Private health insurance premium increases
With health insurance premiums rising an average of 3.25% as of April 1 2019, almost half of all Australians are now forking out extra for their policy. Even though it’s actually the lowest rise in 17 years, it still represents a good opportunity to review your policy and make sure you’re getting the best deal.
Choosing a health insurance policy can seem complicated when there are so many insurers to choose from, each of whom provide a different range of products. And with the cost of health insurance consistently rising above the rate of inflation, reducing your premium (without skimping on value) makes sense.
How much does health insurance cost?
Average cost of health insurance by state:
|State||The average monthly premium for a Basic Hospital & Extras policy|
Source: privatehealth.gov.au (17 February 2020).
Top tips on saving money on health insurance
So with that in mind, here are our top tips on how to save money on your health insurance.
1. Make sure you’re only paying for what you actually need
Some consumers prefer to be covered for all possible eventualities – but this level of cover certainly doesn’t come cheap, nor does it make sense to pay for things you don’t even need.
If you’re in your twenties, do you really need to be covered for hip and knee replacements? Chances are you won’t be needing that level of cover for a long time yet. Similarly, it makes no sense to pay for things like IVF and obstetrics if you’re in the mature stage of life.
Take a good hard look at your extras cover too. If you’re not into alternative therapies like acupuncture or naturopathy – don’t pay for it. Take stock of your existing policy and make sure it suits your needs.
2. Shop around in March and June
March and June are typically the busiest months of the year for Australians looking to sign up to a health insurance policy. Premiums generally rise every year in April, so many policyholders shop around in March for a better deal to try to "beat the April 1 price rise" (as covered in tip #4).
June is the other peak period, as many soon-to-be 31-year-olds frantically look to take out cover before being stung with Lifetime Health Cover (LHC) loading which kicks in for 31-year-olds that don't have a health insurance policy come 1 July (see the next point for more detail).
It can really pay off to shop around in one of those peak periods, as health funds are trying to win over new customers by offering a range of bonuses and incentives for new customers.
3. Take out cover before your 31st birthday
If you haven’t already got private health insurance, and you feel you need it, strongly consider taking out cover before you turn 31. Otherwise, you’ll be stung with the Lifetime Health Cover (LHC) loading in addition to your premium.
For every year you put off getting private health insurance after the age of 31, you’ll be charged a 2% loading on top of your premium. As the LHC loading lasts 10 years and goes up to a maximum of 70%, you may want to avoid that cost altogether.
4. Pay up in full before the price rise
It’ll hurt you in the hip pocket initially, as it’s a lot of money to outlay BUT by doing so you can wrangle a good deal. Paying your premiums a year in advance before the April price rise essentially allows you to lock in your premium at the previous year’s. You may even get a discount, with some health funds offering up to 4% off for paying for your cover a year early.
5. Ignore sign up perks
Sure, theme park tickets and fitness trackers are enticing but if you take a closer look, they might be masking a policy you don’t really need… or can’t afford.
6. Consider paying your premiums via direct debit
There are some health funds that will reward you for paying for your health cover by direct debit, offering discounts of up to 4% off your premiums for simply allowing your payments to be made automatically.
7. Save by staying fit
If you’re a bit of a gym bunny, it might be worth considering a health fund that will reward you for your #fitspo lifestyle. Some health funds offer discounted premiums if you continue to take steps to improve your health – there’s incentive to hit the gym if ever I heard it.
8. Consciously uncouple
Roses are red, violets are blue, one person is better than two – at least when it comes to your health insurance policy.
It turns out a couples health policy is often no cheaper than two singles policies. This is because under the "Community rating" system developed by the Australian government, health insurers have to charge everyone the same premiums for the same level of cover, unlike car insurers or life insurers.
Also, if you’re on a couple’s policy, you may be paying for things you don’t even need, because you both have to have the same level of coverage. For example, if a heterosexual couple are trying for a baby and have a couples policy that covers pregnancy, did you know the couple are paying pregnancy cover for both the woman AND the man?
Unless men can suddenly give birth and I just don’t know about it yet, it would be worthwhile to take out two singles policies in that scenario.
9. Find out if you’re entitled to a corporate fund
Some companies will offer corporate health insurance, which could mean significant savings for you. Some offer their members exclusive discounts and perks, such as lower premiums for a higher level of cover, or even free gym memberships.
10. Reduce your premium by paying a higher excess
Most health insurance funds will allow you to increase your excess for a reduced premium. Keep in mind though, that your out-of-pocket expenses should you need to go to hospital will be higher if you use this strategy.
This option really comes down to how often you claim on your policy and how it would affect your budget. If you’re a young, fit person who visits the hospital once in a blue moon, this strategy may well suit you. But if you’re an older person with more health issues, it’s a risk you might not want to take.
11. Take advantage of any age-based discounts
If you’re under the age of 30 on April 1 2019, the odds are ever in your favour. The recent reforms offer a premium discount of up to 10% if you’re aged between 18-29 years old and have, or are planning to take out Hospital Cover.
12. Check your new cover
As of April 1 2019, health insurance products will be labelled under the new categories ‘Gold’, ‘Silver’, ‘Bronze’ and ‘Basic.
Essentially, all the different types of cover will be pushed into each tier. While the new system is supposed to make it easier for customers to understand what they’re covered for, it’s important to check whether you’re getting the best deal under the new system, and whether there will be any changes to your existing policy.
13. Consider whether you even need private health insurance
Don't forget that Medicare provides a level of health cover for every Australian, so the option to take out private health insurance is entirely up to you.
Of course, there are monetary incentives for taking out health insurance such as avoiding the medicare levy surcharge (for singles with gross annual taxable incomes of $90,000 or more) and the LHC loading, so keep those in mind.
14. Put items ‘on ice’
You can essentially ‘turn off’ items you don’t think you’ll need to be covered for in the immediate future. Doing so may reduce the cost of your premiums, but be mindful that you might need to serve the waiting periods again when you switch them back on.
15. Avoid paying out of pocket expenses
An out of pocket expense, also known as 'the gap', essentially refers to the difference between what you’re charged for medical treatment and what you get back from Medicare or your private health insurance.
Thankfully there are ways to avoid paying the medical gap, but it does involve a bit of research on your part.
One thing you could do is ask your health fund about which healthcare services it has gap cover arrangements with. There should be little to no medical gap cost involved when receiving treatment from these services.
If your health fund doesn’t have an agreement with doctors, you can find a doctor who has an agreement in place with a different fund for whatever procedure you need, and simply switch your policy to that fund. Be mindful though, that there is no waiting period once you’ve made the switch.
Also, there’s a handy website called Healthshare, which allows you to find doctors in your area who perform procedures with either no gap (so no out of pocket expenses) or a known gap (a minimum of $500).
Don’t forget about any sneaky hidden costs either, like the cost of an anesthetist.
16. Shop around and compare your options
You wouldn’t just buy a new TV or a house without doing your research first, so don’t go for the first health insurance policy you see. Do your research and compare policies. With so many comparison websites, there’s really no excuse not to do your research first.
You would probably be surprised by what you find by comparing policies. You may get the same cover for less or more cover for the price you’re currently paying. Policies are always changing, so it pays to keep tabs on what’s happening in the market.
17. Don’t forget about ambulance cover
Unless you live in Queensland or Tasmania, ambulance services are not covered by Medicare, so make sure your health policy includes ambulance cover. Emergency transport can cost up to $2,000, so it’s definitely worth making sure you’re covered for it.
Be sure to check with your health fund as to the level of ambulance cover involved in your policy – some policies define an ’emergency’ differently, while others may or may not cover you for the call-out fee. Find out if your policy covers you if you require just ambulance treatment – and not transportation.
18. Avoid paying the taxman too much
The Medicare Levy Surcharge (MLS) is an additional tax (on top of the standard 2% Medicare levy) which is applicable to some taxpayers (singles earning over $90,000 and families earning over $180,000) who don’t have private hospital cover.
But you can avoid paying the MLS by taking out private hospital cover with an excess of $500 or less for singles, and $1,000 or less for couples and families.
19. Mix and match policies
When you think about taking out health insurance, you probably stick with one provider. But sometimes mixing and matching your policies between two different health providers can give you better value or more coverage.
20. Consider the benefits of family policies
If you have young children, keep in mind that health funds often offer things like no excess costs on children's hospital admissions. Also, many funds allow children to stay on a family policy even while they're at university studying full time.
If you're a single parent, you may be able to get a family policy with cheaper premiums.
Frequently asked questions
1. Why is health insurance so expensive?
The short answer is that the cost of private health insurance continues to rise because health insurers aren’t making enough money. Simply put, there aren’t enough young, healthy people with private health insurance and too many old or sick people, which means private health insurers are paying out lots of claims but aren’t earning enough in premiums to cover this cost.
2. How often do you pay health insurance premiums?
You generally have the option of paying your health insurance premium either weekly, fortnightly, monthly, quarterly, half-yearly or yearly, depending on your provider. Some insurers may give you a discount if you pay your premiums annually in advance.
3. How does excess work on health insurance?
Health insurance excess is designed to keep the costs of your insurance down. Generally, the higher the amount of excess you agree to pay, the lower your health insurance premiums will be. Excess is an amount you’re required to pay towards a hospital claim you make with your insurance policy. You’ll only be required to pay the excess if you’re admitted to hospital as a private patient.
4. How does corporate health insurance work?
Corporate health insurance is essentially just private health insurance paid by your employer. Many health insurers offer corporate policies. There are three different ways that corporate health insurance can be paid for: fully funded (the employer covers the entire cost of the health insurance); partially funded (the expense is shared between the employer and employees); and voluntary (the employer chooses a health fund for their employees who can choose to join and pay for it if they want).
Corporate health insurance can include the same policies as regular health insurance policies, such as hospital insurance, extras insurance, and combined hospital and extras.
Savings.com.au’s two cents
When it comes to saving money on your private health insurance, it pays to shop around and compare policies to make sure you’re getting the best deal.
But keep in mind that the cheapest policy isn’t necessarily the best – in fact, often it isn’t. There’s more to choosing a health insurance policy than simply picking the cheapest one. You want one that offers all the features you need at the best possible price.