How to hack your health insurance for the second half of life

Brought to you by Australian Unity.

Most Australians set up their health insurance at an obvious point of their life. It’s usually around the time they started earning decent money, moved in with their partner, had a baby, or got a nudge from their employer to move to a ‘grown-up policy’.

They picked a policy, set up a direct debit and then largely forgot about it, claiming their health costs along the way with as little interaction with their health fund as they could manage.

I know this because I did exactly that. For more than two decades.

And I am here to tell you that the policy you set up in your late 20s or early 30s was designed for an entirely different version of your life. If you haven’t properly reviewed it since, there is a reasonable chance you are paying for things you will never use again, and not covered for things that are becoming genuinely and increasingly relevant.

One of the most persistent misconceptions in Australian health insurance is that gold cover is always better.

You are possibly thinking about health insurance differently to how it is designed to work today, too. And all of that means you’re probably not getting the best bang for your buck. And, in a cost-of-living environment where every dollar matters, it’s time to dive deeper.

The trigger that made me look

For most people, the review of their health insurance in midlife doesn’t happen until something forces it. For me, it was finding out I probably needed cataract surgery.

It wasn’t an urgent diagnosis and I didn’t need it immediately. But the advice from my specialist was clear: “you’re going to want it sooner rather than later”.

So I reluctantly went looking at my policy. And what I found was a little frustrating. My hospital cover, a silver policy held for more than 20 years with the one company, didn’t cover cataract surgery at all.

It did, however, still cover me for pregnancy and childbirth. Which, with three children in their late teens and 20s, and a body firmly in menopause, I will never need again.

I had been paying, for years, for a hospital-cover policy built around the health needs of my younger self – while the health needs of my older self had quietly moved on without me.

What changes in the second half of life

The shift in health needs between the first and second half of life is significant, and it follows a fairly predictable pattern.

In the first half, health insurance tends to earn its keep through events: pregnancy, accidents, sports injuries, the occasional unexpected admission. These are acute, usually resolved, and the insurance does what it’s supposed to do.

In the second half, the picture changes. The things most likely to require hospital treatment are no longer events, they’re health conditions. Think about it. There are joint deterioration and replacements, heart issues and vascular worries, and cancer.

Then there are surgical intervention for hearing loss with cochlear implants and the opportunity to treat cataracts and retinal issues. Most come from the slow accumulation of wear and tear that eventually needs proper medical attention.

A health insurance policy that was optimised for the first half of life is often poorly suited to the second. The inclusions don’t match the problems. The extras don’t reflect how you actually use them. And the gaps, or the things that aren’t covered, are precisely where you’re most likely to end up needing care.

The gold cover myth

One of the most persistent misconceptions in Australian health insurance is that gold cover is always better. That if you’re getting older and want to be protected, you should be paying for the highest tier available. That’s not how it works.

The hospital tiers that the government requires all funds to use for consistency – basic, bronze, silver and gold – determine which clinical categories are covered, not how well you’re treated within them.

If a procedure is covered under your policy, you receive the same care whether you’re on a bronze or a gold hospital cover. Gold cover only adds value to your policy if you specifically need the categories it adds: weight-loss surgery, in-hospital psychiatric care or pregnancy, in most cases. For most Australians in their 50s and 60s, none of those are relevant.

What is relevant – those cataracts, joint replacements, heart and vascular procedures – are almost all available at the silver level. Which means a significant number of Australians are paying gold premiums for gold inclusions they don’t need, while potentially missing the silver-level cover that would actually serve them.

The extras trap

Extras cover deserves its own conversation because this is where the mismatch between what you’re paying and what you’re getting is often most stark.

The extras that made sense in your 30s or 40s, things like orthodontics for the kids, or a generous childbirth allowance for services after a birth, are not the extras that make sense now.

What matters in the second half of life is regular dental care, major dental for crowns, optical cover for glasses and eye tests, physiotherapy for the joints and injuries that come with an active life, and, eventually, hearing aids.

It’s also worth checking whether your fund restricts which providers you can see. Some of the major funds only pay the full rebate if you use their preferred provider network, meaning you may have to leave the dentist or physio you’ve trusted for years if you want to get the most from your cover. Not all funds work this way. It’s worth knowing which camp yours is in.

The flexibility most people don’t know they have

There was one thing that really surprised me when I actually started asking questions: health insurance is far more flexible than most people realise. And some funds explain this as they try to match their policy to your needs.

You don’t have to stay at the same level of cover indefinitely. You can dial up before a planned procedure, serving the required waiting period, and dial back down afterwards.

You can split family members onto separate policies if your needs have diverged significantly for a period, rather than make the family policy wear the cost of everyone upgrading.

Adult children can, often, stay on a family policy well into their 20s or, for some, right up to 31, which is often far cheaper than them taking out their own cover.

And if you switch between products at the same level of cover, you generally don’t have to re-serve waiting periods. The system has more room to move than the set-and-forget mentality most of us bring to it. And that can save you money.

The questions worth asking

If you haven’t reviewed your health insurance recently, these are the questions I’d start with.

What does your current hospital cover actually include and what does it exclude? Are the exclusions things you’re now more likely to need? What do your extras actually pay, and for what? Do you still need everything that’s included, or are you paying for cover designed for a life stage you’ve moved on from?

And, perhaps most importantly, does your fund let you see the providers you want to see, or does it steer you towards its own network and pay less for their non-preferred providers?

When you think about it this way, health insurance could have become one of those financial products that rewards the people who engage with it and penalises the people who don’t understand their policies very well. Most of us have been in the second camp for far too long.

That’s not a hard problem to fix – have a closer look at yours.

Bec Wilson is author of the bestseller How to Have an Epic Retirement and the newly released Prime Time: 27 Lessons for the New Midlife. She writes a weekly newsletter at epicretirement.net and hosts the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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