Applying a risk management approach

There are two questions risk managers ask to reach a conclusion about whether to do something. What is the likelihood of something going wrong and if it does how big will the impact be?  The other component of this conundrum is what can be done to minimise the something going wrong.  I used this logical approach to assess whether I need health care extras insurance. The traditional approach to minimising the something going wrong for minor health care problems is having health care extras insurance. I have come to the conclusion there is a better risk management approach, saving to pay for your own health care extras.

Assessing what cover you need

I enjoy the outdoors, love swimming, running and cycling and try to keep myself fit. I take a positive approach to dental hygiene, I brush, floss and use mouthwash. I don't need glasses and I am not one of those people that go for a massage just so I can max out my health care extras.  Logic would predict I would not have health insurance due to my healthy outlook however, I do have hospital cover as I can never predict the unexpected. One of the negatives of my current cover is that it is bundled with health care extras. When my insurance premium started to rise, coupled with a knee injury (which I got very little back from my health care extras claims), I decided to re-assess the value of my health care extras.

How I realised health care extras were not suited for me

I had knee problems after running the Sydney marathon and needed to see a physiotherapist. I rarely claim on my health care extras and have been paying premiums for over 10 years. I thought when I had to see a physiotherapist, it would be fine because my health care extras insurance policy would cover the cost of my physiotherapy sessions. Oh how I was wrong!!!!! I was very shocked how little it did cover and how paying so much over so many years and getting nothing back is something the insurance company never considers.  The company has made so much profit from me over the years!!!!

The maths to support the logic

Whilst sometimes you can get a care package on medicare for physiotherapy (5-10 sessions), if you want to see a specific physiotherapist you may need to pay for it yourself. My injury was very specific and I wanted to see the best physiotherapist I could.  My physiotherapy annual limit on my health care extras was $350. Each session was $140 and I got 65% back from my insurer for each session, meaning I could claim for 3.85 (2dcp) session per year. This wasn't enough sessions and I ended up paying for the additional sessions out of my own pocket. I also had to pay for 35% of the first 3.85 sessions.

I have been paying $15.73 per week for the past 10 years for my health care extras. This is a total of $8,180 ($15.73*52*10) over 10 years.  Nearly all years, I didn't claim for anything other than minimal dental checkups which were about $200 per 6 months, $4,000 over 10 years. If I would have saved for my own healthcare extras, I would have had $4,180 (net of the dental checkups) to pay for my physiotherapy sessions before I had out of pocket expenses. This would have given me 29.85 (2dcp) sessions before any additional out of pocket expenses, compared to 3.85 (2dcp).

The outcome would have been different if I saved for my own healthcare extras

I needed 10 sessions which ended up costing $1,050 in additional out of pocket expenses over and above my insurance premiums. If I would have saved $15.73 a week, I would have had no out of additional expenses and assuming I would still be getting dental check ups I would have had $2,779 left over to pay for other health care services.

The conclusion

I have come to the conclusion health care extras are not worth it and I now save for my own health care extras instead.

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