Time for a change of fund?
Every year on 1 April, health insurance premiums go up. This is always a good time to check that the amount you're paying for health cover is justified by what you're getting in return. This year, health insurance reform may mean changes to your cover. Check our guide on how to read the letter from your fund to find out how your policy might be changing.
Higher premiums aren't the only source of pain. Australians who earn more than $90,000 (single) or $180,000 (couple/family) aren't eligible for the full 25.1% private health insurance rebate. And, since those income levels won't be indexed, this will hit more and more people.
Fortunately, we've identified some steps you can take to cut your health insurance premium back to a reasonable level.
Why do you have health insurance?
Before you review your cover, go back to the basics and ask yourself why you have health insurance. If you need to understand more of the basics about health insurance, check out our health insurance buying guide and try our quick quiz Do I need health insurance?
Do you have hospital insurance to protect your Lifetime Health Cover (LHC) status so that you don't need to pay a surcharge if you take it up later in life, or perhaps to avoid paying the Medicare levy surcharge (MLS)? Or, are you wanting to be protected just in case you end up in hospital?
If your only reason for having hospital insurance relates to the LHC or MLS, you could take the least expensive hospital cover policy you can find and upgrade later.
But if you want to be protected, you need to check how your policy measures up against others. There may be a product that's better suited to your needs and cheaper than what you have now.
Unlike with hospital cover, government carrots and sticks don't apply to extras cover, so you can cancel it without any impact on your tax or having to pay more if you wish to take it up again later.
Review your health insurance
Health funds provide a fact sheet called the Private Health Information Statement (PHIS) for each policy, which allows you to compare your cover. You can review these at privatehealth.gov.au from 1 April 2019.
Main considerations when switching health insurance
For extras cover, consider the services you use most, such as dental, and check the annual limit per person and per family. Sometimes the family limit is only twice the per-person limit, while with other policies it's four times the per-person limit.
Next, look at the benefit limits for specific services. They're usually a fixed amount. Benefit limits are usually listed as a dollar amount, but occasionally you may see a benefit limit listed as a percentage on the PHIS. This means the fund will give you that percentage of the actual cost of the service (for example, 50% of your dental bills). However, if you see a benefit listed as a percentage in a fund's marketing material it may mean something else, so always go by the PHIS.
Beware of lifetime limits (some funds have them for orthodontics) and combined annual limits for a range of services, such as $400 for physiotherapy, natural therapies and chiropractic. This means that once you've claimed $400 for physiotherapy (for example), you won't receive anything for the other therapies during that 12-month period.
Check for a discount – some funds provide an up to four percent discount for paying by direct debit or by prepaying your annual premium.
Before changing policies, check any waiting periods. For extras cover, they're usually two months for most services, 12 months for major dental and 36 months for hearing aids. Funds often waive the shorter waiting periods and may even waive all waiting periods if you're switching from another fund.
Once you've had hospital cover for 12 months you generally don't need to worry about waiting periods as long as you change to a comparable policy. But if you change to a policy with a lower excess or higher cover, you'll have to serve a waiting period for up to 12 months for the extra services covered or savings.
Some funds have loyalty bonuses that you'll usually lose should you switch to a new fund, though you can always try negotiating with the new fund to maintain the bonus.
Ready to switch?
So you've found a better health policy? Here's how you go about switching health funds.
Switching made easy in seven simple steps
1. Get a detailed quote, including:
- Government rebate
- Lifetime cover rating surcharge
2. Apply for cover
- Ask for cover to start only when old cover is cancelled.
- Clearance certificate
- Itemised claims statement
Make a copy and send to new fund.
4. Cancel old cover
- Cancel direct debit with fund and your bank.
5. Notify new fund to start the cover.
6. Check your bank statement to make sure:
- New cover has started
- Old cover has been cancelled
- There is no overlap