Expert warns about health insurance costs as family gets hit with $9,300 bill: ‘Absolute disgrace’
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Navigating the complex world of health insurance can be daunting, especially when faced with the potential for hefty annual bills that seem to offer little in return.
This is a reality for many Australians, including one family that pays a staggering $9,300 a year for private health insurance.
With cost-of-living pressures squeezing budgets tighter, it's no wonder that more Aussies are considering downgrading or even dropping their health insurance cover.
The case of Fiona's family, who reached out to finance expert Scott Pape, also known as the Barefoot Investor, highlights the dilemma many face.
Fiona questioned if health insurance was ‘necessary in Australia’, considering the country has ‘good public health care’.
She pondered whether the substantial amount spent on insurance premiums would be better invested elsewhere.
Pape's response was clear: while he described private health insurance as 'an absolute disgrace’, he warned against hastily dropping the policy.
‘It’s incredibly complicated and increasingly unaffordable, which is why people are opting out of the system in droves. But not you,’ Pape wrote in his weekly column.
‘As a higher income earner, the government has a gun pointed at your head. If you don’t hold private health insurance, they’ll hit you with a penalty tax called the “Medicare Levy Surcharge”, which will cost more than shutting up and just buying private health insurance.’
This surcharge applies to singles earning over $97,000 and families earning over $194,000 who do not have an appropriate level of hospital cover.
It's an additional charge on top of the standard Medicare levy, which is 2 per cent of taxable income.
The surcharge rates range from 1 to 1.5 per cent of income, depending on your earnings bracket.
However, Pape also pointed out that Fiona was ‘paying way too much’ for her family's health insurance and suggested that she could save thousands by taking a few simple steps.
He recommended visiting the government's privatehealth.gov.au website to compare policies using her policy ID number.
It could also be worth selecting 'hospital-only cover' since ‘most people don’t get much value from extras cover’.
‘If you’re unsure, ask your fund for a claims benefit statement. And if you’re done having kids, you could downgrade from Gold to Silver or Bronze and save thousands—just check the exclusions,’ he said.
Finally, Pape said to compare what the website says and her current policy.
‘These are the exact steps I take every year when my premium is due. It only takes a few minutes, but it can save you thousands,’ he said.
Private Healthcare Australia reported that over 216,000 policies were downgraded in the first half of 2024 alone. With 55 per cent of the Australian population holding some form of health insurance, the financial stress is palpable.
Finder revealed that 22 per cent of insured Australians consider health insurance one of their top three stressful expenses, with the average policy costing $214 per month.
Moreover, private health insurance premiums saw an average increase of 3.03 per cent in April, adding to the financial strain on policyholders.
Have you faced similar challenges with your health insurance? What steps have you taken to manage the costs? Share your stories and tips in the comments below!
This is a reality for many Australians, including one family that pays a staggering $9,300 a year for private health insurance.
With cost-of-living pressures squeezing budgets tighter, it's no wonder that more Aussies are considering downgrading or even dropping their health insurance cover.
The case of Fiona's family, who reached out to finance expert Scott Pape, also known as the Barefoot Investor, highlights the dilemma many face.
Fiona questioned if health insurance was ‘necessary in Australia’, considering the country has ‘good public health care’.
She pondered whether the substantial amount spent on insurance premiums would be better invested elsewhere.
Barefoot Investor Scott Pape highlighted the problems of health insurance costs. Credit: Shutterstock
Pape's response was clear: while he described private health insurance as 'an absolute disgrace’, he warned against hastily dropping the policy.
‘It’s incredibly complicated and increasingly unaffordable, which is why people are opting out of the system in droves. But not you,’ Pape wrote in his weekly column.
‘As a higher income earner, the government has a gun pointed at your head. If you don’t hold private health insurance, they’ll hit you with a penalty tax called the “Medicare Levy Surcharge”, which will cost more than shutting up and just buying private health insurance.’
This surcharge applies to singles earning over $97,000 and families earning over $194,000 who do not have an appropriate level of hospital cover.
It's an additional charge on top of the standard Medicare levy, which is 2 per cent of taxable income.
The surcharge rates range from 1 to 1.5 per cent of income, depending on your earnings bracket.
However, Pape also pointed out that Fiona was ‘paying way too much’ for her family's health insurance and suggested that she could save thousands by taking a few simple steps.
He recommended visiting the government's privatehealth.gov.au website to compare policies using her policy ID number.
It could also be worth selecting 'hospital-only cover' since ‘most people don’t get much value from extras cover’.
‘If you’re unsure, ask your fund for a claims benefit statement. And if you’re done having kids, you could downgrade from Gold to Silver or Bronze and save thousands—just check the exclusions,’ he said.
Finally, Pape said to compare what the website says and her current policy.
‘These are the exact steps I take every year when my premium is due. It only takes a few minutes, but it can save you thousands,’ he said.
Private Healthcare Australia reported that over 216,000 policies were downgraded in the first half of 2024 alone. With 55 per cent of the Australian population holding some form of health insurance, the financial stress is palpable.
Finder revealed that 22 per cent of insured Australians consider health insurance one of their top three stressful expenses, with the average policy costing $214 per month.
Moreover, private health insurance premiums saw an average increase of 3.03 per cent in April, adding to the financial strain on policyholders.
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