Key Takeaways
- Steer clear of policies with unnecessary cover or too few benefits.
- Regularly review and compare your current policy – at least every year before premium hikes.
- Wrap your head around the policy’s exclusions, waiting periods and gap payments.
The worst mistakes to make with your health cover
Health insurance is meant to protect you financially and make sure you always have good access to essential medical care whenever you need it. But far too many Australians inadvertently make mistakes that could cost them thousands of dollars in unnecessary expenses or feel like they’re locked into inadequate cover (when they’re really not).
Here are the five biggest mistakes we see policyholders making with their private health insurance.
1. Going with the cheapest policy without looking at what’s actually covered
This is a big one – and a mistake you would do well to avoid when choosing a health insurance policy. If you think everything should be based purely on price, without fully understanding what’s covered, then think again. While lower premiums might seem attractive at first, it could actually mean you’re not as protected as you think you are.
Cheaper policies tend to have a lot more restrictions and exclusions, meaning they won’t cover vital treatments or services when you need them most. Let’s take Basic hospital cover, for example – typically, this excludes more serious procedures like joint replacements, pregnancy and birth-related services, cardiac surgery and other major operations. If you unexpectedly need these treatments, a Basic policy will leave you dealing with huge out-of-pocket expenses in many cases.
Instead, take the time to really think about your healthcare needs. Consider any future requirements (such as starting a family or managing chronic conditions) you might need or want, and then pick a policy that has enough cover for you at an affordable price. Understanding the inclusions and exclusions upfront is a must.
2. Staying on outdated or closed policies
Another issue is the tendency to stick with the same policy for far too many years without reviewing or updating it. Health insurers will introduce new products every two to three years, matching their policies with current healthcare trends and upping the rebates to match rising medical costs. Older policies, especially those that have been closed or legacy ones that are no longer available to new customers, don’t get the benefit of these updates. As a consequence, their benefits stay stagnant while the premiums continue to go up and up.
Sticking with these outdated policies can greatly erode your value over time. But on the contrary, regularly reviewing and comparing your health insurance means that you will be getting the latest benefits, rebates that reflect actual medical costs, as well as premiums that match your current financial situation.
If you’ve been on your current policy for more than three years without reviewing it, it’s probably time to compare and (most likely) switch to something more suitable for your current needs.
3. Ignoring the importance of extras cover
Too many Australians underestimate or dismiss extras cover as being an unnecessary cost. Maybe you think it’s just an optional luxury rather than a practical necessity. Whatever the case, extras cover can actually be incredibly valuable because it includes non-hospital healthcare services like dental, optical, physiotherapy, chiropractic, podiatry and even mental health services.
The mistake here is either saying ‘no’ to extras cover altogether or taking out a policy that doesn’t really fit with your healthcare needs. Without an appropriate level of extras cover, you might have to deal with lots of unexpected (and expensive) out-of-pocket costs for routine services like trips to the dentist or prescription glasses.
That’s why you need to choose extras cover based on how much you actually require healthcare. Regularly used services – say that’s dental and optical care – might justify a more comprehensive extras package. On the other hand, services you rarely (if ever) use might not require any cover at all, which means you can save a few dollars on premiums. Matching your extras policy to your real-life usage patterns can help you get maximum value for money.
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”
4. Not understanding waiting periods and gap payments
Another common oversight is misunderstanding or neglecting waiting periods and gap payments. Waiting periods are stipulated timeframes within which you can’t claim any benefits after taking out a new policy or upgrading your cover to a higher tier. It’s easy to mistakenly think your new policy will give you immediate cover, which isn’t always the case – particularly for pre-existing conditions, pregnancy and elective surgeries that might have waiting periods of up to 12 months.
Similarly, gap payments can come as a nasty surprise if you don’t know about them beforehand. Here’s the reality: medical professionals can charge above the Medicare Benefits Schedule (MBS) fee, which results in a ‘gap’ between what Medicare and your health fund will cover and what you’ll need to pay yourself. Picking a policy with good gap cover schemes (such as ‘no gap’ or ‘known gap’ arrangements) can seriously lower or even eliminate entirely these out-of-pocket costs.
Always clarify the waiting periods and gap-cover arrangements before committing to a policy. The easiest way to do this is to chat with your provider or broker to see if there might be any unwelcome surprises when you actually need medical care.
5. Failing to compare policies every so often
Arguably the biggest and most significant mistake of all is not regularly comparing your current policy with new offerings on the market. Our health insurance sector is incredibly competitive, and insurers spend a lot of time adjusting their products to attract new members. If you don’t take a little time to compare what’s out there, you’re missing some prime opportunities to save money – or even improve your cover without paying a cent more.
Health insurance policies can change quite dramatically each year thanks to things like rising medical costs, regulatory adjustments, more competition and a variety of other factors. But comparing your policy means you can capitalise on these new offers and try to get cheaper premiums. Also, thanks to the portability rule, you can switch policies without re-serving waiting periods for an equivalent level of cover.
To get the best cover and value for money, we reckon you should compare policies at least every year or immediately after major life changes – whether that’s marriage, childbirth, retirement or a new medical diagnosis.
Conclusion
Knowing about these common health insurance mistakes and taking the time to compare your options can mean you’re always getting the best possible cover at an affordable price.
If you’re ready to get started then reach out to the experts at Fair Health Care Alliance today and we’ll take care of the rest.
FAQ's
Yes, Australia’s portability rule means you don’t have to re-serve waiting periods when switching to an equivalent or lower level of hospital cover.
Ideally, review your health insurance every one to two years, or immediately after a big life event.
Not necessarily. Higher premiums don’t always mean better cover. That’s why you should take some time to compare the inclusions, exclusions, rebates and other factors, rather than judging a policy solely on its price.
