Saving on health insurance | Money Master Diaries

Mark Wenzel is trialling The Hopkins Group’s  Money Master program  to see if it can help him gain more control over his family’s cash-flow position. Mark’s goal is to free up some of his money to fund family experiences rather than spend them on things that don’t matter as much. He is documenting his progress and key insights in a regular blog series called the “Money Master Diaries”. This blog is the third in the series.

Before we get started on this Money Master diary, I want to be transparent right from the start about the topic I’m tackling today. Health insurance is a topic that’s regularly raised by clients – and it certainly makes sense when you start looking at other personal insurances, like life and TPD, with your financial adviser, that health insurance may come to mind. However as a financial adviser, I’m not in a position to provide advice in this particular area, nor am I qualified to do so. If you’re considering or reviewing health insurance in the context of your own situation, you’ll need to undertake your own research to determine what’s going to be right for you in this area.

All that said, health insurance was another big ticket item that came up in reviewing my family’s cashflow position. So, as part of my Money Master experience, I felt it was important to explore the value I was getting out of this insurance, versus what I was paying. You may decide to consider a similar review in your circumstance, but by no means does the following constitute advice. Rather, this is a personal reflection.

As part of my ongoing expense review with the Money Master program, I contacted my health insurer to see where we could save money. We have not reviewed our health insurance comprehensively for many years. We have held the view that this is a taboo topic and we do not want to upset the status quo in fear of needing to claim or triggering waiting periods for procedures we may need in the future. Really, it’s an excuse; we have been avoiding decision making. Financial decisions are trade-offs. They require you to analyse what you know today and choose a course of action you are comfortable with. Not making financial decisions is costly and lazy.

The reality has been that we are healthy and rarely claim on the policy. This fact has made me question the benefits of health insurance in our situation, given the quality of Australia’s public healthcare system and the small amount of money we get back from the services we use.

This blog series has been the catalyst for me delve deeper to save money now and in the longer term. The long term is the main focus here; while $100 per month saving does not sound like a lot of money in the short term, over 10 years this savings likely amounts to $15,000 (with inflation & compounding of savings).

The phone call to my health insurer was very enlightening. We are on top hospital package with a $250 excess per adult, per year. We can reduce the cost of the premium, saving $347.64 per year, by increasing this excess to $500 per person per year. By self-insuring the additional $250 per person (to a maximum of $500 per year) we have a pay back of 1 year 5 months. This means if neither of us need to go to hospital in a year, we save the money. In my mind, this seems a reasonable financial decision for my family.

As part of this decision, I also noted my insurer also offers an option that has a $750 excess per person but only to packages that are current. We are on an extras package called ‘Standard Extras’ (which is not offered anymore), which covers us for a broad range of services including optical, physio, major dental and chiropractic. Many of these services we have not used in the past and are unlikely to use in the future. However, the main reason we have chosen to stick with our current extras package is that there are no real cost savings by reducing extras to a choice of four. The additional extras are not costing us additional money, so why get rid of them?

The hospital cover we are on is ‘Top Hospital’. By changing to ‘Silver Plus’, we can reduce the monthly premium from $381.46 to $366.34; a saving of $15.12 per month. The trade-off is that we will no longer be covered for chronic kidney disease, dialysis, cataract surgery and joint replacements. These can be added in the future with a waiting period of 12 months, but we did not think this was a worthwhile saving. There is no guarantee that they will not change their policy in the future, so this time a saving of $181.44 per year is not enough of a carrot to reduce the level of hospital cover.

All up, the result of my health insurance review is that we will save $347.64 per year by paying more if we ever need to go to hospital. When this saving is added to the $420 in coffee, $468 from calling the bank for rate reduction and $589 in energy supplies, it brings the annual savings identified with the help of the Money Master program to $1,824.64. When you add the benefits of fixing our interest rate, saving $2,860 per annum, the total is $4,684.64 (I have kept this separate because not everyone wants to fix their rate). I’d say that’s a pretty good start on growing our savings; and it’s definitely money I’d rather be spending on experiences and making memories with my family.

In my next blog, I will report on the savings that have been identified in the monthly expenditure and some targets we have set on personal expenditure. Stay tuned!

Do you think The Hopkins Group’s Money Master program can help you identify savings in your life? Speak to us about getting started today!