The float of Medibank Private Ltd (ASX: MPL) late last year was fortuitiously timed for early investors, with the ASX 200 surging in early 2015 and lifting its share price 20% to a high of $2.56.
Medibank is now trading close to its original listing price at $2.08, but this is one company I am happy to leave off my watch list.
I may be proven wrong in time, but I cannot see the value in holding private health cover for my own family – and therefore cannot see the value in investing in Medibank Private.
We live in regional New South Wales and have access to a local public hospital. I am 30, my wife is 28, and our two boys are under 3.
Last month I received a letter from the federal government reminding me that unless I start forking out for private healthcare before June 30, I will face a 2% increase in premiums for each year that I delay in taking up health cover.
We had already made the conscious decision to not join a private health fund, but it was cause for me to again investigate exactly what the government was asking me to sign up for.
According to the Medibank Private website quotes, the best match for my family would be the "New Families Comprehensive" cover at $72.37 a week.
For just $3,763.24 each year I could have the luxury of an extra plastic card in my wallet and the option for a free dental check-up and optometrist visit.
Sorry Tony Abbott and Joe Hockey, but I think I'll stick to the Medicare-funded public services that I pay for each time I fill out a tax return.
Given that my wife and I are reasonably fit and active, young, and non-smokers, the risks of us having to attend the hospital for anything other than an emergency situation are low.
If (heaven forbid) we do have a serious accident, there is only one hospital that the ambulance will be rushing us to, and it is the very same public hospital that would treat us if we were private healthcare members.
We do hold ambulance cover for a small fee each year, but we'd much rather invest the $3,763 private healthcare fee we are not paying in strong, dividend-paying companies that will return far more than the punitive 2% surcharge for "defaulters" like us who refuse to pay extra for private health cover.
Foolish takeaway
Everyone's situation is different, but in uncertain economic times with historically high unemployment and low wage growth, many young families like my own are likely skipping the optional expense of private healthcare.
From the perspective of a potential investor, policy holders who do think private health cover is good value are likely to be those with higher healthcare needs, who in turn will be a drain on Medibank Private's profits.
Of course I must note that those who live in our major cities have access to better private hospitals or extra benefits from their memberships, but if I am ever lying in a hospital bed after an accident, having my own room with a blu-ray player will be the least of my worries.
Until I see a better value offering for young families, or those in regional Australia, I simply won't be investing in Medibank Private.
