Rethink pregnancy cover in private health insurance – even if you want to start a family

Pregnancy cover can add a significant cost to the average private health insurance policy.
Pregnancy cover can add a significant cost to the average private health insurance policy. 

One of the many cons to convince young people to take private health insurance is to exploit their natural anxiety around pregnancy and childbirth.

If young people weren't fooled by the ads exhorting them to take out insurance before their 30th birthday, a topic I've written on previously, they'll often decide it's necessary when they're planning to start a family.

I'd like to challenge that. Pregnancy cover adds hugely to the cost of a health insurance policy and leaves people thousands of dollars out of pocket for the delivery – for care that is probably just as good in the public system.

Comparison site Canstar crunched the numbers for me to show how much pregnancy cover adds to cost of the average policy. As the table shows, using NSW figures as a reference, the dominant type of cover is a comprehensive plan that covers cardiac, hip/knee replacement and pregnancy/obstetrics, for an average $157 a month for a single. There are 70 policies like this, but the likelihood of you claiming on all three treatments is remote.

If you drop all three, you can save an whopping $76 a month by buying one of the 37 basic hospital policies. However, basic is the operative word here.

Bear in mind that it's not as simple as dropping particular treatments – you may be dropping other coverage as a result, because of the way the policies are designed with cross-subsidies between treatments. Private health insurance is not a la carte because it wouldn't be profitable if people could choose to insure only what they'll probably claim. It's more like a pay TV package where you might have to pay for movies in order to get sport.

The middle ground for a young person who wants quality cover is to drop pregnancy cover and hip/knee replacements but retain cardio – there are 28 policies like this and it's an average saving of $50 a month compared with full cover. That's $600 a year.

Remember you generally need to have insurance with pregnancy cover for 12 months before you conceive – and that doesn't always happen on cue; you may be paying for it for several years beforehand, as well as the year of the pregnancy itself. You'll also need to budget for the out-of-pocket expenses of your hospital stay.

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So what would you forgo by not having pregnancy cover?

Australia is not the United States and private health insurance is not a necessity. Health economists say private health insurance is worthwhile for people over the age of 60, and those who have chronic health problems. It's also worthwhile for high-income earners who would otherwise be paying extra tax in the form of Medicare Levy Surcharge – but you don't need pregnancy cover in your policy to satisfy the Tax Office.

One of the biggest reasons to get private cover is the lower waiting times for elective surgery. That doesn't apply to pregnancy and childbirth – no one is going to tell an expectant mother that they'll deliver her baby in two years' time because of a waiting list.

What private health insurance does offer pregnant mothers is access to the obstetrician of their choice rather than the doctor on duty, greater convenience with appointment times, and a private room.

For some people that's worthwhile. If you want those added extras and can afford it, fine.

Many first-time mothers find it reassuring to have that certainty and continuity of care at what can be a nerve-racking time.

It's a personal decision but it's worth talking to other mothers about their experiences. I had a friend who had her first baby in the private system and realised she'd paid about $5000, on top of her premiums, essentially for a fancier room. She cancelled her insurance and happily gave birth to her second and third babies in the public system.

My own experience is relevant too. I was living in San Francisco when I fell pregnant with twins in 2010. Naturally I had private health insurance because that's what you do in the US, unless you really, really can't.

Then we decided to return to Australia and flew home when I was seven months pregnant. By this stage I didn't have a choice but to use the public health system.

Before the birth, the main difference was that I wasn't seen immediately for my routine scans but had to sit in the waiting room for 45 minutes to an hour waiting for the public clinic. I could have chosen to see an obstetrician for my check-ups instead and Medicare would have subsidised the cost - this is an option whether you're going public or private for the birth itself and private health insurance generally wouldn't cover this cost anyway.

Later things became complicated. At 37 weeks the doctors decided, for a few reasons, they needed to book me in for a c-section. Soon after the birth my baby boy was diagnosed with a diaphragmatic hernia and was transferred to a major children's hospital to await surgery. My newborn daughter and I were transferred the next day to the public hospital adjoining the kids' hospital so we'd be nearby.

It was a traumatic time but the quality of care that my family and I received across all three hospitals was nothing short of excellent. Oh and they gave me a private room.

I didn't know it at the time, but the surgeon and the paediatrician who cared for my son both have great reputations and work in both public and private practice. I saw them privately for check-ups after we were discharged from hospital.

The public health system has many faults but it's good at dealing with issues that require urgent attention. My family is complete but if there were ever a next time, I'd be more than happy to go public again.

That's all well and good but what if you still want pregnancy cover? The table suggests that family starters who want the pregnancy cover can save a modest $14 a month by dropping the hip/knee replacement, but there are only seven policies that offer that.

Probably the biggest savings tip is that couples who want pregnancy cover are likely better off with two single policies – one with pregnancy cover and one without – rather than a couple policy, which is usually double the cost of a single one. Even the most involved father in the world doesn't need to be insured for pregnancy and childbirth.

Caitlin Fitzsimmons is the Money editor. She writes regular columns about money, work and life. You can find her on Facebook or Twitter.

Edited to add information about the ability to see an obstetrician privately before birth.

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