A Few Reasons Why Australia Needs Cheaper Health Insurance

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A new player will be entering the Australian health care market with an insurance industry giant getting ready to start managing public hospitals by 2020, in conjunction with local government. The global insurance player has also expanded its operations to include dental, optical and aged care as well as preventive health service, following the announcement of $500 million worth of acquisitions.

The company says it is well positioned to start taking risk on more aggressively and has recently undergone an intensive restructuring project. The company currently has 3.3-million policy holders in Australia, comprising 27% of the local private market, which also contributes 40% of its revenue.

The latest spree of acquisitions has included the country’s largest dental chain and a $250 million aged care facility purchase which will make it the country’s biggest aged care home operation. The company has cited the need for a risk-intensive, agile approach that draws in strong partnerships. They have said that they want to provide cost effective solutions to the local market, in respect of health care. The move is significant in light of recent news about the increase in the cost of health insurance premiums and the proposed strain it will put on local households, and the health Minister’s recommendation for policy holders to compare health insurance products. The local market is in need of competitively priced policies if it wants to be able to uphold the standard of care.

Also topical is the recent news that the current cost of living is ensuring that most working people are not able save up enough money to be able to live a comfortable retirement. The latest figures supplied by the industry body say the average single person needs $430,000 and the average couple $510,000 to live a comfortable retirement, but it is only those earning in the upper income brackets who will be able to afford to get there.

A person earning $50,000 per annum will only be able to save up $183,000 in their 30 years of working life, and contributing 9% of their income into super funds. That person would only be able to save up $244,000 if they increased their contribution to 12%.

Someone making $100,000 a year, and contributing 9% of his or her income to a super fund, would only walk out with a lump sum of $366,000 on retirement. It is only if the contribution is increased to 12%, and applied for their entire working life, that this person would be able to save up $487,000. Even if they did get to the lump sum target they would still need a pension top up to live comfortably.

The body says the average couple needs $56,300 per year to live comfortably (a 2% increase from last year) and $41,200 per annum to support a modest lifestyle. A “comfortable” lifestyle is defined has maintaining a good standard of living, recreation and leisure activities, the ability to purchase household goods as needed, occasional travel and having private health insurance. A “modest” lifestyle is better than that provided by the average age pension but one which can only afford a basic lifestyle and activities. The current super balance at retirement age is sitting at $112,000 for women and $192,000 for men.

In defence of the big difference between what is needed and what is being accrued, the implication has been made that a handful of very large nest eggs are preventing 75% of Australians from retiring with lump sums on par with the average. Retirees have had to reduce their living standards to keep pace with increasing costs, a phenomenon that is being experienced by young and older Australians alike.

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