The cost of private health insurance is set to have the lowest growth for
seventeen years in 2018, but the average premium increase will still be twice the rate of inflation.
The Health Minister, Greg Hunt, has confirmed that premiums will increase by 3.95% on average, although some consumers will see price hikes as high as 8.9%.
"Every dollar matters to families, which is why we introduced a
billion-dollar change and reduction in medical costs through better deals
for medical devices and earlier access for families and patients," he says.
Premium changes for all health insurance customers will take effect on 1
Health insurance more expensive in real terms
With a 3.95% increase, the average cost of a single-person top hospital
policy will increase from $2020 to $2100 before the rebate discount. With
couples and family policies typically costing twice as much, a family might
find themselves spending around $158 a year more on hospital cover.
Despite being low by historical standards, this year's premium hike will be
twice the rate of general inflation, raising concerns that private health
insurance is being priced out of the reach of many Australians.
"This latest increase will mean private health insurance customers have
been hit with a 70% cumulative price hike since 2008, forcing many to
downgrade or drop their private health insurance," says CHOICE head of
media Tom Godfrey.
"Notwithstanding the barrage of fear-laden advertising from health insurers
and for-profit switching sites, private cover is unaffordable and often
unnecessary for many consumers."
While premiums have increased by 70% in the last decade, the Consumer Price
Index (CPI) grew only 26%.
Rebate cuts mean consumers pay even more
Compounding the price pressure will be simultaneous cuts to the
government's private health insurance rebate. The rebate amount goes down
if the average premium increase is greater than CPI growth – which it is
every year. The rebate amount for under 65s earning less than $90,000 (or
$180,000 as a couple) is expected to reduce from 25.9% to about 25.4%.
With premium increases at one end and a rebate cut at the other, the cost
of the average policy will actually increase by 4.7%. When the annual cuts
to the rebate are factored in, the real cost of health insurance has grown
82% in the last decade.
CHOICE to Health Minister: Put junk insurance in the bin
Rising insurance costs are driving many consumers to seek out low-cost policies that offer little in the way of actual cover. While most policies cover the majority of treatments and may come with some exclusions, these 'junk' policies do the reverse, covering as few as 10 treatments and excluding everything else. Other junk policies will only treat patients in public hospitals, raising questions about their worth as a 'private' hospital insurance policy.
"Consumers are often unaware that their junk policy excludes the vast majority of treatments until its too late," says Mr Godfrey. "These extremely limited policies do not reduce strain on the public healthcare system. The government should remove the rebate from junk policies which do not provide value to the individuals who purchase them or to the Australian taxpayer who subsidises them."
We believe it's time for the government to force insurers to give clearer information about the policies they sell. "If you're deciding to go private, it pays to be aware of exactly what you're getting in terms of cost, coverage and value for money," says Mr Godfrey. "That's why we are also calling on the federal government to simplify policy information, making it easier for consumers to find a better value policy that meets their needs."
Health insurance saving tips
Consider increasing your excess to reduce your premium.
See if your health fund offers discounts for paying by direct debit.
Ask yourself if you really need
extras cover: if the amount you claim is lower than your premium, consider dropping it.
Check to see if you can join a
restricted membership health fund.
Pay your annual premium in March to put off the April 1 price hike until next year.
- Take the Do I Need Health Insurance? health check to see if there's any tax benefit to paying for hospital cover.
Read our health insurance buying guide for more information, or see our independent health insurance reviews to compare policies.