How to avoid a double whammy to your private health premiums next month

In just over two weeks, there will be yet another hit to the hip pockets of millions of Aussies: private health insurance premiums will go up.

But this year there is a double premium whammy because the rebate you receive for those premiums will also go down. But let’s start with premium increases that will apply from April 1.

Health insurance costs are increasing, but there can be some ways to dodge the hikes.Credit: Getty Images

At the beginning of the year, Labor rejected the health insurance industry’s bid for price hikes of around 6 per cent, a tussle that plays out most years but one crucial for a government facing an election by May. We ended up with approval for a more subdued 3.73 per cent lift.

This is still the highest increase since 2018. It also masks huge variations, with many of Australia’s largest funds all about to pump up their premiums by more – Bupa is lifting by 5.1 per cent, HCF by 4.95 per cent, Medibank by 3.99 per cent and NIB by 5.79 per cent.

Police Health premiums are going up by a mammoth 9.56 per cent, while the lowest increase will be felt by the Health Insurance Fund of Australia. Which brings us to the revision of the rebate.

At the same time each year, this is also checked for premium inflation versus broader prices inflation… to keep health spending sustainable. And in the first case since the pandemic, it will tick down for every private health member.

Many funds let you pay a few more months ahead than just 12, so you can lock in the current lower rates for longer

Don’t have private health and all of this is putting you off further? Then know the income threshold at which you really ought to hold private health because you will pay the Medicare Levy Surcharge penalty if you don’t. This is also rising from April 1 to $101,000 for singles and $202,000 for couples (increasing by $1500 for each dependent child after your first).

The surcharge is up to 1.5 per cent of income (for singles on $151,001-plus and couples on $316,001-plus), so you could instead swap a hefty penalty for private hospital treatment.

Remember, too, that for every year you delay taking out private health insurance you will pay a 2 per cent lifetime loading on top of your premiums, for up to 10 years. Indeed, you could end up paying as much as 70 per cent extra.

But for those wondering how on earth they will cope with even more private health cost, there’s a strategy to sidestep it for at least a year: pay your annual premium before April 1 (check the date your fund would need to receive it for processing).

In fact, many funds let you pay a few more months ahead than just 12, so you can lock in the current lower rates for longer. You may also be offered a discount for doing it. But if that’s just not an option with times so tight right now, look to cut the cost of your cover in one or all of the below ways.

Hack 1: Turn off cover for services and procedures you no longer need. If you are well and truly done with having babies, why pay for obstetrics and reproductive services (just this usually adds $500 a year to your premium – possibly the equivalent of about a month)?

Similarly, if you are young, why would you fork out for hip replacements?

The trouble with tailoring your cover for what you really need is that some insurers don’t let you do it. Instead, they will bundle services and procedures together that cross the age-groups (it’s to get younger, ‘cheaper’ members to cross subsidise the payouts to older and more expensive ones).

However, there are funds that let you choose your cover almost pick-n-mix style. A quick search on the excellent and independent privatehealth.gov.au will show you.

Hack 2: Up your excess. It was several years ago that the government raised the level of the excess that will still exempt you from the Medicare Levy Surcharge. The allowable excess is today $750 for singles and $1500 for families/couples.

Realise that this is not a great financial risk as you will only ever pay a hospital excess once per person per year, and none is payable for kids.

Hack 3: Opt for a co-payment. I need to preface this by saying I am not a huge fan as a long, unfortunate hospital stay could put a big strain on your fortunes. But if you must cut the cost of your cover more, there is the option to commit to a say, $50 co-payment for each night in hospital.

This reduces the insurer’s risk at your expense, so will dial down your premiums more. With April 1 and another escalating expense around the corner, you have no time to lose.

Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.

• Advice given is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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