If you think taking out Private Health Insurance (PHI) is saving you money…

Read this and THINK AGAIN

A common anxiety about an upcoming visit to the dentist is the cost of treatment. Patients are often concerned when it comes to extras cover and how much of the treatment fee will be covered.

PHI extras cover isn’t really insurance in the traditional sense of buying a financial product for “just in case”. Most people understand that they are going to need one or two dental check-ups a year, or perhaps optical glasses, physiotherapy sessions, orthotics, chiropractor or osteopathy treatment etc….. so PHI is not really insurance in the true sense. The common belief is also that your PHI extras cover will help reduce your out-of-pocket costs and in some cases cover the entire treatment.  In other words, as a consumer, you are hoping to ultimately pay less in premiums than what you receive back in benefits.

But that never happens, does it!

People taking out PHI ‘extras cover’ are generally paying, depending on the level of chosen cover, 30% or more in their insurance premium costs on top of the Hospital Cover component and receiving only a fraction of that premium back in rebates.

According to a recent article published in the Australasian Dentist (Leading Dental industry magazine), in 2018, the average insurer rebate was only 54% of the premium paid and then the remainder of the treatment fee still needs to be paid (it’s funny how this is often referred to as an ‘out of pocket cost’… people need to add the premium cost to this for the true ‘out of pocket cost’).

According to recent research by APRA, nearly 2 million Australians have recently opted out of having PHI. This decrease in fund member numbers, along with government approved annual increase which will inevitably occur again this April as it has every year before will force more people out of cover, putting further pressure on the system. These government approved yearly premium increases have been 2-3 times the annual inflation rate and the rebates for items have in many cases been reduced.

A more frightening figure is that the Federal Government’s annual subsidy to the Health insurance Funds has now hit an all time high of $6 Billion and as a result the PHIs and their shareholders are benefiting from billions of dollars in profit without passing on these benefit to their members.

Here are some stats to consider.

Net profit after tax 2019 (Source APRA)

Medibank Private$467,781,000

NOTE: don’t get fooled by PHIs who claim to be ‘not for profit’ or ‘member’s own funds’. The reason they are described as such is that they re-invest profits buying properties & growing their massive investment portfolios & paying their executives millions of dollars in wages & bonuses.

Keeping all this in mind, we at CDIC recommend that people set aside PHI extras cover premium each month & use that to pay for your entire treatment. We have seen families save thousands of dollars this way.

Stay tuned for our next blog exploring PHI rebate limits and business rules.                                                                                                                        

 Dr. Khushboo Agarwal & Dr Hillel New