Introduction
If you have – or have been thinking about getting – private health insurance, there are a number of things that can influence the premiums you pay. While some factors like government incentives or your chosen level of cover are straightforward, others, such as your location or family circumstances, might surprise you.
Before diving into a new policy or switching providers, it pays to take some time to really wrap your head around how much your health insurance is going to cost. Here are 10 things that can influence your premiums.
1. Your age and Lifetime Health Cover (LHC) loading
The Australian government’s Lifetime Health Cover (LHC) loading is in place to incentivise people to take out hospital cover earlier in life. Here’s how it works:
- If you don’t get private hospital insurance by July 1 following your 31st birthday, you’ll pay a 2% loading on your premium for every year you delay.
- Let’s say you take out hospital cover at 40. Your premiums will include a 20% loading.
- The loading maxes out at 70% and is removed after you hold continuous cover for 10 years.
The good news is that the LHC loading doesn’t apply to extras cover. This means if you’re looking to save on premiums while still getting health insurance benefits, you can start with an extras-only policy.
Bottom line? If you’re under 31, taking out hospital cover now can help you steer clear of hefty financial penalties later in life.
2. Your income and government rebates
Your taxable income will play a part in the cost of your health insurance thanks to the Medicare Levy Surcharge (MLS), as well as government rebates.
Medicare levy surcharge
If you earn over $97,000 as a single or $194,000 as a family and you don’t have private hospital insurance, you’ll pay a surcharge of between 1% to 1.5% of your income. So for someone earning $120,000 annually without hospital cover, you could pay around $1,500 in MLS.
Private health insurance rebate
The government has a rebate on private health insurance premiums, with rates ranging from 8.202% to 32.812% depending on your age and income. Higher earners get smaller rebates, while lower earners benefit more. For a family earning less than $90,000 annually, the rebate could mean big savings and even make private health insurance a more affordable option.
3. Your chosen level of cover
Private health insurance policies come in different tiers: Basic, Bronze, Silver and Gold. There are also ‘Plus’ offerings that some providers sell.
Basic and Bronze policies are the cheaper options and they come with only limited coverage. This means treatments like joint replacements and heart surgeries will be excluded. They’re great for young, healthy individuals who want to avoid the MLS, but don’t count on them to do much if you have serious or ongoing medical needs.
That’s where Silver and Gold stand out. As much more comprehensive plans, they cover a wider range of treatments (but are also saddled with higher premiums). They’re more suitable for couples who want to start having kids, families and older individuals who have specific medical conditions.
4. Whether you choose hospital cover, extras or combined policies
- Hospital cover: Pays for treatments as a private patient in public or private hospitals.
- Extras cover: Covers out-of-hospital services like dental, optical, physiotherapy, chiropractic and more.
- Combined cover: Includes both hospital and extras cover in one policy. While more convenient, combined policies are more expensive – especially if you don’t regularly use the extras services.
5. Your family circumstances and type of policy
Who you include on your policy can also impact your premiums:
- Singles policy: Covers one person and is usually the cheapest option.
- Couples policy: Covers two adults and averages the cost of age-based discounts or LHC loading between both people. It can be a cost-effective option for partners with similar healthcare needs.
- Family policy: Includes cover for kids at a slightly higher cost than just a couples’ policy. Some family policies also include no-gap extras or free cover for kids.
- Single-parent policy: Covers one adult and dependent children. It’s generally more expensive than a singles policy but less than a family policy, so it’s great for single-parent households.
As your life circumstances change – like having children, getting older or transitioning to single living – it’s important that you keep your policy updated to make sure you’re not overpaying for unnecessary services or missing out on any benefits.
Portability
Don’t re-serve waiting periods when you switch to a new health fund or policy
“John was immediately covered for a hip replacement in private hospital because he had already served his waiting periods for joint replacements on his old policy”
6. Your location
Factors like the availability of private hospitals and healthcare costs in your state or territory will play a role. States with more private hospitals and facilities, for example, could have higher premiums because of the broader accessibility of private healthcare.
Rural and regional parts of the country tend to be more lacking in private healthcare, which could affect the value you get from your policy. If you live in one of these areas, you might benefit more from the public healthcare system.
Then there’s the fact that premiums can vary even within states/territories due to regional healthcare demands. If you’re relocating, check whether your current policy will be as cost-effective in your new area.
7. Your chosen excess and co-payments
Excess is the amount you agree to pay upfront whenever you need hospital treatment. Going for a higher excess can lower your premiums, but you’ll face higher out-of-pocket costs when claiming.
A hospital policy with a $750 excess, for example, might cost less monthly than one with a $250 excess. But couples and families can usually share the excess to reduce the individual burden. Similarly, co-payments – daily fees for hospital stays – are something you might need to think about.
8. Annual premium increases
Private health insurance premiums tend to go up at least once a year in Australia, usually on 1 April. While it’s never nice to see your bills go up, the annual rate hike helps insurers keep up with:
- Rising healthcare costs
- Increased claims from members
- New advances in medical technology and treatments
Premiums increased by an average of 4.4% annually over the past decade, but the actual rise will depend on your insurer and the type of policy you have. Paying your premiums every year before 1 April can lock in the current rate and save you from the hike. It’s also a good idea to regularly compare your policy against competitors so you know you’re always on top of rate changes and can find better value if you need to.
9. Waiting periods and pre-existing conditions
When you first take out health insurance or switch policies, waiting periods will usually apply before you can claim benefits. In most cases, it’s 12 months for pre-existing conditions and pregnancy-related services, and two months for most other services.
While waiting periods don’t directly influence the cost of your premiums, they will determine when you can access said benefits. That’s why they’re an important consideration when choosing a policy.
10. How regularly you review your policy
Too many Australians stick with the same health insurance policy for years, whether out of loyalty or simply laziness. The problem is that you can fall into the trap of paying the ‘lazy tax’ – in other words, failing to review your policy usually means you’re paying more than you need to. So take some time every year to compare your health insurance options and make sure you’re not being taken for a ride.
Conclusion
Ready to take control of the cost of your premiums and find a policy that matches your family, your lifestyle and your healthcare needs? Speak to the team at Fair Health Care Alliance today so we can match you to the most appropriate private health insurance.
