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Australia’s private health insurance industry is a baffling and confusing minefield, where many pay through the nose for next to nothing.

Even health insurers are now admitting that healthcare is unaffordable and thousands of Australians are letting their policies lapse.

Medibank chief Craig Drummond says he has already visited branches this year and the message from customers was clear — affordability was their biggest concern.

He warns that there was a risk the sector would tip into a crisis in five years if nothing was done to address the issue. Other bosses warn of the industry being at a crossroads. 

Things are so bad in some areas, that if patients complain about a premium hike, they may be offered a junk policy which doesn’t cover anything.

So how do you choose the policy that’s right for you?

Singles under 31

It’s possible to get through life without a health insurance policy at all. According to the Centre for Policy Development, a 25-year old who invested the equivalent of their insurance premium every month to cover medical expenses would still have $80,000 left over at their death.

If you’re in very good health and earning under $90,000, you won’t be charged the Medicare Levy Surcharge if you don’t have hospital cover. But if you’re likely to go bungee jumping and maybe break a leg, you may need it.

30+

Once you hit 31 the Government will charge you a Lifetime Health Cover loading (LHC), an additional 2% on top of your premium for every year you don’t take out hospital cover. And if you take out a couples policy, your partner’s LHC could apply to you.

If you’re considering starting a family, you’ll have to wait 12 months before you can claim on pregnancy-related services. You could also just decide to use the public system.

40+

You might now need more ample cover for what could become long-term issues like back pain. If you’re considering changing policies, you could wait up to 12 months before you claim on treatment for existing conditions.

50+

Review your extras cover. If you’re done with having a family, why should you still be paying for any pregnancy-related services?

Pensioners

Stay insured unless you can wait months for a hip replacement, but you can now access low cost prescriptions and more bulk billed services.

No matter what stage you’re at, always review your extras cover. Why be insured for iridology or a hearing aid if you’re not likely to need them? If you’re not claiming back at least what you spend on your extras cover per annum, then cancel it.

We recommend visiting the Private Health Insurance Ombudsman site which explains how private health insurance works in Australia. If you are looking to purchase health insurance, read our article on comparison websites to see which ones you should consider using.