How to avoid paying to much for health insurance
MOST people buy a health insurance policy, put it away and just pay the bill. Our experts explain why that’s a costly mistake.
Your health cover really needs to be reviewed every year to ensure you aren’t paying too much.
Many insurers offer new policies with lower rates and you may be overinsured in your current cover. Changing policies or tweaking an existing one should be done before April 1, as rates are going up.
Shopping around costs nothing but doing nothing can be very expensive.
EACH year on 1 April private health insurance premiums increase.
In 2014 the increase was an average of 6.2 per cent - around twice the rate of inflation. That’s not unusual; each year the premium increases are around twice the rate of inflation. This year it’s likely to be even more: inflation is currently running at just 1.7 per cent, but the increase in health insurance premiums is likely to be closer to 7 per cent.
So what would a 7 per cent increase in health insurance premiums mean for gen Y? Well, for a young single with hospital and extras, it translates to an extra cost of around $120 per annum, on average. That’s based on cost analysis of the 943 health insurance policies on CANSTAR’s database.
Not all health insurance policies are created equal though, so some tips to make sure you’re not paying too much include:
•Ignore the upfront incentives. Whether it’s a Fitbit or movie tickets, there are plenty of “sign up now” incentives on offer. Your health insurance policy is going to be a large ongoing expense though, so ignore the incentives and concentrate on whether the policy itself is right for you.
•Check out your family medical history. If breast or bowel cancer, or depression or diabetes, crooked teeth or bad eyesight run in your family, make sure you have a health insurance policy that covers them!
•Shop around. Not all policies are created equal and certainly they all cost a different amount. While the average premium increase last year was 6.2 per cent, the actual increase fund-by-fund ranged from less than 3 per cent to almost 8 per cent. So do an online check of who offers what — at what cost. It might save you hundreds.
Justine Davies is finance editor and commentator with financial research and ratings firm Canstar.
THEY say bad luck comes in threes. But when it comes to your health, a single event can be devastating. I’ve seen incredibly fit people get knocked for six health wise, including gen Xers fit enough to run marathons, collapse with heart attacks. Good luck if you want to rely on the public health system. We’ve got a pretty reasonable public system in Australia. However, for many Xers, not having health insurance is actually financially stupid. Higher income earners get penalised with higher taxes. Individuals earning more than $90,000 ($180,000 as a couple) who don’t have private cover, pay an extra 1 per cent tax as the Medicare Levy Surcharge. For couples, that’s a minimum of $1800 a year. Cheap basic private cover will cost less than that. And you might get some benefit from it. Salary earners above $140,000 ($280,000 for a couple) pay an extra 1.5 per cent tax. For couples, that is $4200 a year. That will pay for pretty good private cover. And then there are the 2-per-cent-a-year penalties that come in after reaching the age of 31. For those earning less than $90,000, private health cover has got to be a justifiable expense. And with annual increases of multiples of the rate of inflation, insurers make it hard. Put your provider to the test regularly, as you should with all your personal service providers. Is there a more suitable cover available? Do you need to increase, or add benefits that you might need? Start with some of the comparison websites, which will help with researching on price and benefits.
Bruce Brammall is the principal adviser with Bruce Brammall Financial and author of Mortgages Made Easy.
IT’S very important to get value from a health insurance provider and there are several ways to ensure you’re not paying too much. The first thing I would do is shop around, and there are a few ways to do that. You can ring a few insurers and see if they can do better than the premiums you are currently paying, or compare to see if they have better extras or flexibility. You can also visit an online health insurance comparison site and look at a break down of premiums and cover, or you can go to an insurance broker and get the best cover for the premium.
But there’s another way of looking at health insurance which is probably more important, and that’s the intrinsic value to you.
Let’s say you insure your car, your house and your life (with death cover). You pay a certain premium to have this cover: you can’t do without your car, you need a place for you and your family to live, and if you should die, your spouse and kids would benefit from being able to pay-off large debts such as a mortgage. So you take the insurance.
Health insurance may be harder to quantify, but for many people the argument is similar: whatever else they save money on, they want to be able to take their kids to the dentist and have procedures done when they want or need them done.
In this second method of weighing the cost of health insurance, it really comes down to individuals and prioritising what the household can afford, rather than wondering if the premiums are rising too fast. I understand this motivation, but also remember that you can still have health insurance and — by shopping around — not pay too much.
Mark Bouris is executive chairman of wealth management and advice firm Yellow Brick Road.
GETTING older can literally be a pain in the neck. Apart from a few hale and very hearty souls, most people tend to get more aches and pains as their bodies age. It’s just what happens — sometimes regardless of how much carrot juice, kale or coconut water is consumed.
Many retirees who have private health insurance will have looked at switching providers, at some stage. Chances are that having looked, retirees have stayed put. It is mind numbingly difficult to compare providers. No two private health funds offer exactly the same services and price their products in exactly the same manner. It is a smorgasbord of services, rates, options, extras and more. So how do you work out which is better value and ensure you are not paying too much?
Firstly, all Australians are able to receive free medical treatment at public hospitals. You don’t need to have private health insurance. However, if you don’t have private health insurance and your taxable income is over $90,000 (singles) and $180,000 (couples) then you will be liable for an extra 1 per cent Medicare Levy Surcharge. This rises to 1.5 per cent for taxable incomes over $140,000 (singles) and $280,000 (couples).
If you do have private health insurance, you need one that meets your needs the most. Cover for “extras” can add to the cost of the premiums. If you are prepared to pay for dental, optical, and physiotherapy services yourself, most providers have a hospital only cover. Many policies also have the option to pay an excess. This means that you pay an upfront fee for any hospital admission. Frequently, the premiums are less, the higher the excess.
You need to look carefully at the types of medical services you have been using in the past, but also most importantly for retirees, what you are likely to need and what you want going forward.
Kerrin Falconer is a finance writer and has worked in the financial services industry for 18 years.
JOIN THE SWITCH CAMPAIGN
News Corp Australia’s moneysaverHQ in conjunction with consumer movement One Big Switch has launched the Big Health Insurance Switch this week to help drive down the cost of premiums.
Over the next four weeks, One Big Switch will use the combined buying power of consumers who sign up to the campaign to unlock an exclusive health insurance offer. Already 25,000 have signed on.
OBS spokesman Joel Gibson said the latest rise will hit consumers hard as it follows a constant wave of “year-on-year increases.”
“It’s no surprise people are dropping their cover or reducing their cover or increasing their excess and doing anything they can do to cope with these repeated price rises,’’ he says.
Gibson is urging Australians to sign up to the free campaign and is hoping more than 40,000 will do so to help secure a better deal.
If you register there is no obligation to take up the offer.
For more details about the Big Health Insurance Switch campaign visit moneysaverhq.com.au. News Corp Australia and One Big Switch will earn a commission from people who accept an offer.