How to reduce your health insurance premiums

Are you doing everything you can to control your healthcare premiums?

This year, private health insurance costs are
set to rise 6.18 per cent. Here are some suggestions on how you can manage the cost of your premiums.

Every year on 1 April, health funds raise the price of the premiums they charge on the policies they offer. According to insurance comparison website Compare the Market, over the last five years the average price of health insurance policies has risen by 31.56 per cent. The average annual increase has been 5.64 per cent. Given these figures, it’s highly likely health insurance premiums will increase by a similar amount this year.

 So what can policyholders do to help put a cap on their health insurance premiums? Unlike life insurance, where taking actions such as stopping smoking can help keep the cost of premiums down, health insurance is priced based on the community rating model. This means policies are priced without considering the policyholder’s health status.

 So the main way health insurance policyholders can reduce the price of their premiums is to get the right balance between hospital and extras (or ancillary) cover.

Choosing cover that makes sense for you

 According to Sarah Brown, Mercer Marsh Benefits leader (Pacific), the right health insurance policy will depend on the policyholder’s unique circumstances.

 “The best thing people can do is review products and make sure the policy they choose is aligned to their specific circumstances,” she says.

 So if you’re a woman of childbearing age and you plan to have a family, choose a policy with hospital cover that covers obstetrics. But if you’re a university student, you might not want cover for hip replacements. Excluding this from your policy will generally help to reduce your premiums.

“When you’re choosing your extras cover, make sure that the cost of the premium doesn’t offset the benefit you receive,” Brown advises.

What really impacts the price of premiums is the level of extras chosen: the higher the level of cover, the higher the premium. Brown says the “extras” part of a health insurance policy is its most complex aspect, because policyholders have the option of choosing different limits and exclusions.

 “When you’re choosing your extras cover, make sure that the cost of the premium doesn’t offset the benefit you receive,” Brown advises.

 So if you wear glasses, you might choose extras cover that will contribute $200 each year to the cost of glasses or contact lenses, and pay out $300 towards the cost of dental services. But if the premium for the policy is $600 a year, it might be worth looking for a different insurer that offers better value for money.

Other Alternatives

 Another way to get the cost of your premium down is to increase the excess you’re prepared to pay. The higher the excess, the lower the cost of your policy. Similarly, the lower the value of the benefit you receive, the lower the cost of the policy.

 Similarly, those who can afford the cost may also want to consider paying a year's premiums in advance. This means policyholders pay for their premiums based on the previous year’s prices. Australian health funds that allow pre-payment of premiums include Medibank Private, NIB, HCF, GMHBA, Frank Health Insurance, Australian Unity and Bupa.

 When choosing the right policy, it’s important to remember health insurance isn’t just about finding the most cost-effective premium: the idea is to do your research, identify a number of policies that offer the right cover for your circumstances and compare the price of their premiums before deciding which one to choose. 

December 2021
December 2021

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