With no ability to access most extras from our private health insurance in recent months, and elective surgery cancelled for a time too, tens of thousands of Aussies are considering cancelling their private health insurance.
Already, many Aussies were unconvinced it was still worth it. As premiums pushed ever higher over the past five years, a poll by YouGov Galaxy suggests more than 2 million have dropped it.
Indeed, the cost of premiums was given as the top reason for ditching cover, accounting for 64 percent of decisions, while lack of “value for money” was named in 50 percent of cases.
And that was before tight coronavirus times. The first indication of what’s happened since is the Australian Prudential Regulation Authority figures to March 31. More than 11,000 people between the ages of 25 and 29 dumped their cover. In other age groups, particularly 70-pluses, uptake increased.
So in a Covid-19 economy, should you kick your cover to the curb? Well, not until you consider first the five clever strategies to get your health insurance to pay for itself.
First of all, realise that funds know they haven’t been able to deliver value in the past few months... and they’re doing something about it.
Many health funds have postponed the usual 1 April premium hike (nearly 3 per cent this year). For example, Choice says Bupa, Medibank, HCF and NIB won’t increase premiums until 1 October, while HBF has cancelled its 2020 price hike entirely.
And there are other concessions too. AIA, for example, is offering cash-back to customers who have been unable to access extras and AHM is allowing you to roll over any unused extras limits into the following year. The last one makes a significant difference to what you could ultimately claim.
Expect more funds to follow suit.
It’s also worth looking to see if you can get a better value policy with some incentives for new customers thrown in. HBF, for example, is giving six weeks free if you join before the end of June.
You can compare policies on the excellent and independent private health.gov.au.
If you earn above $90,000 as a single or $180,000 as a couple, and don’t have private health insurance, you’ll pay a tax penalty in the form of the Medicare Levy Surcharge. At up to 1.5 percent of your taxable income, you may as well actually get cover for this
Depending on your income, you could also be eligible for a premium rebate delivered either as a discount on your premiums or through your annual tax return. This rebate, which was scheduled to decrease slightly as it does each year, has been frozen until at least April 2021 to give people financial relief.
Nearly 400,000 31-year-olds, says Finder analysis, face paying a permanent premium penalty if they don’t sign up for health insurance by June 30. There’s a 2 per cent lifetime loading for every single year you delay.
Over the years, that will really hurt. So think carefully about whether it’s time to find a fund.
Bear in mind that to avoid the surcharge I mentioned above, you don’t need all the bells and whistles in your cover. You just need basic hospital cover.
Also, singles can opt for an excess – a cash payment if you need to go to hospital – all the way up to $750 and couples, to $1500, and still get exemption from the levy.
Doing this significantly cuts the cost.
Doing this is also preferable to taking up the so-called co-payment method of reducing premiums. This requires you to pay, perhaps, $50 a night for each night you spend in hospital. If something horrible befalls you, it could work out really expensive.
Note also that you usually only pay the excess once per year, no matter how many hospital visits you have, and it mostly doesn’t apply to children.
Also, now that the Covid-19 ban on non-urgent elective surgery has been lifted, people with private cover are being treated far quicker than those who need to go on public hospital waiting lists. Before Covid-19, non-emergency waiting times if you went public were 109 days, whereas they were just 24 days for private hospitals. Worth considering.
What’s more, don’t forget to switch off obstetrics if you are totally done with children. This will save you an average $500 a year.
But let’s move on from the big picture health stuff.
Where I find private health pays for itself is in the extras. My family has top cover and uses it really diligently. Between regular physio, osteo and the like, we claim back a decent chunk each month.
When you add in bi-annual free dental check-ups for four people, which would otherwise suck up some $1500, the benefit leaps.
Then there is the little-known way of cancelling another whole month’s premium: claim your kids’ swimming lessons. Many funds that you do this for up to $200 per child.
If you don’t have kids or they swim like fish, you may instead be able to claim this amount of your gym membership. The two things normally cap at, say, $400 a year and fall into the same “health management” allowance.
Better still, if you have niggling injuries, "therapeutic exercise" with an exercise physiologist often triggers a higher payout than gym membership. That annual benefit could easily add to an $1000, wiping out another almost three months of premiums.
Add up all the savings and benefits above, and should you instead keep your cover?