Time to read : 5 Minutes
If there’s one thing most of us won’t be able to escape, is the rise in health insurance premiums come 1 April this year. For many Aussies, the annual health insurance price increase is a bitter pill to swallow…
We know it’s coming.
It’s going to hurt our back pocket.
And shopping around is the best way forward.
But when comparing health insurance options, there are some “junk” policies you should know about and avoid.
While everyone’s situation is different, being aware of junk policies could help you make better decisions about your health insurance. Let’s look at the two types of junk policies: one’s at the bottom tier, and the other’s at the top. But first…
What exactly is a junk health insurance policy?
A junk policy is one that either provides very little value for money… or one that gives you much more than what you may need for your life stage.
Either way, you’re paying good money on a health insurance policy that’s not giving you the right cover or the best value for money.
Here are the two junk policies to watch out for.
Junk policy 1: Basic hospital cover
This policy is quite often pitched at younger Aussies or those who are taking up health insurance for the first time.
This is the most affordable entry-point for health insurance, and signing up to this policy should mean you avoid the Medicare Levy Surcharge (MLS) or Lifetime Health Cover (LHC) loading – assuming you take out cover before you turn 31. But as far as what it actually covers you for, it won’t give you much bang for your buck.
Basic hospital cover usually only covers ambulance and hospital emergency with three clinical options:
Rehabilitation
Hospital psychiatric services
Palliative care.
Note: there is restrictive access for the clinical options so if you have treatment in a private hospital you’re likely to have out of pocket expenses.
For just a little bit more coin, you can go to the next tier: Bronze hospital cover. This will give you a larger pool of clinical categories – everything you get in Basic and approximately 18 more. And it includes common hospital treatments such as:
Eye
Ear, nose and throat
Chemotherapy for cancer treatment.
Check the full list of the Bronze tier clinical categories.
Be aware: it can be tempting to “trade down” to Basic if you’re looking to save money by keeping your health insurance, but it’s not good value for money. Take time to compare Bronze or Basic Plus options before you switch – or better still, get one of our health insurance experts to do the hard work for you.
Are you on the right health cover?
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About the Medicare Levy Surcharge
The federal government introduced this charge to encourage people on higher incomes to use private hospitals and reduce the pressure on the public hospital system. The surcharge amount depends on your taxable income. It’s currently $97,000 for a single person or $194,000 for a couple.
To avoid MLS you need to have the right health insurance cover for the whole tax year.
About Lifetime Health Cover loading
From the age of 31, for every year you’re without hospital cover, a 2% loading fee is accrued. This all adds up, and eventually – when you do take up hospital cover – the accrued fee is added to your hospital premium.
To avoid LHC loading, once you turn 31 you need to take out hospital cover by 1 July.
Junk policy 2: Gold hospital cover
At the other end of the health insurance polices is the top tier Gold hospital cover. Aussies on Gold are covered for everything. Sounds good? Not necessarily, as it’s unlikely that you’ll need everything.
Let’s look at some examples:
If you’re peri-menopausal or menopausal, what are the chances you’ll need pregnancy and birth options?
If your weight has always been in a healthy range, will you really be needing weight loss surgery?
If you’re not over 65, do you think you’ll need a joint replacement or two?
The point is the clinical categories for Gold hospital cover lots of treatments and services you may never need – so why pay for them? Remember the Gold tier is the most expensive so you’re likely to be paying top dollar for services you won’t use.
Important: remember that while you may not need services like joint replacements now it’s worth reviewing your cover if you think this may be a problem in the future, so you can get ahead of waiting periods.
Top tip: Silver Plus which is between Gold and Silver may be a better option if top cover is important to you. Silver Plus covers select services and procedures included in Gold but tends to be designed for specific life stages.
For example, some will have joint replacements but not pregnancy, while many insurers have Silver Plus policies specifically for young couples looking to start a family.
Before changing from a Gold hospital cover, weigh up the differences between Silver and Silver Plus. If you need help, talk to our experts to find the best value cover.
Saving tip: to make big savings on the 2025 premium increase, ask about paying your health insurance as an annual fee. If you can afford to pay your health insurance upfront for the year – before the 1 April increase comes in – you’ll avoid the price rise.
Paying too much?
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Finding the right health insurance can give you peace of mind and could save you serious money in the long term.
If you haven’t reviewed your policy in a while, now’s a good time to check if your policy is the best one for your life stage. Keep in mind the junk policies – the ones that offer very little value or much more than you’re likely to need.
Health insurance can be confusing, so if you’d like to talk to someone about finding the right policy and comparing providers, our experts can make switching easy for you. And if you’re already on the best cover, that’s peace of mind for you.
Go deeper:
Should you pause health insurance when going overseas for a long trip?
Insider’s guide: how to get the most value back from your health insurance extras
Disclaimer
Any health or financial advice is general in nature and does not take into consideration your circumstances. Always check with a financial or health professional before making any decisions.
