Each year, private health insurers apply individually to the Health Minister to increase their premiums. Premiums usually rise by an average of 5% to 6% each year1, though individual funds can have a higher or lower rise than the industry average.
As with any household expense, most consumers are keen to find out how to save more. With dozens2 of registered health funds in Australia, you do have options when it comes to saving more on private health insurance for you and your family.
Understanding premium rises
Other than to keep up with inflation, health insurers raise their premiums for various reasons such as administration and medical costs. Contributing factors3 can include medical staff salaries that increase the costs of getting medical treatment, doctor’s charges, and changes in the costs of equipment and technology, and new, more complex procedures becoming available. The fund’s own operating costs and profits can also have an impact.
Australian private health insurance funds are allowed to apply for an increase on an annual basis, and these increases are monitored4 by the Health Minister. The increases are usually applied each April after the Minister grants approval. Sometimes the Minister can ask for more information5 from the insurers about why they’re increasing their premiums, but generally approval is granted.
Historically, premiums increased by an average of almost 40%6 in the five years between 2010 and 2015. As such, consumers will want to make sure they’re not paying more than they have to.
The rate rise for 2016 is an industry weighted average of 5.59%, with the lowest increase being 3.76% and the highest increase being 8.95%.2
How to avoid premium rises
There are two main ways you can avoid paying the private health insurance premium rise each year. The first one is to lock in the current premium rate by paying annually, and the second option is to compare plans and switch to another insurer that offers a more competitive rate.
We look at these options in more detail below.
1. Lock in your current premium
If your insurer has already announced that they’ll be increasing rates for the coming year, you have options other than cancelling your insurance. One way to avoid premium rises is by paying the full 12 months’ of premiums in advance before the increases each year in April. This way, you’ll end up paying less for the next 12 month. Some funds will offer a small discount, such as a few cents per dollar, if you pay your premiums as an annual lump sum.
If you decide to lock in your current premium, make sure you contact your insurer well before the rise (which usually occurs in April) and have the payment processed before the new rate comes into effect. Once you’ve done this, while your fund can still make changes to your policy and coverage, you won’t have to pay the 6% or more increase on your premiums, for the next 12 months.
Note that if you’re setting up a new policy on or after 1st April, you won’t be able to lock in the rate. Your policy should have started before that date and you need to have the payment processed by the bank before that date each year.
2. Change insurer and/or policy
You can also look around and switch to a better policy or insurer to avoid a big hike on your premiums. Whether it’s removing extra coverage that you’re unlikely to need, increasing your excess, or finding another insurer, a little bit of research could help you save more.
Downsize your policy
Use an online comparison tool7 to find out more about different health insurance premiums, and compare different policy levels to see if you can save more by eliminating the types of coverage you’re less likely to need. For example, if you’re not going to be welcoming a child into your family this year, you can consider removing birth-related services from your cover, which can help you save a considerable amount on premiums.
Increase your excess
The excess (or co-payment) is another way to pay less on your premiums. By increasing the excess, you will end up paying more out of pocket if you need to make a claim. However, if you think you’re unlikely to make a claim, opting for a higher excess can let you save more.
Find another insurer
It could be a good idea to switch to another insurer. In 2016, even though the average is 5.59%, premium hikes8 on an individual basis range from 3.76% to 8.95%. If you can find a suitable policy by an insurer with a relatively low hike and lock in that rate for the next 12 months, you’ve probably saved as much as you can on health insurance costs.
Hospital and extras from different providers
Your hospital and extras cover can be from two different insurers, and you can pick and combine separate hospital and extras packages to suit your unique requirements and save more in the process. For example, while you might be happy with your hospital premium level with your current insurer, another insurer could offer a more competitive premium on the same coverage for extras.
This is general information only and does not take into
account your personal objectives, financial situation or needs. You should
consider the relevant PDS available on this website prior to purchasing any
product. Choosi offers insurance products from a range of brands but does not
compare all products available in the market.