How to establish if private health cover is right for you
Almost 30,000 Aussies ditched their basic hospital cover over just three months bringing the figure to the lowest level in more than a decade. Here’s how to work out if you should dump your health insurer too.
The number of Aussies covered by basic hospital cover has plunged to its lowest level in more than a decade after almost 30,000 people ditched their policies across three months.
New data released by the Australian Prudential and Regulation Authority (APRA) has backed up reports from the health insurance sector of an ongoing drop off in policy cover.
As at June 30, 44 per cent of Australians had hospital cover. The decline of 0.3 percentage points from the previous year meant coverage had dropped to its lowest level since 2007.
APRA figures also revealed premiums increased almost 2.8 per cent across the June quarter, suprassing inflation and wage growth.
During the June quarter alone 28,539 people shed their hospital cover, led by 7,804 of those aged between 20 and 24 years and 6,338 families. Earlier this week, health insurers NIB warned cost-conscious consumers are weighing up their cover against the backdrop of low economic and wages growthand premium costs rising faster than inflation.
“Premiums continue to rise while household disposable incomes remain static and competition for discretionary consumer spendingremains fierce,” Managing director Mark Fitzgibbon said.
NIB said more needed to be done to curb significant out-of-pocket expenses and a “diminishing value proposition for members”.
It comes after News Corp Australia in June revealed that up to seven in 10 families now face charges of up to $1500 to use their health insurance in a development that is likely to add to pressure on public hospital waiting lists.
Many health fund members are facing increased premiums after they were forced to upgrade their cover when April 1 reforms stripped key procedures like hip and knee replacements and pregnancy from lower levels of insurance.
An analysis of consumer behaviour by health fund broker iSelect found in order to control their annual health fund premiums thousands of health fund members are opting to pay huge new excess fees that were allowed from April 1.
This means when they go to hospital they will have to pay the first $1500 of their bill before the health fund rebate kicks in.
Today, MoneysaverHQ delves into some of the most important charges you need to factor in before ditching your existing cover or signing up for the first time.
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1. HOSPITAL AND EXTRAS
Australians have the choice of signing up to hospital and/or extras cover.
Hospital cover is used when a patient needs to be treated as a private patient in a public or private hospital.
Costs can quickly run into thousands of dollars, so health insurance can help ease the financial burden. Members have to pay an excess if they require a hospital visit and it cannot exceed $750 for singles and $1500 for families.
The number of times you would pay the excess annually depends on the cover and how many hospital visits you make.
The excess is paid directly to the hospital.
Medibank chief customer officer David Koczkar said it was important to assess your financial state and prioritise whether cover is essential.
“What’s your ability to insure yourself?” he said. “That’s linked to your priority to have choice and control of your health and peace of mind.
“Gold, silver, bronze and basic cover makes achieving cover more clear and we have standard categories that allow customers to really understand and compare what they are covered for.”
Insurers have started reclassifying hospital cover into these categories to make insurance easier to understand.
Australians aged between 18 to 29 could be eligible for a discount on hospital cover of 2 per cent per year when they first take out cover, to a maximum of 10 per cent.
Extras cover is used to help reduce the cost of expenses such as dental, optical and physiotherapy.
People with extras will usually have a portion of the claim covered and also be left with some out-of-pocket costs.
2. PICKING YOUR COVER
Working out if you are getting good value from your insurer can be a tough task.
It’s well worth visiting the government website privatehealth.gov.au, which compares every health insurance policy available in Australia. Be mindful that other comparison websites do not include every insurer and every policy.
CUA Health’s product manager, Harmeet Saini, said people should pick up the phone and speak to insurers.
“Insurers may have some niche products that suit some consumers better than full cover,” he said.
“For instance, hospital cover which excludes obstetrics may help save some money.
“Secondly, if you are not anticipating any planned hospital visits you might want to weigh up if you’d be comfortable to increase the excess to your cover to reduce your premium.” Consumers should also remember if they pay for a full year’s cover before the annual health insurance price hikes on April 1 each year, they can avoid the annual premium increase.
This can be a big outlay for many households.
Mr Saini said 90 per cent of CUA Health customers paid their cover fortnightly or monthly.
3. LIFETIME HEALTH COVER LOADING
This is an important consideration for younger Australians because it is a charge designed to get people to take out cover before they turn 31.
From that age, Australians will pay a 2 per cent loading on top of their premium for every year they do not have hospital cover, up to a maximum of 70 per cent.
For instance, if you take out hospital cover for the first time at age 40 your loading on your premium would be 20 per cent more than someone who signed up to it before they turned 31. Mr Koczkar said this meant “you are much better off if you take out private health insurance earlier in your life”.
“Every year after you’re 31 it’s government policy that insurers will charge you a loading increase on top of the normal premium,” he said.
4. MEDICARE LEVY SURCHARGE
This is a levy paid by taxpayers who do not have private health cover and earn above $90,000 annually for singles and $180,000 for families.
H&R Block director of tax communications Mark Chapman said if you did not have hospital cover you might be stung by the surcharge.
“It’s a way of penalising people through the tax system by not taking out private health insurance,” he said.
“The theory is if you are wealthy enough to have private health cover you should do that.” The idea is to drive more people to use the private system and reduce the demand for services on the public health system.
CUA Health’s Mr Saini said going without hospital cover could cost anywhere between $800 and $2100 extra in tax a year.
“It’s best for consumers to shop around to not just receive the tax savings but to find a private hospital cover that provides good cover if you ever need hospital treatment, as well as choice over your medical specialist and hospital,” he said.
Originally published as How to establish if private health cover is right for you