Health Cheque or Reality Check?
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Health Cheque or Reality Check?

Stories/138 , Issues/Healthcare , Issues/Policy
22nd Oct 2017
Health Cheque or Reality Check?
Private health insurance or DIY health insurance? Sharon unpacks US health cost sharing communities and whether they're a viable option in Australia.

Have you ever thought about giving private health insurers the flick and paying your own way into private health care? In Australia if you are under 30 it’s probably a feasible option provided you don’t already have chronic illness. Statistically speaking you are less likely to need hospital care, you probably exercise and eat pretty well and you’ve likely got heaps of disposable income since you don’t have a mortgage – even if you want one.

If you need to visit the physio or dentist you can just pay upfront, and if you have a credit card you can probably afford a specialist’s appointment. But once you hit 30 you’ll have to start paying the Medicare Levy Surcharge unless you’ve at least got some basic hospital cover (which you probably won’t use until you’re ready to have a baby). Is there any way to get around this? People handle their own superannuation, so surely you can do your own private health insurance?

Organisations have popped up in the United States that do a similar thing. Known as health cost sharing communities, they operate in the same way as food co-ops – groups of people come together and pool their funds in order to help members save costs and to afford treatments through the combined effort of the group.

Similar to Australia, the healthcare policy in the United States requires that people earning over a certain amount must contribute extra income tax if they are not paying for private health insurance – or what we in Australia know as the Medicare Levy Surcharge. Of course, the current US government is in the process of revising this policy but the details have not yet been ironed out (and the bill has yet to pass the Senate), so let’s work with what is currently under legislation.

Health cost sharing communities are commonly set up by religious groups for logical reasons, which we will get to shortly. Although the groups are not technically private health insurers, members of these groups are exempt from paying the healthcare mandate penalty. The organisations themselves are also exempt from paying company tax as they are religious or not-for-profit organisations.

It does make sense that religious communities would come together in this way to form a medical cost sharing community. After all, they tend to live the most low-risk lifestyles due to their beliefs. In fact, upon joining one of these groups, members have to sign a clean-living pledge, agreeing to live according to God’s teachings: swearing off tobacco, drug use, alcohol and unhealthy lifestyles. Smokers are allowed to join if they also enrol in a quitting program. Each member’s pastor or priest must sign an annual declaration confirming the member has lived according to these values, and attended church at least three times a month.

Now we get to the fun part. What procedures and care are you allowed to claim? Keep in mind that the fund is set up by people who are trying to keep costs as low as possible for members who can barely afford the cover in the first place, so anything that might drive costs up would be excluded. One person’s $300,000 surgery can deplete the group’s fund pretty quickly, and the US health care system has some pretty ridiculous funding models.

Here's what’s NOT covered, among other things: abortion (not surprised); breast implants or cosmetic surgery/removal of tattoos; extremely hazardous hobbies like skydiving and bungee jumping (you should be looking after God’s vessel); mental health; war - any costs incurred due to a declared or undeclared act of war or military activity (that’s a bit harsh?).

While it is understandable that members would not be willing to pay for someone to be patched up after they tried to break into someone’s house (illegal activity not covered), and those engaging in motocross as a profession should be utilising other funds (another activity not covered), it seems a bit much that something as fundamental as mental health is excluded, so too the exclusion of cancer treatment patients from accessing wigs or prosthetics.

Surely if these organisations just paid their taxes, they could include a bit more without cost to their members?

So what about self-funding in Australia? The common consensus is that no-one feels confident enough to answer the question (sorry). To quote the website of the Private Health Insurance Ombudsman,

If you do not have hospital cover with an Australian registered health fund on your Lifetime Health Cover base day and then decide to take out hospital cover later in life, you will pay a 2% loading on top of your premium for every year you are aged over 30. The maximum loading is 70%.

When the Lifetime Health Cover Surcharge was established in 2000, private health insurance in Australia was fairly affordable (and competitive). However, in 2017 obtaining a private health insurance plan quote is a confusing and complex process with somewhere around 40,000 variations of policies, according to The Guardian. It wouldn’t be difficult to pay $2500/year for hospital plus extras (ancillary) cover, which doesn’t include the gap payment of anywhere between $250-1000, payable on claiming your hospital stay.

If you feel confident gathering multiple quotes from health insurers and you know exactly what you need coverage for, you can get a good deal on private health insurance. Beware, premiums rise every year and your health changes too – so revising your cover doesn’t just mean bargaining with the poor call centre associate, but also getting advice from your health professionals.

If you want to go down the DIY path, keep in mind that you will have to pay the Lifetime Health Cover Surcharge if you ever join a private health insurer. If you are going to be paying for all of your health care out of your own retirement fund, then perhaps you should take up the Christian living pledge (above) and also say your thanks that although our public health system isn’t perfect, at least it allows us access to care regardless of whether we can afford it.

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