Explore Health Insurance

Many Aussies misunderstand how health insurance is priced. Namely, they believe that health insurance is more expensive if you’re older, or if you have a pre-existing condition.

This isn’t necessarily true.

While numerous factors affect your health insurance premium, you may be surprised to learn that it’s a simple product when it comes to how premiums are calculated.

Does age affect health insurance premiums?

Australia’s community rating system ensures that every person – regardless of age, health and claim history – can purchase the same health insurance policy at the same base price, with the ability to switch to a new policy without penalty.

The main factor that your age will play when it comes to your health insurance premiums is whether or not you have a Lifetime Health Cover (LHC) loading. It’s beneficial to purchase private health insurance when you’re younger to avoid this loading. The Australian Government introduced LHC loading as an incentive for Aussies to take out private cover at a younger age by charging a loading to people who decide to purchase a private hospital policy later in life.

As a result, your private hospital insurance premiums will attract a 2% loading on your premiums for every year you don’t hold hospital cover over the age of 30; this loading comes into effect when you don’t take out hospital cover by 1 July following your 31st birthday, however, you only need to pay it once you take out hospital cover.

Taking this into consideration, someone aged 40 would have to pay 20% LHC loading (unless an exemption applies) on top of their usual premium if they purchase private hospital cover for the first time after 1 July following their 31st birthday.

The maximum loading amount is 70%, and your loading will be dropped altogether once you’ve held hospital cover continuously for 10 years.

It’s important to note that once you’ve reached 1 July following your 31st birthday, every year that you don’t hold hospital cover from that point on will increase your loading by 2% each year that you do not hold cover. So, if you ever intend to take out private hospital cover, it’s essential that you continue to hold some form of hospital cover to avoid the LHC loading. That being said, once you take out hospital cover, you are allowed 1,094 Days of Absence (one day less than three years) without hospital cover before your loading will start increasing again.

Income bracket

Depending on your taxable income and age, you may be eligible to receive the Private Health Insurance Australian Government Rebate. The rebate is currently tiered by income and age brackets, ranging from 8.471% through to a maximum of 33.887%.

People in lower income tiers and higher age brackets will receive a more substantial rebate.

If you are eligible for an Australian Government rebate, you can claim it back at tax time, or through a reduced premium. To claim it through a reduced premium, you will need to supply your insurance provider with your age and predicted income bracket. Keep in mind that if you claim in the wrong tier, an adjustment will be made at tax time.

Learn more about health insurance during tax time.

Your chosen policy

The policy you select will be the greatest determinant of price, as policies can range from comprehensive (most costly) through to basic (budget policies).

The different levels of cover are generally determined by what services and procedures are included or excluded on your cover, so it’s vital you regularly assess what you need cover for and tailor your policy accordingly.

For example, if you have a top-level health insurance policy, it will cost more because it generally covers most services/treatments that Medicare pays a benefit towards; such as obstetrics, joint replacements, assisted reproductive services and thousands of other procedures. Conversely, a basic policy will cost less due to fewer of those treatments/services being available for you to claim on.

Your family status

Who your policy covers also affects the price of the premium:

Singles policies provide cover for one adult only. If you’re over 30 and taking out health insurance for the first time, you could be subject to LHC loading.

Couples policies cover two adults and are generally the price of two equivalent single covers; this means you will be covered for the same benefits and procedures. If you feel either of you with need more or less cover, it’s important you weigh up whether you’d prefer two singles policies.

It’s important to note that LHC loading is averaged across a couples policy. For example, if your partner attracted a 4% loading and you attracted 0% loading, you would both be charged an average of 2% LHC loading on top of your policy’s hospital premiums.

Families can take out a family policy, which covers two adults and any dependent children under a certain age specified by your health fund. Children under the age of 18 (or even older, depending on the fund) can be added for no extra cost, and even stay on the policy until the age of 25, if they’re studying full time.

Policies for single-parent families cover a single adult and any dependents under a certain age that is specified by your health fund. This type of policy generally has a higher premium than a singles policy, yet it can be cheaper than a family policy, given that it covers just one parent. Similar to family policies, single parent family cover can also cover dependents until the age of 25 if they’re studying full time.

Along with the level of cover you select and who is covered by your policy, other factors that will impact your premium include:

This is a set amount you agree to pay when you are admitted to hospital and claim on your hospital cover. No matter how long you require treatment, this figure doesn’t change – provided you remain on the same policy. Your full excess is only charged once per person per year.

The time of year your excess ‘resets’ will depend on your fund. For example, if your fund operates by the calendar year, you’ll pay your excess on your first admission to hospital in that calendar year; if you’re admitted back into hospital within that same calendar year, you won’t have to pay the excess again.

The excess you choose to pay can affect your premium as well; lower excess rates can lead to higher premiums as your insurer would foot more of the claim, and vice versa.

Similar to excess, a co-payment is an amount you agree to pay per day. However, where it differs from an excess is that a co-payment is an amount you agree to pay for every day you’re at hospital, rather than a one-off payment. For example, if you agree to a $100 co-payment and you’re in the hospital for five days, you will be out of pocket $500.

Some funds have a limit on how many days you would have to pay for per hospital admission, with some funds implementing a maximum amount that you would have to pay per year.

Health insurance premiums can differ across Australia. Factors, such as varying treatment and hospital charges, and the rate of claims, can influence premiums between states and territories. As such, you might find that your premium could change if you moved from Queensland to Western Australia.


Estimating the cost of health insurance in Australia

Health insurance premiums change every April

Health insurance premiums are subject to change every year due to the annual premium review. This review is a process where health insurance providers submit an application to the Minister for Health to increase premiums. Once the submitted changes are reviewed and approved, they usually become effective on 1 April.

Generally, these proposed increases aim to cover the following:

  • wages for hospital staff and medical professionals
  • medical equipment and technology
  • costs of complex procedures completed through private hospitals

Learn more about the health insurance premium rate rise and how it could affect you.

Comparing health insurance can help you find affordable cover

Are your premiums making you reconsider your health insurance cover? If so, why not try to find a more suitable policy?

Compare policies from several Australian providers by using our health insurance comparison service. It’s free to use and you can receive quotes and even join in just minutes.

If you prefer the personal touch, call one of our experts on 13 32 32. They can help take the confusion out of health insurance and even handle the paperwork for you.

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