- Australia’s public health system is under a heavy load.
- Private health insurance isn’t mandatory but can be a wise investment.
- Australians can receive rebates on the cost of their private health insurance.
- Shopping around to lock in good deals each year can help stem rising insurance costs.
The Australian public health care system1 offers free care at public hospitals and heavily discounted care for services received as a private patient, but it doesn’t cover all eventualities. Many Australians opt to invest in private health insurance so they can skip waiting lists, have certain elective procedures or benefit from more choice of providers. Private health insurance can be costly, but there are strategies that can greatly reduce the premiums.
Private Health Insurance Costs Can Vary
The cost of private health insurance varies depending on the insurer, the type of coverage and the circumstances of the person taking out the policy. Insurance providers consider several factors when setting costs, including:
- The age of the policyholderWhether the policyholder has any pre-existing health conditions.
- What treatments and services the policy will cover.
- Whether the policy has mandated waiting periods before benefits can be claimed.
- Other risk factors, such as the policyholder’s profession.
It can be tempting to save money by choosing the lowest-tier policy. However, this could be a false economy if it locks the policyholder out of accessing specific services they need.
Australians Save Money If They Take Out Insurance Before Age 31
The Lifetime Health Cover Loading2 rules mean that if an Australian fails to take out health coverage before the age of 31, they’ll be charged a surcharge of 2% for each year they delay starting a policy. This caps at a 70% surcharge at the age of 65. While not all younger Australians are in a position to take out a health insurance policy, the best way to avoid hefty fees is to do so as young as possible.
New Migrants Are Encouraged To Take Out Health Insurance as Soon as Possible
The Lifetime Health Cover Loading rules are slightly relaxed for migrants. Rather than simply taking into account the person’s age, they look at how long the person has lived in Australia. Migrants have a 12-month grace period from the day they sign up for Medicare, during which they won’t be penalized for their age when starting a private health insurance policy. Taking advantage of this grace period can save mid-career migrants a lot of money.
Shop Around To Find the Best Provider
Shopping around is the best way to find a good health insurance provider. The government makes it easy to compare health insurance policies,3 and it’s usually possible to get instant quotes online. Many providers offer special incentives, such as:
- A $300 discount on joining for the first year.
- 6 weeks free after 60 days.
- Attractive fees such as $1/day health insurance for a limited period.
Some providers offer direct billing to insurance. This means there’s no upfront payment required for health-related expenses. This kind of coverage helps people access private health care without worrying about out-of-pocket costs.
Loyalty Doesn’t Always Pay With Health Insurance
Between 2019 and 2020, the average industry premium increase was 2.92%.4 Individual providers can set their own fees, and in many cases, Australians would save money by switching providers when they’re eligible to do so. This is particularly true if they qualify for a new customer discount or special offer. Those who choose to let their coverage automatically renew may be missing out on significant savings compared to those who take a few minutes to shop around each year when it’s time to renew.
It Is Possible To Get Coverage With Pre-Existing Health Conditions
It can be challenging for people with pre-existing health conditions to find health insurance. Many insurance providers have limitations on what sort of pre-existing conditions they will cover. According to the Private Health Insurance Act 2007,5 a condition is classed as pre-existing if a person is already diagnosed with it or has had symptoms of that condition in the 6 months before taking out the policy.
Some insurance companies will accept people with underlying medical conditions, but this is assessed on a case-by-case basis, so it’s a good idea to shop around. Some providers will accept applications with no medical examination required.
Consider Gap Cover To Avoid Out-of-Pocket Expenses
Private medical insurance in Australia doesn’t cover medical expenses already covered by Medicare. However, Medicare doesn’t always cover the full cost of medical services. This means an individual can be left with some out-of-pocket expenses if they receive a treatment that’s not wholly covered by Medicare.
Some private medical insurance policies include what is known as “gap cover”. This covers the gap between the amount the doctor or hospital charges and what Medicare is willing to pay. Australians who don’t want to pay out of pocket for their medical treatments may find this kind of insurance gives them peace of mind.
Government Rebates Cut the Cost of Health Insurance
To encourage Australians to take out private health insurance, the government offers rebates6 on the cost of such policies. The rebate is paid only on the base cost of the policy, not any lifetime health cover loading element. Australians can claim the rebate through their health insurance provider or as a refundable tax offset when they complete their tax return. The rebate is income-assessed, so not all individuals with health insurance will qualify. However, those who are eligible may benefit from a significant discount on the cost of their policy.
Look For Combined Deals To Save Money
Health insurance providers typically offer general treatment coverage, hospital coverage and a combined package that covers both elements. Combined packages can give good value for money for those who are interested in health insurance that covers most of the expenses a person is likely to face above and beyond those already covered by Medicare. Read the policy documents for each insurance provider carefully to fully understand what is and isn’t covered under that specific policy.
Family Deals Can Be Cheaper Than Individual Policies
Australians can choose individual health insurance or health insurance policies that cover a couple or a family with children. Family packages offer significant savings compared to each member of the family having their own policy. However, the compulsory excess on a family policy may be higher than that set on an individual policy. Before signing up, make sure each member of the family is happy with the hospitals and treatment options provided by that insurance company.
Study Each Provider’s Private Health Information Statement
The Australian government maintains a database of private health insurance providers and each provider’s Private Health Information Statement.7 This document describes the level of coverage and the features of each policy in a standardized way, helping prospective customers compare health insurance more easily. When shopping around for a provider, be sure to read these documents. If the document includes a reference to Other Services, this means the provider offers services above and beyond those required to be listed in the PHIS. Contact the insurance company to learn more about those services.
Seek Advice if You’re Unsure About Your Options
Shopping for health insurance can be confusing, and while there are many ways to save money, such as claiming rebates, choosing a family package and shopping around for the best provider, getting help from experts can be beneficial. The Australian Competition and Consumer Commission8 has a knowledge base of help and advice covering a variety of topics, including health insurance. The ACCC can be a good starting point for those who are looking for advice about how to choose a private health insurance policy.