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Sunday, April 23, 2006

Brave or stupid?

We are sick of paying private health insurance premiums. It wouldn't be so bad if it went even close to bridging the gap between the service and the benefit, but it doesn't. Furthermore, the cost of insurance has increased rapidly over the last couple of years to the point where we have had to decrease our level of cover. The government 30% rebate was swallowed up long ago.

But what are we going to do about it? Well, we're not going to take it anymore, we are going to self-insure. We will set aside the same amount as we are paying in premiums now into a high interest savings account, only to be used for health related services. This is a scary move for us, but when we sat down and did the sums, we just can't afford a system that sees us pay huge premiums, get little benefits and then have to pay huge gaps to make up for it. Furthermore, most people I have asked have acknowledged that many more people are doing this now. My main concern about this move is that we won't have enough saved up for any short-term medical expenses. I'm afraid we may just have to wear that if it happens. In the long-run, I am aiming to save up a very large health nestegg. With two young children, I'm sure we will need it in the not too distant future.

We did quite a bit of research into this approach, and it seems to be a bit of a taboo topic. Many financial advisers and medical practitioners give conditional approval to this approach, but neither the government nor any other bodies seem to endorse it. It is very difficult to find information about how much you should set aside per year and how much you should save all up. We can only afford to set aside the amount that we are currently paying, and I would like to keep contributing for at least a couple of years before reviewing the amount we put in. Over the next decade I'd like to get it up to around $10,000. I wonder if this is enough.

At the moment we have fairly minimal medical costs but if you add the premium onto the gap payments, we are paying 150-200% or more of the cost of the services that we are using at the moment. For example, my initial visit to the physio cost $55, the benefit was $24, leaving a gap of $31. Future visits would cost I think $36 with a benefit of $16 leaving $20 gap. If I see the physio 4 times this month (which may happen), then it will cost me $91 plus the $187 premium that we pay = $278. If I pay the fees upfront without insurance, it will have cost me a maximum of $163, although my physio has agreed to charge $30 per visit if I don't have private health insurance, so it would be even less (he's a mate). So for this month I would have almost swallowed up our health savings, but that money would have been paid anyway and some. It is unlikely that I will need ongoing treatment for this injury, and I would consider taking extra caution to make sure that I don't dip into these funds on an ongoing basis.

I suppose the point is that we are healthy now and we are used to setting aside money for health, so why throw it away to a health insurance company now when we can save it for when we need it later, but can also dip into it if required?

This entry is unfinished, but I would invite any thoughts about this approach. We have started it. As of Tuesday we are sans health insurance for the first time in my life!


Beth said...

I am with you Dave. I can't justify the high premiums when you still have to fork out so much for the gap! I am comforted by the fact that we still have Medicare so if something bad happens I am still going to be treated.

Louise said...

I never bought into the Government's scare campaign when I landed here 6 years ago, so I'm "self insured" as well. I don't put the money aside though - it goes into the mortgage where it'll do the most good (until/if I need it). Just make sure you eat all your veges and stay healthy. :-)

Tesso said...

I just wrote a long comment about how pissed off I am at private health insurance premiums etc and then bloglines spat the dummy and I lost it all.

Anyway, I can't advise but I can sympathise. It costs me a motza ($75 a fornight for just me) and I rarely claim a thing. Its the only positive thing about being injured, at least I can claim some of my physio.

go girl said...

Yep, I do the same thing Dave. In fact we put the same amount of money away each year as we were originally paying into another account. If we don't use the amount through out the year on health related expenses then we use it for our family holiday.

Better in my pocket than theirs.

A Girl Running said...

Dropping health insurance was a very good move for us, even with the cost of my recent dental work, glasses, and my daughters upcoming kidney operation - we are still better without it. It was quite a shock to work that out!

Ewen said...

I've been without it for over 20 years. Haven't missed it. My major MBA cost nothing. Probably a 12 month wait if I wanted non-urgent running injury type surgery but I'd probably go back to swimming or biking if that was needed.

Black Knight said...

I don't complain because I have the public service and the insurance payed by my company