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Australian economy staggering along + how to fight the increase in private health insurance premiums

5 min read
13 Mar 2024
kochie compare the market

The economic growth figures for the December quarter were released this month and the good news is that we haven’t dipped into economic recession. We’re still growing… but only just.

Real gross domestic product (GDP) grew by a weak 0.2 per cent for the December quarter for annual growth of 1.5 per cent. That is a weaker figure than was forecast by the Reserve Bank.

The figures show it’s Australian households that are slowing the economy – which is what the RBA has been hoping for to fight inflation. The RBA forecast annual household consumption of 1.1 per cent in the December quarter and it looks like the reality was just 0.1 per cent.

I’ve talked about Australians going into the bunker (scared to spend) and these figures prove it is much worse than expected. There is no way the RBA will increase interest rates in this economic environment and, if the economy keeps going like this, it is on track to cut rates in the second half of the year.

The RBA is getting the slowing economy it wants. Just keep an eye on the jobs figures. If they collapse and unemployment heads above 4.5 per cent then the RBA would consider bringing those rate cuts forward.

I was also interested in the analysis of the economic growth figures by the Australian Financial Review. They found federal government spending was equal to 11.1 per cent of GDP (the size of the economy) in 2023, only slightly lower than the 11.5 per cent record reached during the depths of the pandemic (when we had the big spending JobKeeper economic stimulus) and sharply higher than the 9 per cent average level from 2000 to 2015.

Taxation revenue across all tiers of government amounted to a near-record 30.3 per cent of GDP in 2023.

As I’ve pointed out over the last few months, the federal government is rolling in cash and spending up big.

How to fight the increase in private health insurance premiums

At a time when the economy is sagging and household budgets are being squeezed by high inflation and interest rate increases, the government-approved lift in health insurance premiums on 1 April is the last thing Australians need right now.

If you’re one of the 14.7 million people covered by private health insurance, you have just over three weeks to fight back and reduce the pain.

First of all, understand the government’s 3.03 per cent rise in premiums is an average… it’s not a blanket rise. Some private health insurers will be lifting premiums higher than the 3.03 per cent while others will be lower. Even within the health insurers some plans will rise higher than others.

Your insurer will notify you of your increase over the next week or so.

But as a benchmark, the biggest premium increases are from these insurers:

  • CBHS Corporate Health (5.82 per cent)
  • CBHS Health Fund (4.51 per cent)
  • nib (4.10 per cent)
  • HBF Health (3.95 per cent)
  • Health Insurance Fund of Australia (3.87 per cent)

While the private health insurers passing on the lowest premium rises are:

  • Health Care Insurance Ltd (0.27 per cent)
  • Defence Health (1 per cent)
  • Australian Unity Health (1.42 per cent)
  • Peoplecare Health (1.63 per cent)
  • Health Partners (1.93 per cent)

As you can see, there are big differences. So it pays to give your current private health insurance policy its own financial health check to see if it’s still the right policy for you. There could be better deals out there.

First of all, make sure your private health insurance cover still suits your individual needs and stage of life. Being a “senior citizen” I always had the top Gold cover because I figured I’d need it as I aged. That was until my wife Libby pointed out that it included obstetrics (we’re a bit past that). On top of that (brace yourself) we had extras cover for orthodontics.

After a quick audit of the cover we needed we settled on Silver Plus and saved a fortune in premiums. When is the last time you looked at the actual services covered in your policy?

Many people are scared to change their health insurer if they’ve developed a medical condition and another insurer either won’t cover them or charge them a huge premium. It’s understandable because home and contents insurance premiums are set depending on your risk profile (whether you live in a bushfire, flood or dangerous zone).

But private health insurance cover is not risk rated, it’s community rated. So no matter what ailments you have, your premium is rated as exactly the same as anyone else of your age. So switching to another provider shouldn’t be a problem.

Another misconception about changing health insurers is that you’ll have to sit through a waiting period before being eligible for some cover.

Not necessarily. If you switch to the equivalent cover (or lower cover) with another provider, typically no waiting periods apply. If you switch to a higher level of cover then waiting periods may apply.

But at this time of year a range of private health insurers will offer attractive incentives to switch insurers, which includes waiving waiting periods even if you opt for a higher level of cover.

It is so easy to compare your health insurance cover these days using one of the online comparison websites.

I know a lot of people are tempted to just ditch private health insurance altogether and pay the Medicare Levy Surcharge (MLS) on those earning over $93,000 a year and $186,000 for a couple. Do your sums carefully first. Depending on your income tax tier, ditching could cost more.

Basic hospital cover will help you avoid the MLS but, for a bit extra, you could get a lot more cover by choosing a Bronze policy.

Be careful because cheaper “extras” health cover won’t offset the levy. A bloke this week was telling me he was avoiding the MLS with a cheap “extras, dental” policy. Should have seen his face when I said it didn’t qualify and for the last five years he had unknowingly been paying the surcharge…

I know private health insurance can seem complex, and there are a lot of misconceptions around, but it is worth using the next three weeks to review your cover to make sure you’re not paying for services you don’t need.

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