Family money: Susan Hely looks at health cover for kids

Parents will soon be able to keep adult kids on their insurance policy for longer

When my 25-year-old daughter fainted at work, her colleagues called an ambulance and the paramedics took her to hospital. She was checked out thoroughly, sent home to rest and returned to work a few days later. A month later she received a bill for $980 for the ambulance.

She was shocked and naively thought work would pay as it had called the ambulance. The bill was one of the biggest expenses to come her way. Luckily, I had talked her into taking out health insurance a year earlier as our insurer had dropped her off our family policy. She was thrilled to discover she would be reimbursed the full $980. (Some states – not NSW – do cover an ambulance.)

It was an “aha!” moment for her. She saw the value in having private health insurance.

It is one of those big expenses that you may need to help your adult kids with. Why would they take it out on their own? It is expensive and if they are healthy they really can’t see the point.

After all, Australians pay a Medicare levy, 2% of their taxable income. This covers us for visits to a bulk-billing doctor and public hospitals.

So what does private health insurance deliver? It is split into two parts: hospital insurance and insurance for extras such as visits to the dentist, physiotherapist, podiatrist, mental health services, some natural therapies and products such as glasses, lenses and pharmaceuticals.

Around 43% of the population, or 11.3 million people, has private hospital cover and 53% (13.7 million) has general treatment cover for ancillary services. But young people aged 20 to 49 have been dropping out of private health insurance, according to APRA statistics.

This is why changes will be introduced this year allowing adult kids to remain on the family insurance policy from 24 years of age until they reach 31. The legislation is still to be passed but the insurance industry is confident it will be introduced in coming months, says Ed Close, chief executive of Australian residents health insurance at nib Health Funds.

This will be a big saving for young adults and give them protection that they might have lost if they didn’t take up private health insurance. It also gives parents peace of mind knowing that their children are covered in case of emergencies and there is cover for extras such as visiting the dentist.

Will it mean that families will pay higher health insurance premiums?

“There won’t be a material impact on pricing,” says Close. He believes keeping adult kids signed up to private health insurance will give them more time to appreciate its value before they could be potentially taxed more if they don’t have private hospital cover.

Susan Hely has been a senior investment writer at The Sydney Morning Herald. She wrote the best-selling Women & Money.