Time to read : 6 Minutes
It’s the increase that we’re all dreading – health insurance premiums going up in April. And with health funds asking for an average increase of 6%, this year’s rise has the potential to be one of the biggest yet.
So what can you do about the health insurance price hike?
Well you have two options:
ditch your health insurance
or
switch your policy.
And for whatever reason you don’t do either of these: you’re accepting the increase.
Should you ditch your health insurance?
Cancelling your health insurance is one way to make considerable savings in the short-term but it can be easily negated if you have an accident or develop a (costly) health condition.
There’s an infinite number of possibilities but here’s one example. If you needed emergency dental work which resulted in requiring a crown, you could unexpectedly be faced with a range of fees for services including:
an Xray
root canal therapy
anesthetic
creation of the crown.
Without the right type of health insurance, your out-of-pocket medical expenses would rack up. And these costs could very well exceed what you’d pay in health insurance premiums.
Cancelling your health insurance may also mean you risk getting hit with taxes like the Medicare Levy Surcharge (MLS) and Lifetime Health Cover loading (LHC).
The Australian government charges high income earners MLS when private health insurance is not taken up. The surcharge is designed to encourage Aussies on higher incomes to sign up to private health insurance and help reduce the strain on the public hospital system.
The surcharge is determined by the income earned annually – it’s currently $97,000 for singles or $194,000 for couples. And the more you earn, the more you’ll have to pay if you don’t have the appropriate hospital cover.
Note: to avoid MLS, you’ll need to hold the right level of hospital cover for the full tax year.
Be aware: the income bands often change each financial year.
And then there’s Lifetime Health Cover loading. Designed by the government, it penalises Aussies who have not taken up health insurance by their 31st birthday.
The way it works, a progressive surcharge of 2% is accrued for each year you’re without health insurance, starting from July 1 after you turn 31. The surcharge relates to the hospital component and can reach up to 70%. So the longer you’re without the cover, the more it will cost you.
If you ditch, what happens to future waiting periods?
This could be another disadvantage of ditching your health insurance. Any extras you previously served a waiting period for will need to be re-served. And waiting periods can be anywhere from two months or up to 12 months for pre-existing conditions, pregnancy or birth-related services – to name a few.
Tip: many Aussies don’t realise that when switching to an equivalent or lower cover, any waiting periods already served don’t need to be re-served. Think of it as not being penalised for changing a better value policy.
I don’t want to cancel my health insurance but I’m heading overseas and won’t use it?
If you’re heading abroad for a long time, most health insurers will allow you to pause your cover for a set period of time, so you don’t get hit with new waiting periods or be affected by the LHC loading when you return.
Another benefit of pausing a health insurance policy is that waiting periods that you’ve already served will not reset when you resume your policy.
Tip: if doable, it’s a good idea to complete any waiting periods before heading abroad so if you happen to need any urgent services when you return, you won’t need to complete the waiting period when you reactivate your policy.
Like most things, there are rules and eligibility criteria for pausing health insurance. Most funds will require you to have held a policy for at least 12 months. Learn more about pausing your health insurance for a long overseas trip.
Now that we’ve covered ditching and pausing health insurance, let’s look at switching.
Why switching health insurance saves dollars, makes sense
Life never stands still and while a family history may give you an idea of what could happen down the track health-wise, you can never really know for sure. The point being, having private health insurance can give you peace of mind.
But with premiums – which are already making a dent in your cash flow – about to go up, it’s a good time to take a look at your policy and switch to one that provides better value for money.
Are you paying the loyalty tax?
Our health insurance experts talk to Aussies everyday who have been on the same cover since day dot. And that means they are paying for extras they don’t need… but at the same time, are not getting the cover that’s right for their life stage.
You may have heard the saying: if it ain't broke don’t fix it. Well this couldn’t be further from the truth for health insurance. We call this the ‘loyalty tax’ and it’s the price you could be paying by staying on the same policy – when in reality it’s not the best option for you or your family.
Here’s an eye opener: our data shows families who switch to better-value policies can save an average of $462* a year. So if your policy is getting a tad dusty from rolling over year after year, it’s probably time to switch and stop paying the loyalty tax, and start saving.
Paying too much?
Australia: We saved our average customer $300* on their average annual premium! Select your age below and see how much you could save!
Just me
Me and my partner
My family
Me and my kid(s)Changing health insurance is painless
The other feedback we often receive is how easy the process is with Compare Club. We handle all the paperwork making the transfer between funds seamless and extremely straightforward.
Our customers are also pleasantly surprised that the cost of the policy through Compare Club is the same as what they would pay via the health fund if they were to go direct. The advantage of doing it through us is that we have the tools to compare policies at a glance, saving you time, as well as money.
And once customers know about the savings, they have an aha moment and realise why it’s important to shop around more regularly.
Add adult children to your health insurance policy
If you have adult children, did you know up to the age of 31 they can go on your health insurance policy?
As long as they’re not married, in a defacto relationship or have their own children, they can stay on your policy. And they don’t need to be living under your roof to qualify.
There is a 25% loading fee which is charged to your premiums, but it’s 25% regardless of how many adult children you have. So the more children you have, the greater the savings. And this fee works out a lot less than if each of the children had their own policies.
Tip: why not divi up the 25% loading fee among the adult children to pay so there’s no extra cost to you?
Are you on the right health cover?
Find out here...
Bottom line
With health insurance premiums going up, should you ditch or switch your health insurance? Or will you wear the costs and do nothing?
It’s an individual decision. You’ll need to weigh up whether the short term savings in cancelling your premiums are worth the risks such as accruing government surcharges or paying hefty out-of-pocket costs for future health care needs.
If you do nothing, you could be paying for health insurance that’s not giving you the right cover but costing you an arm and a leg.
On the other hand, switching to a policy that provides better value for money could help you save on your health insurance premiums – even with hikes on the way – and give you peace of mind at all times.
Go deeper:
About the Medicare Levy Surcharge
About the Lifetime Health Cover loading
* Numbers calculated based on average premiums sold by Compare Club over the past 5 years.
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.
