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Should you keep or drop your health insurance during the COVID-19 crisis?

As most funds delayed their yearly premium hike, we look at more options to save.

Last updated: 31 March 2020

Need to know

  • The majority of health funds are delaying their premium increase until at least 1 October
  • Non-urgent elective surgery has been cancelled and extras services will be impacted by social distancing measures
  • Health insurance isn't needed for COVID-19 - so would you be better off dropping it? 

In response to the coronavirus crisis, most private health insurance funds, including Medibank, Bupa, HBF, HCF and NIB, didn't increase health insurance premiums on 1 April this year. Most have delayed the increases until at least 1 October 2020, while HBF has cancelled theirs. 

How to save on health insurance

1. Downgrade your hospital cover

Unless you're pregnant or need to go to hospital for urgent surgery, consider downgrading your hospital cover. That's because:

  • non-urgent elective surgeries like cataract operations or hip replacements have been cancelled by the government
  • the usual benefits of private health insurance like shorter waiting lists for elective surgery, choosing your own doctor and accommodation in a private room will be increasingly harder to come by
  • private hospital insurance isn't needed to cover treatment for COVID-19. Testing for the virus and treatments are covered by Medicare and free for Australians and some others.

Compare health insurance with us to find the right level of cover.

Remember: If you downgrade your hospital cover now you may have to re-serve some waiting periods. You could re-serve waiting periods of up to 12 months for pregnancy, for example, or 2 months for heart surgery if you drop to a lower level of cover that excludes these.

2. Drop extras cover

If you're currently paying for extras cover, think hard about the fact that you won't be able to use many of your extras benefits due to necessary social distancing to avoid infection with COVID-19.

Some funds now cover some extras services like psychology and physiotherapy provided over the phone or online (telehealth). But many dentists are already cancelling check-ups, and chiropractic sessions and other extras services will also be impacted by social distancing measures.

Remember: If you drop your extras cover and want to take it up later again, the waiting period for most services is usually two to six months. It can be higher, including 12 months for major dental work and orthodontics, and several years for services like hearing aids.

3. Look into financial hardship measures

Waive your premiums

If you're experiencing financial hardship because you've lost your job, for example, contact your fund and ask them to waive your premiums for a period. During this time, you'll remain covered under your policy.

Suspend your policy

Some funds will allow you to suspend your policy during hardship. You won't be covered while your health insurance is suspended, but you can usually take up your cover again without having to serve waiting periods.

Drop your cover temporarily

If your insurer doesn't let you waive your premiums or suspend your policy, you can drop your hospital insurance for up to 1094 days (three years minus one day) in your lifetime without your Lifetime Health Cover loading being affected. 

You just need to think about whether this is the time you want to use this break.

Remember: If you drop your hospital cover you'll have to re-serve waiting periods if you take it up again. Waiting periods are up to 12 months for pre-existing conditions and pregnancy.

Financial reasons to keep your private health insurance

If you earn more than $90,000 (single) or $180,000 (family, couple) you'll want to hold on to your hospital cover.  Dropping or suspending private hospital insurance will mean you pay extra tax. Consider downgrading to a cheaper, lower cover policy instead: compare health insurance here.

You can still think about dropping your extras cover though: extras insurance isn't needed to avoid the Lifetime Health Cover loading or to avoid extra tax, so there's no financial advantage in keeping it.

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