Australia’s private health insurance and insurance products industry is a baffling and confusing minefield, where many pay through the nose for next to nothing.
Even health insurers now admit 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 is done to address the issue. Other bosses warn that the industry is 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 that doesn’t cover anything.
So how do you choose the private hospital cover that’s right for you? Here are helpful pointers to remember about getting a health insurance policy at different life stages.
Ideal Health Insurance for Australian Singles under 31
It’s possible to get through life without a health insurance policy at all. This will save you money that you can otherwise invest.
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 leftover at their death.
If you are young and healthy, health insurance that covers accidents seems practical because it provides you access to private hospital emergency care.
However, you need to consider that the public health system covers accident treatment.
If you’re in excellent health and earning under $90,000, you won’t be charged the Medicare Levy Surcharge (MLS) if you don’t have hospital cover.
The Australian government introduced the MLS to encourage people to sign up for private insurance and be admitted to private hospitals. This program is designed to reduce the demand for public hospitals.
If you’re likely to go bungee jumping and maybe break a leg, you may need a private coverage.
If you are already working and want to enjoy some tax benefits, private health insurance may be worth it.
Some health funds are advertising policies with minimal coverage to young singles who want to avoid paying extra tax obligations, such as the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loading (learn more in the next section).
To attract young Australians, some health insurance companies are offering discounts and rebates to new policy owners who sign up before they reach 30.
One common offer is the 20 per cent discount off insurance premium each year that the owner is below 30.
The discount could even reach as high as 10 per cent for people aged 18 to 25, and the discount is applicable until you are 40+.
Some health funds even allow the rebates when you switch health cover.
So check with your insurance provider or ask your agent when you are shopping for insurance what discounts are available for your age.
However, you should bear in mind that you may find an insurance policy that has lower premiums compared to one with a discount.
Private Health Insurance for 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 pregnancy-related services. You could also just decide to use the public system for basic hospital treatment.
Many Australians about to hit 31 usually find it hard to decide whether they should just get public hospital cover or pay for LHC loading.
It all depends on your financial and personal circumstances, but it helps if you know how LHC works.
For instance, let’s say you waited until 35 to get hospital cover. In this case, the LHC loading will be 10%.
Thus, your $100 monthly hospital only premium will now become $110 due to the loading.
Don’t forget that getting hospital cover will not save you from paying LHC loading once you celebrate your 31st birthday.
LHC can provide you with peace of mind and can substantially help cover the cost of unexpected medical emergencies.
If you are married, you may need to take a look if a couples policy will save you money.
Getting one policy for partners seems convenient, but there are instances that the cost doubles.
Also take into account that your insurance needs may be different than your partner.
Perhaps, you may need a more expensive policy because of a pre-existing condition, and your partner may find a cheaper plan.
Best Health Insurance for 40+
Life begins at 40…as well as lower back pain.
You might now need more ample cover for what could become long-term health issues.
If you’re considering changing policies, take note that there are waiting periods such as 12 to 18 months before you claim treatment for existing conditions.
If you decided not to obtain a health insurance policy in your 30s, you might have to pay an added 2% for every year you didn’t have the hospital cover.
So when you are in your 40s, the insurance cost will be higher than 20%.
At current rates, the average cost of hospital cover is around $4,500 per year for a family, so at age 40, you might be paying an extra $900 for premiums.
Cheap Health Insurance for 50+
Once you hit your golden age, you should start reviewing your level of cover for your health insurance policy.
Look for extras that are no longer applicable to your needs.
If you are already an empty-nester and you’re done having a family, there’s no point paying for any pregnancy-related extras.
Your health insurance at this age should focus more on managing chronic conditions like diabetes or hypertension, as well as dental, optical extras.
At this life stage, the financial pressure could be severe if you have chronic conditions as you may be forced into early retirement and deal with reduced income.
While you may be eligible for an early pension such as Disability Support, you may have to use your savings if you need emergency treatments or lifetime care.
Recommended Health Insurance for Pensioners
Retiring from work? Then you should not retire your policy.
As we age, the higher the chance that we need medical treatments.
For example, 6 out of 10 hip and knee replacements in Australia are for pensioners.
Most pensioners would have a limited income stream. Hence, private health insurance can shoulder the bulk of medical expenses.
And those who are more than 60+ have higher chances of being admitted to hospital than younger age groups.
While most insurance companies would accept pensioners for new applications, the health insurance premium can be astronomical compared if you are much younger.
So if you have existing insurance, don’t let it lapse, or you may have to carry higher premium rates in your retirement years.
Aside from private health insurance, pensioners may also rely on low-cost prescriptions and bulk-billed services.
No matter what stage you’re at, always review your extras cover. Why be insured for iridology or hearing aid if you’re not likely to need them?
The Key to Finding the Cheapest Private Health Insurance in Australia
What’s the secret to buying the most affordable private health insurance in Australia?
Buy what you only need.
You can determine your insurance needs if you compare health insurance companies and carefully review each policy before you choose and sign the dotted line.
And if you have a current insurance policy in force, you should review the terms and inclusions to make sure that they are essential.
If you’re not claiming back at least what you spend on your extras cover per annum, then cancel it.
Also beware of junk insurance.
Some private policies only cover a few types of hospital treatments, and some will only cover for accidents under limited circumstances.
These policies are called junk insurance because they don’t cover treatments for serious medical conditions such as heart disease, stroke, or cancer.
For more information about private health insurance in Australia, we recommend visiting the Private Health Insurance Ombudsman site, which explains how private health care and 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.