Is health insurance worth having? 

Maybe you’re considering getting health insurance for the first time but unsure whether it’s worth the money. Maybe you’re looking at the amount you’re spending on health insurance and wondering whether you’re getting enough value from it. Whatever your reason for querying the value of health insurance, it’s a worthy question.  

We asked Professor Luke Connelly, Professor of Health Economics at the University of Queensland, for advice on deciding whether Private Health Insurance is worthwhile.  

What are the benefits of having health insurance?

While every Australian qualifies for free treatment at a public hospital through Medicare, one of the biggest benefits of Private Health Insurance is you can get treated at a private hospital, and skip long waiting lists for non-emergency surgeries. You can also choose your doctors, says Prof Connelly.  

“The main benefits for most families and individuals who are well are that if you become ill and need hospitalisation, you have coverage against costs which might otherwise be very difficult to pay privately. For elective surgeries, it can speed up the time in which you can get those done. So if you need a hip replacement, or something like that, you’re likely to be seen much more quickly in the private system than the public system,” he says. 

According to the Australian Institute of Health and Welfare, the elective surgery waiting list for a hip replacement in public hospitals in 2021-22 was 153 days, while septoplasty (to fix a deviated septum in the nose) was 315 days.  

Even if you think you’re unlikely to need Hospital Cover, it might be worthwhile financially to avoid the Medicare Levy Surcharge (MLS), Prof Connelly adds. If you earn more than $97,000 as a single or $194,000 as a family and you don’t have Hospital Cover you’ll be taxed the MLS. 

Find out how much the MLS will cost you.  

Should I wait until I’m older to get Private Health Insurance?

While you’re young and healthy, you’re less likely to need healthcare services than in the second half of your life. For that reason, Prof Connelly says people from the age of 55 upwards tend to get more value from Hospital Cover than younger Aussies.  

“As economists, we think of the price of insurance as the ratio of the premium to the benefits you get back,” he explains. “So if you’re a younger person, you can pay $2 to $3 for every benefit you get back, and people in their mid-80s – who, on average, tend to have more claims – can pay as little as 18 cents in the dollar for what they get back. By the time people get to their mid-50s, they’re receiving about $1 benefit from every dollar spent on health insurance. So Private Health Insurance becomes a much better proposition as you get older. But of course, we really don’t know what illnesses we’re going to get at what time of our lives.” 

Speaking of age, getting insurance as a younger person might be worthwhile financially to help you avoid or reduce the Lifetime Health Cover Loading, which applies to anyone taking out hospital cover after the year they turn 31, adding 2% to the cost of premiums for up to 10 years. And if you take out Hospital Cover in your 20s, you’ll qualify for the Age-based Discount that will keep your premiums cheaper until you turn 41.  

Work out the cost of Lifetime Health Cover Loading, or your savings from the Age-based Discount, with the healthslips.com.au Calculator.

Is it worth having health insurance? What should I consider?

As well as age, Prof Connelly says it’s important to consider your lifestyle when deciding whether Private Health Insurance is right for you. Think about whether private healthcare is important to you, and how likely you are to experience illness or injury down the track (remember that being healthy now doesn’t necessarily mean you won’t need hospital treatment later).   

“I think the main thing is: how much do you value access to private healthcare and how important is that compared to being able to use the public system?” says Prof Connelly. “A young person who is playing a lot of sport may be at risk of serious leg or hip injuries – those things can be pretty expensive to deal with, so lifestyle factors are going to be important.” 

He also recommends considering your family situation. 

“Many people want Private Health Insurance when they’re considering becoming pregnant. And of course, you need to hold health insurance long enough before the baby’s born for it to be a qualifying treatment. And then that also gives peace of mind to people that if they have a child with high needs that they will have cover.”  

Get tips on deciding whether you need health insurance. 

What if my policy isn’t giving me value?  

If you’re not getting much value from your health insurance policy, or you want to get a better deal, try the healthslips.com.au Calculator to find the plan that’s best for you. 

Trudie McConnochie

Writer and Researcher

Knowledge is power – that’s the guiding principle behind everything Trudie writes, and it’s a philosophy she brings to her work at healthslips.com.au. By breaking down complex information into easy-to-understand blogs and stories, she aims to empower Australians to make the best choices and an informed decision around private health insurance.

Trudie understands firsthand some of the complexity of private health insurance having moved to Australia from New Zealand and having to navigate a vastly different public healthcare system and health insurance structure.

Trudie holds a Bachelor of Communication Studies (journalism major) from the Auckland University of Technology.

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