Health insurance can seem like the enemy of your bank account, with cash leaving every month before you even get a chance to plan your next holiday or stash it away in savings.
But, with a little preparation and some straightforward research skills, you can find ways to save money that still provide you with a cover in the event you need to use medical services not fully covered by Medicare.
See below for some suggestions to tweak your policy.
Health insurance in Australia
Firstly, it is important to recognize that the structure of the private health insurance model in Australia is community rated, which is protected by the Private Health Insurance Act 2007. This means that health insurers are banned from dynamically pricing a person’s policy based on their previous claims history, age or state of health.
This is because unlike most other insurance types, risk ratings are not permitted to be factored into health insurance premiums. More simply, you cannot be charged more if you claim more on your insurance.
However, be aware that age does impact your insurance cost if you fail to take out health insurance as you pass 30 years of age and reach your base day. For most people, the base day is calculated as the 1st of July that passes after their 31st birthday.
The government will impose and an additional 2% on top of your premiums which is only removed after 10 continuous years of having health insurance that includes private patient hospital cover. Referred to as lifetime health cover loading, the maximum cap on this fee is 70%, so it’s best to avoid it if you can.
The difficulty of like-for-like
Another thing to understand about health insurance is that the equivalent products across various companies are not standardized.
This can make comparing them a complicated exercise that may ultimately mean that the policy with the cheapest monthly premiums at whatever level of cover you may choose, may not actually save you the most money overall.
Therefore, while evaluating these products is an exercise that you absolutely should do, a direct, item for item evaluation will not always be possible.
In this instance, it will mean that the best solution when trying to cut costs on your insurance will be to make your choice of policy based on what suits your situation the best, rather then what offers the ‘most’ in terms of rebates and perks.
After all, perks and benefits that you do not end up using, will not become real savings and out-of-pocket costs that you need to pay for yourself because your cover is insufficient, will also affect your bottom line.
For example, say you only take out private hospital cover with no or very basic extras but frequently use physiotherapy. In the end, you may ultimately spend more than if you had higher annual limits for your extras that include a more substantial rebate for physio in exchange for a slightly higher monthly premium.
To then counteract your monthly premiums when you have a greater level of extras cover or more comprehensive hospital cover, you may choose to select a policy that includes an excess or front-end deductible component.
This means that you can opt to pay a lower premium each month, but will incur an upfront payment if you stay in hospital as a private patient. This upfront payment (or excess) can generally be selected from a few amounts such as $200, $500 or $800, which might be payable each time you go to a hospital or only once a year, depending on your policy.
Some funds might offer a single excess payment per financial year per family, while others charge it per individual. In many funds, children are generally exempt from this payment for hospital stays, even if the adults are subject to the excess under the same policy, and day surgery also may often be exempt from excess. You will need to calculate that if you do go to a hospital, whether this will work in your favour financially.
Remember that if you go for a longer period without any stays in the hospital as a private patient, the monthly money you save will add up and ideally exceed the cost of your excess should you need to pay it in future. This results in a higher level of cover for you at a lower premium that will
This results in a higher level of cover for you at a lower premium that will potentially incur an excess cost if you stay in the hospital, as versus a guaranteed higher premium and no or low excess payable if you stay in hospital.
Of course, a crystal ball would make this calculation a lot easier!
Your health stats
When calculating how to most cost-effectively structure your cover, you should also consider your previous health expenses. This will assist you to decide whether to reduce benefits or to add an excess in exchange for a cheaper monthly policy, or even a combination of both (or none).
Therefore, every few months take stock of your medical receipts or online rebate history and compare your current level of cover with the claims you have actually made. If you prefer, you can do this bi-annually or annually, depending on how many claims you make.
If you are able to detect a pattern of surpassing or being beneath your annual limits, consider adjusting your policy. This approach, however, will mean you need to pay close attention and be prepared to amend your cover as needed as proactively as possible.
Benefit limitation periods
Once you have reviewed your situation and are switching or amending your cover, you may select a fund that will apply benefit limitation periods. This arrangement will mean temporarily paying a lower premium in exchange for a lower coverage of benefits.
The benefit restriction will be for a specified period of time and for particular conditions, sometimes you can opt to have one or more benefit limitation periods on your policy at a given time.
Check with your insurer as not all funds offer this option and if they do, be sure to clarify whether the restriction occurs after waiting periods have been served or as soon as your policy is purchased, so you know exactly how long you will forfeit certain benefits.
Once the limitation period concludes, your cover will be resumed to its full benefit. So, say for example you one day plan to undergo IVF to have a child, but not straight away. It doesn’t make sense to pay for it while you are not using it, so if your fund allows, negotiate a benefit limitation period for assisted reproductive services that corresponds with when you want to begin a family.
However, make sure that you factor in any additional waiting periods when considering using a benefit limitation period to ensure that you know when your benefit will be reinstated.
As you can see, there are many ways to configure your health insurance. But these all ultimately stem from an engagement with your policy and ability to monitor how it is working for you.
So do your homework and consider excesses, benefit limitation periods, tracking your actual use of extras cover and negotiate exclusions to your cover, to work your health insurance in your favour.