is easy to know how much money I should expect to receive as benefit and how much I should expect to pay out of pocket; as long as the item is covered, I can do the percentages myself. And second, the lack of scheduled fees means my policy cannot be killed through the private health insurer stagnating its scheduled fees. That said, I’m sure NIB has plenty of other ways with which to work its way further into my wallet, such as raising its policy prices above and beyond inflation levels (something all health funds seem to be allowed to get away with on a yearly basis by the government we, the people, have elected).
At the bottom line, I have much criticism against Australia’s system of private health. To be honest, I would rather live in a world where private health does not exist, and all health services are freely delivered to those requiring them. I live in this world, though, and for now I consider it important to know my enemy and to choose the lesser evil wisely.
Image by José Goulão, Creative Commons license