Last Updated: 31/08/2020
In Australia, the cost of providing quality health care continues to rise, largely due to our aging population and improvements to medical treatments and technology. Health insurance funds generally need to increase their private health insurance premiums to keep up with these rising costs. Each year, health funds seek approval from the Federal Government to increase the costs of their individual products.
Normally, the health insurance premium increase takes place on the 1st April every year and were due to rise by an average of 2.92% on 1 April 2020 . However, on the 29th March 2020 health funds announced they were delaying the planned increase for at least six months to relieve financial pressure experienced by many policy holders due to COVID-19.
While the delay was welcome news back in April, unfortunately many funds are planning to now go ahead with their premium increase on October 1st 2020 instead. This ‘out-of-cycle’ premium increase will be an unexpected shock for many policy holders already struggling financially due to reduced income or loss of employment.
At this stage we’re not sure, but funds may increase premiums again next April as per normal. If that does happen, it would mean many customers could see their premium rise twice in six months, rather than once per year. Additionally, funds who decide to defer the October 2020 rate rise are likely to participate in the April 2021 rate rise.
No, some funds (including HBF, AIA ,and TUH) have confirmed they will not be increasing premiums on October 1st 2020. However currently, the majority of health insurance funds are still planning to increase their premiums on October 1st 2020, at least for some of their customers.
Premiums were due to rise by an industry-wide average of 2.92% on 1 April 2020 but given at least a handful of funds are not increasing their premiums on October 1st 2020, that industry-wide percentage is no longer correct. What we do know is that some funds are likely to pass on average increases much higher than the previously reported 2.92% and that on average, health insurance premiums have risen by more than 50% over the past ten years .
It’s important to remember that 2.92% was still an industry-wide average, with some policies set to go up by more than that and others less. That’s why it is so important to find out if your policy is one that could be increasing and by how much. Then take the time to see how it stacks up against other options.
If your fund is still planning to increase premiums on October 1st 2020, you can find out what your fund’s average policy increase is (as per April 2020) . Keep in mind that even within your own fund, this is an average increase across all of the funds’ policies and your individual policy might go up more or less than this fund average amount.
You may have received a notification from your fund back in late March letting you know that the planned April 1st increase was postponed. Either way, if your fund is planning to increase your premium on October 1st 2020, they are required to let you know and tell you exactly how much you will be paying from October 1st 2020.
Keep in mind that most funds no longer advise policy holders of premium changes via letter. These days most communicate via email or simply a notification within your app or online portal. This can be very easy to miss (and too often end up in junk mail) so for some customers the first time they realise their premium has been increased is when they notice a bigger than expected amount has been deducted from their account or credit card.
Make sure you pay attention to any communication you receive from your health fund in the lead up to October 1st and if you aren’t sure, give them a call. If you are notified that your premium is set to increase, this should be your prompt to review your policy to make sure you are still happy with it.
Remember, not all funds are planning to increase premiums on October 1st 2020, and of those policies that are going up, not all will be increasing by the same amount. That’s why it is so important to check if your premium is set to increase, and if so, by exactly how much. Armed with that information, you should take the time to compare your current policy against other options to see whether you may be able to find better value.
If your policy is set to increase, then there isn’t much you can do about it other than switch! You may be able to find a policy offering a similar level of cover for a cheaper price with a different fund. Alternatively, you may be able to find a different policy that offers better value for the same price. Or it may be time to make some changes to your current policy to better suit it to your current health needs and budget, such as removing cover for things you no longer need or increasing your excess.
If you are in a position to do so, pre-paying your annual premium upfront for a full year before October 1 will lock in your current rate for another 12 months.
Also keep in mind that if you are struggling to pay your premiums due to financial pressures related to COVID-19, you may be eligible for hardship support with your current fund. Speak directly to your fund about what help may be available.
Many Aussies are under increased financial pressure right now so it is understandable that many policy holders may be questioning the value of private health insurance, particularly in light of the recent restrictions on elective surgeries and extras services. However, given elective surgery waiting lists in some public hospitals could blow out due to the coronavirus backlog, the peace of mind private cover provides could be more valuable than ever.
If you are struggling to justify the cost of private cover, look to switch before you ditch. It is important to remember that if you cancel your hospital cover entirely and then want to re-join down the track, you will have to re-serve waiting periods and, depending on your age, may be stung with higher premiums due to Lifetime Health Cover (LHC) loading.
Rather than simply cancelling, first explore whether there may be a more affordable option available through either switching to a different fund or making changes to your policy. You could decide to increase your excess, drop your extras or even temporarily downgrade your level of hospital cover to keep costs down. Just make sure you are fully aware of what you are no longer covered for so you aren’t caught out should you need to make a claim.
Every dollar counts at the moment! And switching is generally a lot easier than many people realise. That’s where iSelect can help. In one simple phone call, iSelect’s trained health insurance consultants can help you compare your current policy against other options from our range of providers to see if you could get better value. If you do decide to switch, they can take care of the whole process, saving you time, effort and hopefully money!
Switching health funds can be well worth it, with a recent survey of iSelect health customers finding that 67% of customers who switched through iSelect told us they were paying less for their health insurance. Of those, 78% said they were saving a $100 a more on their premiums, with 43% saving more than $300 year ! That’s time well spent!
 Source: February 2020 survey of just over a 1000 (1103) customers who recently switched private health insurance policies and/or providers through iSelect.
A lot of people are put off switching because they mistakenly assume they will have to re-serve hospital benefit waiting periods. The good news is that simply isn’t true. Any hospital waiting periods you’ve already served will be protected by law as long as you switch to a lower or equal level of cover.
If your policy covers psychology and physiotherapy, you will now be covered for these telehealth services from March 30.