24 hours left to avoid the 6.18% health cover hike

Don't be an April fool.

Health insurance premiums are going up by an average of 6.18 per cent tomorrow (on April 1) in what is the second biggest hike in a decade.

Couples will be hit the hardest by the price rise, paying on average an extra $160 per year, with families forking out an additional $200 for the average family policy.

The rate rise is almost three times the inflation rate and will affect over 13 million Australians who have some form of private health insurance. The Government is encouraging consumers to “shop around” for the health insurance policy which best suits their needs and budget.

“With over 30 private health funds now operating in the Australian market, my strong advice to consumers is shop around to get the best deal if you are unhappy with your health fund's offering,” said Health Minister Sussan Ley.

The private health insurance rate increase varies from fund to fund, so that alone makes it a good reason to compare health insurance policies between different providers and make sure you're getting the best value for your money.

Why are health insurance premiums rising?

Each year private health funds lift their premiums on April 1 in response to increased costs to private hospitals and medical services. Factors that lead to increased costs can include hospital staff and nurses wages, doctor’s fees, the cost of medical equipment and more complex and costly procedures being available through private hospitals.

Related: How much are you willing to pay to see a GP?

The Private Health Insurance Act 2007 requires health insurers to submit details of proposed premium increases to the Commonwealth Minister for Health before they can increase premiums on any of their policies. If the insurers can’t justify or provide sufficient information to show the Health Minister that an increase would be necessary, then there is no change to the premium.

How can I avoid paying too much for private health insurance?

With some forward planning, you can avoid paying more than you need to for health insurance.

Consider locking in the previous year’s rate by paying a full year of premiums in advance (before April 1st!) to save on costs.

However, keep in mind that your policy changes being made on April 1 may affect more than just the premium cost. Other details of the policy might also change, including levels of cover, benefits, annual limits or more. Paying a year’s premium in advance will lock in the previous year’s rates, but it does not guarantee that other changes to the policy will not be made.

When it comes to getting the best deal, don't underestimate the value of calling a professional insurance comparison service like comparethemarket.com.au (1800 008 082) to see if you’ve got the best value policy in the market for your needs, and or calling your current insurer to remove covers you won't use such as pregnancy for the elderly or hip replacement for young adults.

If you plan to call between now and April 1 be prepared to wait a while in the phone telephone queue. Alternatively you can use the Moneyhound online comparison tool (powered by comparethemarket.com.au) to compare policies from multiple funds online and get a quote to switch in minutes.

If you decide to switch insurers, make sure that you are aware of all the pros and cons before you change.

Do I even need private health insurance?

As premiums and out-of-pocket expenses continue to rise, should you opt out of private health insurance altogether?

The numbers show that Australians still see the value in taking out private health insurance. Private health insurance benefits paid to members increased by 7.4 per cent from $16.09 billion in the December 2013 quarter to $17.28 billion in December 2014 quarter. In that same period, the number of policies taken out also increased by 2.5 per cent.

There are great advantages to having private health insurance, even if only at a minimum level of cover.

Private health cover ensures peace of mind if any health problem takes you or your family by surprise. It means that you may have less waiting time or can jump the queue on long waiting lists for operations in public hospitals. And with the uncertainty of government health care reform, now is a good time to make sure you are covered.

Most Australians with private health insurance receive a Private Health Insurance Rebate at tax time from the government to help cover the cost of their health insurance premiums, making private health cover more affordable and accessible. The rebate amount is based on your level of income (means tested) and available to everyone who holds a Medicare Card and has private health insurance with a registered fund.

As an example, a single person under the age of 65 earning $70,000 per year can expect a rebate of nearly 30% of their annual health insurance policy cost. This gives consumers the flexibility to choose a more comprehensive level of cover or makes basic cover more affordable.

Related: Reducing your tax with private health insurance

A private health insurance policy can also benefit you by providing access to health services you might need all-of-a-sudden without having to wait, and some policies also permit you to claim on common health expenses like gym memberships, remedial massage, acupuncture, chiro, physio, optical and dental.

How to get the best out of your health insurance policy

Use the premium rate rise as a time to review your existing policies and make sure you’re getting the most out of your health cover.

1. Decide which cover is essential

Take a step back and ask yourself: why do you have private health insurance? Is it to cover yourself in case of an emergency, are you planning on having elective surgery, or are you interested in extras cover like dental and physio? Depending on the policy you have, you may be paying for services you don’t actually need. Make a list of the cover you want, such as hospital and ambulance, and then shop around to ensure you've got the right policy for you. Your family circumstances change from time to time, so check what benefits your existing policy offers and consider whether you do need that level and type of coverage.

2. Review your optional extras

Unless there’s a history of illness in the family, you probably don’t know which health issues may arise in the future. As a result, it can be tempting to over-insure yourself. Take stock of your optional extras such as dental, optical, acupuncture and pregnancy and decide which are most important for your current stage of life. Health funds vary greatly on cover and rebates, so make sure your policy covers your needs yet still remains competitive on price.

3. Look at your excess options

Excess is an amount you agree to pay before health fund benefits are available. Generally, the higher your excess payment is, the lower your insurance premium will be. Before boosting your excess to a higher amount, make sure you consider all of your options. If your excess is too high, you may end up in a worse financial position than paying lower excess. Read your policy carefully.

4. Bundle your cover

Many health funds will offer pre-packaged policies that cover you for both hospital and general treatment. If you want basic hospital cover with a more comprehensive general treatment policy, you may be able to tailor your own package. For hospital cover, most insurers can offer cheaper options if you are prepared to pay a higher excess or co-payment towards the cost of any hospital admission. You might also decide to opt for reduced benefits for some additional services. Bundling your policies may result in greater cover for a cheaper premium.

5. Compare other providers

If you haven’t taken the time to compare health insurance policies recently, what are you waiting for? Look at your current level of cover and see if you can get a similar or greater cover for a better price. Waiting periods for similar or lower levels of cover transfer with you, so you won’t have to wait out the period all over again.

Moneyhound has partnered with comparethemarket.com.au to help our users compare health insurance policies from a range of leading Australian health insurance providers. Use our free online comparison service to compare prices online or call our specialist consultants on 1800 008 082.

Things to remember when taking out private health insurance

Not all health insurance police are created equal. They vary greatly, from high-end policies that cover everything, to dirt cheap policies that omit crucial things such as ambulance cover, obstetrics, and heart related procedures. It is well worth reading the small print and taking into consideration your lifestyle and health profile before deciding which policy to go for.

Other considerations include:

- There might be a cooling off period when you join a new provider, and if you come to a new provider with a pre-existing health condition there is likely to be a waiting period or a higher than normal premium rate. This is to stop people from joining and making claims straight away, which drive up everyone's premiums. While a health insurance provider cannot refuse you if you are chronically ill or elderly, in most cases you will still have to endure the cooling off period before your rebates come into effect.

- If you switch funds, you may also have to serve waiting periods before you qualify for any new or higher benefits the new policy may offer. For any pre-existing conditions, the new health fund will usually limit the benefits it pays to the same benefits you were entitled to at your original fund for the first year.

- Private health insurance will quite often not cover your entire hospital bill. You will have to pay the gap and this amount will vary depending on your level of cover.

- You can still access Medicare when you would like to use the public system or fear the difference may be too large to make up.

Situations can change. Just like any other financial expense in your life, you should regularly review your health insurance policy and ensure it still meets your needs every few years.

Questions? Comment and share your questions, comments and tips on our facebook page.