Coronavirus Australia: What virus means for health insurance premiums

Health funds were set to increase their prices tomorrow – but many have put those plans on hold as the coronavirus crisis rages on.

Major private health funds have frozen their annual price increases, which were set to kick in tomorrow as a result of the coronavirus crisis.

So far, Australia’s five biggest health funds – Medibank, NIB, Bupa, HCF and HBF – have announced they will not be passing on their annual April 1 premium increases.

But consumer advocacy group Choice argues more needs to be done to protect Aussies suffering under the economic fallout caused by the virus, and has called for the Lifetime Health Cover Loading to be suspended.

The organisation said the Federal Government should add an extra 365 days to the bank of permitted days without hospital cover, saving people who drop their private health insurance this year from being punished financially in the future.

Lifetime Health Cover loading is a penalty that adds 2 per cent to future premiums for every financial year you don’t take out hospital cover, once you turn 31.

The loading, which has an upper limit of 70 per cent, only applies for 10 years if you do ultimately take out health insurance.

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“These changes to Lifetime Health Cover loading rules would mean people wouldn’t have to pay more for private health insurance in the future because they can’t afford it now and have to drop out of the market,” Choice health expert Dean Price said.

“Financial penalties for not taking on private health cover must be suspended while Australians focus on securing the basics for their families. The Australian Government has a chance to provide further financial relief to the community.

“The Government should quickly change the Lifetime Health Cover loading rules, ensuring that people’s financial decisions made at the height of this crisis doesn’t punish them down the track.”

He said the Lifetime Health Cover Loading had always been used as a “scare tactic” by the industry, and that Aussies needed to know they would not be penalised for not having cover right now.

“The pressures placed on the health system by the current crisis emphasise the need for whole-of-sector reform. Once the crisis is over, the industry needs a thorough, independent and public review. People are demanding better of their health system and private health insurance is well overdue for a thorough review,” Mr Price said, although he praised the decision to defer price rises.

Meanwhile, data from comparison site finder.com.au has revealed only 53 per cent of Australians think they’re getting good value for money when it comes to health insurance, while 21 per cent think they’re not and 26 per cent remain unsure.

The research found when it came to household bill stress, health insurance was the fourth most stressful bill behind home loans and rent, energy and groceries.

Australia’s biggest health funds have frozen their scheduled price hikes. Picture: iStock

Finder health insurance specialist Sophie Walsh said it was important for health funds to do whatever they could to encourage Australians to keep their policies, as “the less people in the system, the more expensive it will be for those who stay”.

“It’s unclear at this stage if this will be enough to stop Australians ditching their health insurance policies, especially with so many people losing their main source of income,” she said.

“However, before Aussies ditch their cover they should take a moment to see if it’ll cost them when it comes to tax time as they may be hit by the Medicare Levy Surcharge.

“Also if for those who plan on taking out cover again in the future you will likely need to reserve waiting periods and you may even be hit with a loading penalty if you’re over 31 – so think twice before you cancel your policy.”