How does insurance work? – Dr Geoff Wan

I may be a dentist, but I wanted to share with you how health funds were originally made to help, and are quietly changing how dentistry is done. I am in no way a financial expert, and this is merely an opinion based on observations and my limited understanding of corporate businesses. With that understanding let’s first talk about insurance.

Comedian Chris Rock calls insurance, “In case it happens”

What kinds of insurances are there? 
Vehicle insurance to cover damages done to other people from an accident caused by you. The payments can range from several $300 to $500,000. 
Earthquake insurance or home and contents insurance, as it may cost $2000 to $2,000,000 to repair/replace the affected things. 
How about travel insurance – imagine needing an emergency appendix operation while you are travelling in USA? This could cost you tens to hundreds of thousands in medical bills! People generally do not have hundreds of thousands/millions lying around to pay for these expenses, but how often do these incidents occur? 1 in 1000?  1 in 10,000? 1 in 100,000? Due to the many insured vs the few number of people needing the insurance benefits, the “many” covers the very few needing the hundreds of thousands of dollars “in case it happens”.

In Australia, I was fortunate to witness first hand, the wonderful level of care in a private hospital setting. My wife gave birth and spent a few restful days, in the privacy of her own room, well-cared for, at Westmead Private Hospital. I thought that it was worth the money to pay for private health insurance so that we could enjoy that benefit. Not everyone will voluntarily use those benefits for private hospital benefits, so the many who subscribe pay for the few who use the service. 

When it comes to dental “coverage” with private health insurers, it’s a different story. When the insurance first came out back in the 1960’s, they would cover $1000 worth of treatment – that could get you a whole lot of treatment! That could also be a down payment on a house in Glebe back then too! Unfortunately, most health funds won’t even “cover” $1000 worth of treatment nowadays. Why? Because if the premiums slowly raised without equally doing the same to the benefits paid, people wouldn’t really notice, right? So out of all the people who subscribe for dental coverage – how many will actually use them?  Certainly not 1 in 1000, but more like 2 out of 3. This means that many subscribers will pay for the many who use the service. Unlike the previous categories “in case it happens” where the odds are 1 in 10,000, now it’s more like the majority will utilise these benefits. 

The health fund serves basically as a “piggy bank” to partially cover dental services, which is why there is a “gap”.  As private health funds gain more popularity, they will even influence you to seek one of their “preferred providers” so that you will pay less out of pocket. These “preferred providers” may have financial arrangements with these health funds, so that their profits go back to those private health insurance institutions. Private health insurers are big businesses. They are out to sell a product to benefit the people they serve. The more subscriptions they sell, the more revenue they generate. The fewer the people use the benefits, or the less they reimburse you, the more profits they reap. They also have a skilled team of lawyers setting up rules making it challenging to access your benefits were you to ever need them.

If you are a understand numbers, picture this. Our average basic treatment plan costs $2,500 which will get you a couple of check-ups and cleans, a crown, and a few fillings. Some people will require less treatment, some will require much more. 

I would pay $35/week for “top level” extras cover, that covers $1,200 of my dental expenses, with “waiting periods”, which means after paying $1,680 to the health funds for $1,200 of dental coverage, I would still have to pay $,300 for the rest of the average basic treatment plan, resulting in a total annual cost of $2,980 in this instance.

Private health funds are excellent in covering private hospital expenses, if they are needed. I certainly hope no-one has ever been in a situation needing hospital attention. Private health cover “extras” also helps dentally healthy people by partially covering their routine dental check-ups and the odd filling. Dentists will diagnose what they see. Some see little so they tell you little, and may not spend much time with you.  Some will try to sell you a bunch of stuff you don’t need because they are greedy. Some see a lot but will take the time to explain to what’s going on.

It is up to you to decide who takes care of you, kind of like how you would choose a hairdresser. We are not here to fight against the health funds or force you into dental treatment you don’t think you need. We are here to help you attain your ideal dental and oral health goals. Do you think that is the same goal as the private health fund you are paying monthly fees for?  Who is really looking out for your best interest?

We are!  

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