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Reducing health insurance pain:

How to take the pain out of the April 1 price hike.
By Motherpedia
Date: March 31 2014
Editor Rating:

With health insurance premiums expected to rise by 6.2% from April 1, consumer group CHOICE is urging people to review their health insurance and consider ways to offset the premium rise. 

The price rise follows a 5.6% premium hike last year and reduced rebates for high-income earners, which came into effect on 1 July 2012.

In the 2013-14 financial year Australians who earn more than $88,000 (single) or $176,000 (couple/family) are ineligible for the full 30% Private Health Insurance Rebate.

“Unfortunately many consumers are feeling the pinch when it comes to private health insurance, with many downgrading their level of cover to accommodate increased premiums,” says CHOICE Head of Media, Tom Godfrey.

“There are two types of health insurance, hospital and extras, and by understanding which type of cover is right for you and your family’s circumstances, you could end up better off.” 

“Extras insurance can be good to have if you require a lot of dental or orthodontic work or high priced items such as hearing aids. Typically, families and people aged 55 to 74 benefit the most from extras insurance.” 

“However, one way to reduce your premium is to cancel your extras cover if you don’t require a lot of dental, optical, physio, chiropractic and other extras services. If you are not going to use these services it doesn’t make a lot of sense to take out extras cover.” 

“It’s also worth considering that extras insurance rarely covers the full cost of your treatment. On average, health insurers pay about half the cost for dental and optical services, a third for medicines not covered by the Pharmaceutical Benefits Scheme, and only a quarter for hearing aids.”

“There are wide variations between funds and policies, too. For example, the most generous insurer for dental refunded 60% on average in 2011/12, while the most miserly covered just 32%.” 

When weighing up whether you need hospital insurance, CHOICE advises consumers to consider:  

  • If you earn less than $88k, the only financial incentive for taking out hospital cover is that you will have to pay the Lifetime Health Cover (LHC) loading if you take out hospital cover in future.
  • The public hospital system serves people who require emergency surgery well.
  • For more complex and expensive medical conditions, you'll end up in a public hospital regardless of whether you have private hospital insurance or not, because public hospitals have the equipment.
  • But, if you need elective surgery, such as cataract eye surgery or a hip replacements, private hospital insurance can be a good idea because it allows you to jump the waiting list, choose your own doctor and get treatment in a private hospital, which can be more comfortable. 
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