From the start of April, the fifty per cent of Australians who have private health cover face an increase in their monthly premiums. That makes now the right time to look at ways to trim the cost of health insurance.
Advances in technology are driving significant improvements in health care, but it doesn’t come cheap. Each year private health insurers must seek government permission to raise the cost of health insurance, and from 1 April, premiums will rise by an average of 5.57%.
For families facing higher energy, housing and food bills, the latest round of premium hikes may force a rethink of private health insurance.
The problem is that bailing out of health cover now could mean paying far more if you decided to take up health insurance later on. Fund members are permitted a break of up to three years before being hit by the lifetime health cover loading – an extra 2% on top of the standard premium, if private health insurance is resumed further down the track.
High income earners who discontinue private cover also risk facing the Medicare Levy Surcharge (MLS). This is an additional tax impost on top of the standard 1.5% Medicare levy. It only applies if you don’t have private health insurance – and your annual income exceeds $77,000 (singles rate) or $154,000 for couples (allow an extra $1,500 annually for each dependent child).
The MLS is set at 1% of taxable income, which for many people is likely to be more than you could pay with some basic health insurance policies. This being the case, it’s worth looking at ways to cut the cost of cover before bypassing it altogether.
If you have the cash, it’s possible to avoid the premium hike by paying a year’s worth of premiums in advance before 1 April.
A second alternative is to review your existing cover to check that you’re only paying for services relevant to your needs. You may decide obstetric care is not for you, or that you’re unlikely to need a hip replacement any time soon. Scratching these sort of options from your policy can reduce the monthly premiums.
Increasing the agreed excess or opting to make daily co-payments if you require hospital treatment will also reduce your premiums. Just be sure you could meet the cost if you need to make a claim.
It’s also important to check that your current fund is charging competitive premiums. The government website www.privatehealth.gov.au features an online premium calculator, which shows how much you could expect to pay with a wide range of health funds.
As a guide, basic family hospital cover can cost from around $74 per month with Health Insurance Fund of Australia through to about $232.60 each month with GMHBA. That’s a difference of almost $160 so it’s worth shopping around.
As long as you choose the same level of cover with a different fund, you shouldn’t have to serve another waiting period before being able to make a claim.