What can you do about Health Insurance Going up?
The following is contributed by By Laura Crowden, iSelect spokeswoman who has provided a few sponsored articles for us on the topic of health insurance as it is something we are asked about a bit but don’t have the knowledge.
No one likes a price increase at the best of times. But right now, with many Aussies struggling financially due to COVID-19, a price increase is really the last thing anyone needs. But for many private health insurance policy holders, an out-of-cycle premium increase is just around the corner.
We’re all pretty used to private health insurance premiums creeping up every year but in a normal year, they go up on 1st April. But as we all know by now, 2020 is anything but normal. A few days before premiums were due to rise by an average of 2.92% on April 1st, the scheduled increase was postponed for at least six months to help reduce financial pressure on policy holders due to COVID-19. But that six months grace period is now almost up, and many private health funds are planning to push ahead with the delayed increase on October 1st, 2020.
If you have experienced reduced income or lost employment over the last few months, then you definitely won’t want to be paying even a dollar more than you need to for private health insurance. And even if you are someone who has been lucky enough to remain financially unscathed by COVID-19, the ongoing financial uncertainty during a recession means now is a really good time to make sure you are still getting value for money on your private cover.
So ahead of the October 1st deadline, here is what you need to know to help ensure you aren’t stung with a higher than expected premium next month.
Not all funds are Increasing Premiums on October 1st
You might notice I said ‘many’ funds are planning on increasing premiums. That means that not all of them are, which is why it’s really important to take the time to find out if your policy is due to increase from October, and if so, by how much.
Some health funds, including HBF, AIA, Health.com.au and TUH – won’t be increasing premiums on October 1st, while other funds – such as Bupa and NIB – have announced they will waive the increase for any current customers on JobKeeper or JobSeeker.
Among the many funds who are increasing premiums from October 1st, the actual increase amount varies between funds and even between policies. If your fund is planning on increasing your premium, they should contact you in advance to let you know how much more you’ll be paying from October. But don’t expect to receive a letter in the mail clearly explaining the price increase. Most funds now communicate with members electronically and not only can this be easier to miss, but the level of communication varies between funds with some sending detailed emails while others simply notify you via your online portal or mobile app.
Carefully Consider the Implications of Cancelling
Many Aussies – even those who haven’t experienced an income reduction – are looking for ways to cut back on expenses and boost the household budget. And it’s perfectly understandable that many private health insurance holders will be looking closely at their policy and questioning its value, especially given the recent restrictions on elective surgeries and on using your extras during COVID-19.
If you have been considering cancelling, make sure you carefully weigh up the pros and cons. With elective surgery, public wait times are expected to increase due to the COVID-19 backlog. The greater choice hospital cover can provide is arguably even more valuable. If you are a higher income earner (taxable income over $180,000 for couples) then you’re likely to pay additional tax via the Medicare Levy Surcharge (MLS) if you drop your hospital cover. And keep in mind that if you do decide to take out private cover again in the future, depending on your age you may be stung with higher premiums due to Lifetime Health Cover (LHC) loading, as well as having to re-serve waiting periods.
Rather than being a reason to drop your cover altogether, this out-of-cycle premium rise should instead be a prompt to take a close look at your cover and see how your fund stacks up compared to others.
Look to see if you can Switch and Save
If you suspect you may no longer be getting good value on your private cover, then now is the time to shop around and check out your options. There can be as much as $1500 a year difference between some gold level family policies, and up to $700 a year between some silver family policies. Saving money doesn’t necessarily mean sacrificing your level of cover. Almost half (47%) of customers surveyed who recently switched health insurance through iSelect told us they are getting the same or better value for a lower price.  If switching funds means paying less for a similar level of cover, then that’s time well spent!
Of course, there are times when it is perfectly appropriate to make changes to your level of level of cover and this can make a significant difference to how much you pay. If your life stage or health needs have changed, then it’s important to check you aren’t paying for anything you don’t need (the obvious example is paying for pregnancy cover when you don’t need it, as this can considerably inflate your premium). Equally as important is to make sure you are covered for things you do need. Taking out the cheapest policy purely for tax avoidance reasons could end up costing you more in the long run should you need to make a claim only to find out you aren’t covered.
Remember, Support is Available
Keep in mind that many funds are offering support to those members who are struggling to pay their premiums due to COVID-19. If you fit that description, then reach out to your fund sooner rather than later to find out what hardship support options might be available, such as a premium holiday.
Other options for reducing the financial strain include opting for a higher excess if you think you are unlikely to go into hospital in the near future (increasing to the maximum excess of $1500 can save families up to $350 a year off premiums) or downgrading your level of hospital cover – even just temporarily.
Private health insurance is complicated, and even the most financially savvy of us can be overwhelmed by the sheer number of health funds and policy options available. That’s why it can be well worth giving iSelect a call. Their trained health insurance consultants can compare your current policy to loads of others from their range of providers to see if there is another option better suited to your needs and budget in 2020 and beyond. Then come October 1st, you’ll have the smug satisfaction that comes from knowing that you’ve already got your health insurance sorted.
Disclaimer: iSelect does not compare all providers or policies in the market and not all policies or special offers are available at all times, through all channels or in all areas. Not all policies available from our providers are compared by iSelect and due to commercial arrangements and customer circumstances, not all policies compared by iSelect are available to all customers. View our full range of providers via our website: https://www.iselect.com.au/partners/
 Source: Based on NSW policy costs provided by Privatehealth.gov.au in June 2020. Policy costs are unrebated, with no government rebate, LHC loading or other discounts applied.
 Source: February 2020 survey of just over a 1000 (1103) customers who recently switched private health insurance policies and/or providers through iSelect