Private health insurance: why you need it and how to get the best value

Private health insurance premiums rose an average of 2.74 per cent this April year. Ouch. Here’s how to make sure you’re getting a good deal.

It was the lowest increase by the sector in years, but still well above inflation (which in the month following the health insurance hike sat at less than one per cent).

The Ombudsman lists a multitude of reasons for the large increases by health funds year after year. These include an increase in members using health services, increased wages for nurses and hospital staff, increased doctor’s fees, the cost of medical equipment and technology, and so on. This may be so, but it doesn’t reduce the extra sting of funding private health insurance one bit.

So, now is the time to act to make sure you’re getting value. It all boils down to you taking an interest. Never automatically renew any insurance policy, especially private health insurance, without checking you have the right cover for the right price.

Here’s how to ensure you’re squeezing as much value as possible out of your cover.

Do we even need private health insurance?

With premiums rising so quickly, many people ask, “should I just cancel my private health insurance cover?” Believe me, I understand why you may think that way. I just don’t recommend it.

Firstly, private health insurance provides you with a broader choice of treatment options than Medicare. Both for hospital treatment and common health ‘extra’ services like dental, optical or physio treatment.

Plus, if you earn above $90,000 a year for singles or $180,000 for couples and don’t have private health insurance, you’ll pay a Medicare Levy Surcharge of between 1 and 1.5 per cent of your income.

On top of that, the Lifetime Health Cover policy means if you don’t have hospital cover by the time you’re 30 years of age, you’ll pay a 2 per cent loading on your premium for every year you’re aged over thirty.

So the financial penalties for not having private cover can really mount up.

How do I choose the right cover for me?

It’s sometimes possible to save a significant sum simply by choosing a more appropriate policy.

To do this, first make a realistic assessment of your health needs and how you expect them to change over the short-to-medium term.

If you have 20/20 vision and are in good physical health, paying top dollar for extras such as physio and optical cover may not be worth it.

But you might be really into your sports, so that physio cover will be worthwhile. Or if you’re planning to have a baby in the next couple of years, you’ll want to be fully covered for pregnancy related services.

Not sure what you’re after? Speak to your insurer. They’ll ask you a series of questions to establish your needs, and talk through your current policy in detail.

Comparing the market

There are plenty of market comparison sites that will help you compare all of your available private health insurance options. Be careful, however, as it’s actually quite difficult to compare what’s on offer across the different insurers. Each of them offers slightly different cover for a slightly different price for the exact same service.

There’s also the fact that many of the comparison sites earn their money by getting a commission from the insurance companies when they sell their policy. It can mean that if they don’t have a fee arrangement with a particular insurer, they might not show you their policy at all. Even if it’s the one that best suits your insurance needs.

PrivateHealth.gov.au operates an independent comparison tool. You can also pay an upfront fee to CHOICE to guarantee an independent search that takes all policies and insurers into account. Otherwise, some of the comparison sites you can check include:

Before you head to one of the comparison sites, make sure you’ve got a copy of your current private health insurance policy with you. That way, you can quickly check what you’re currently covered for against what’s on offer elsewhere. You can also check your current premium against the market as well.

How do I cut costs?

Your main options for cutting costs are dropping unused hospital or extras services, increasing the excess you pay, paying your premiums annually or switching to another insurer.

As always, there are pros and cons for all of these options.

Cutting cover down to the bare minimum will save you money on premiums, but it often means you’ll receive less benefits for services that you do claim on.

Plus, if you suddenly decide that you do need cover for a particular treatment — major dental for example— then you won’t be able to access your benefit until you serve a waiting period.

Before switching to another insurer, do a full comparison of your current policy versus the new one (see above). Be careful you are not losing important benefits. And remember, if you have a trusted service provider such as a physio or dentist, you may not get the same rebate from them with your new insurer. Check they are fully covered by the insurer you want to switch to.

Raising your excess is another way to save money but, again, be careful. While the savings can look tempting now, if you were in an accident or needed treatment for an illness, could you afford the higher payment? And is that something you want to be worrying about in this kind of scenario?

Save the difference

As a safety net, put the savings from any lower premiums into an “emergency” savings account for any unexpected eventualities.

Remember, while saving money is great, if it puts you or your family’s health in jeopardy, it’s not worth it.

When it comes down to it, the simplest option is to review your current policy against your needs, then compare the market and see what else is out there.

You’re then in a strong position to negotiate with your current provider for a better deal or more appropriate cover. Good luck!