From 1 April 2017, private health insurance has increased by an industry weighted average of 4.84%. That means the average cost of an Australian family’s insurance policy will be approximately $208 more. Prices are reviewed yearly and typically go up, rather than down. Here’s why…
The Private Health Insurance Ombudsman narrows down the reasons for annual price increases below:
If premiums never increase, then health funds may struggle to offer great value insurance to their customers. By raising rates each year, they can stay “financially viable,” according to the Private Health Insurance Ombudsman.
Private funds paid a whopping $19.83 billion in benefits on behalf of their members during 2016-17. As health fund premium revenue increased by 4.6%, so did the fund benefits by 4.5%, highlighting an almost even ratio of private health insurance profit to member expenditure.
In 2015-16, total spending on health in Australia was $170.4 billion, a $6 billion increase from the previous year.
|Private health insurance industry average by year||Average premium increase (%)|
So the claim checks out; health insurers are contributing more and more to our growing national healthcare expenses. It now becomes an issue of ‘how much’ rates have to rise in order to absorb this cost. Who decides what is fair to Aussies nationwide?
Rest assured, the Commonwealth Minister for Health ensures all premium increases are justified, necessary, and fair. A health fund must submit the details of their potential premium rises to the Federal Government under section 66-10 of the Private Health Insurance Act 2007. If a fund can’t demonstrate why it needs to increase its prices, then the increase will be rejected.
Price rises come into effect on the 1st of April each year, but you should keep in mind that not all health funds raise their premiums by the same amount. Some will raise their price up more than the average increase and some may actually decrease theirs, that’s why it’s always a great idea to compare health insurance.
Learn more about the health insurance rate rise here.
By reviewing your current level of hospital cover you can effectively lower your health insurance premiums by selecting a level of cover suited to your health and lifestyle. Choose between public, basic, medium or top level cover, depending on your circumstances (i.e. budget).
Choosing an appropriate level of extras cover is a great way of ensuring more affordable health insurance, particularly if you are only claiming for things like routine dental, optical or physiotherapy.
For whatever reasons, life choices and circumstances can change, and that’s why it’s important to check your health insurance policy. There are different life stages to suit all Australians when it comes to finding an appropriate level of cover, and in some cases, it may be wise to evaluate and update your cover.
Paying a higher excess or co-payment may reduce any out-of-pocket expenses during a trip to the hospital and lower the cost of your premiums (depending on your level of cover). Most private health funds provide members with excess or co-payment options in exchange for a reduction on your premium. A co-payment is an agreed-upon amount paid for each night you are an inpatient in hospital, and can either be capped at a specific amount, or not. On the other hand, excess is generally only ever charged on your first admission to hospital per person per year, regardless of how many nights you end up staying.
Acquiring private hospital cover will help you avoid the Medicare Levy Surcharge (MLS). The MLS is an extra 1% to 1.5% tax levied on high income earners who have not taken out private hospital cover, in an effort to ease the burden on our public health system.
Explore and compare hundreds of different health insurance policies that are best suited to you. At Compare the Market, we put ourselves in your shoes to help you find the right cover at the right price. Simples.