Finance expert Sarah Megginson said a once-attractive six-figure salary isn’t going as far as the cost-of-living crisis bites. ·Getty/Supplied
Health insurance premiums increased on April 1, as they do every year (no April Fool’s joke here!). Most people arrange insurance and then “set and forget”.
Health insurance is regulated in Australia in a way that means prices can only be increased once every year. Insurers also have to get permission from the government on the amount that they increase.
This year, insurers asked for about 6 per cent. The government approved an average across all insurers of 3.7 per cent.
My family’s monthly premium increased by $8. One of my colleagues at the financial comparison site Finder shared that her policy went up by $35. That’s over $400 per year for the exact same cover.
In other words: there’s a big variation in how much each policy increased.
This means there’s a big opportunity to shop around and save on your health insurance.
It’s a super competitive industry, and insurers are offering all sorts of deals and incentives to get your business, including six weeks (or more!) of free cover.
I shopped around this week and scored a total of $1,600 in discounts.
An hour online can save you a small fortune, and why spend more than you need to for health insurance?
There are a tonne of things that can impact the amount you pay for your health insurance – and every insurer treats these factors differently.
This means you could switch to an insurer with a different policy, and pay much less while still getting the same level of cover.
Here are some unexpected factors that can impact your premium (and one surprising thing that doesn’t).
Where you live isn’t just about great coffee and good local schools – it also affects your insurance costs.
Premiums vary by state due to differences in healthcare costs, regulations, and even competition between insurers.
So, living in the suburbs of Sydney versus the Brisbane CBD could mean a difference in your premium.
Personal finance expert Sarah Megginson said there are many factors that go into what you pay for health insurance. (Source: Instagram/Getty)
Are you single, coupled up, or wrangling a few little humans (either in a two-parent home or as a solo parent)?
Your relationship and family situation can impact your premium – for instance, if you have a partner, taking out a couples policy can be more cost-effective than you each having two single policies.
Adding kids to your policy may change what you pay, though in many cases, cover for your dependents is free until they’re 21 – or sometimes even older.
The heath insurance industry’s community rating system means that every person can purchase the same health insurance policy at the same base price – regardless of age, medical history and claim history.
Where your age comes into it is with Lifetime Health Cover (LHC).
If you don’t take out hospital cover before turning 31, loading kicks in.
This is applied at a rate of 2 per cent for every year you don’t have cover.
Say you decide to get insurance at 35 for the first time: you’ll pay 2 per cent extra for every year you didn’t have private health from age 31 (in this case, an extra 8 per cent).
The Medicare Levy Surcharge (MLS) applies to higher earners without private health cover: if you earn over $97,000 per year (or $194,000 as a couple), you’ll pay this extra levy of 1 per cent to 1.5 per cent of your income at tax time.
This increases to $101,000 for singles and $202,000 for couples from July 1 this year.
Finder research shows that of those people earning above $100K, almost one in five (18 per cent) don’t have private health insurance.
Your income also determines how much of the private health insurance rebate you can get your hands on.
The more you earn, the lower the rebate.
If you’re over the threshold – currently $151,001 for individuals and $302,001 for couples – you’re not entitled to any rebate at all.
You know the LHC I mentioned earlier?
The government does you a tiny favour by giving you a three-year window to ‘take a break’ from private health.
This means that once you’re over 31 and hold hospital cover, you can cancel your policy and be without hospital cover for a total of 1094 days – almost 3 years – over your lifetime.
It can be all at once, or you could take strategic pauses; for instance, you might cancel it for six months while you’re on parental leave and your income is lower.
If you cancel your hospital cover for more than 1,094 days, when you take it out again, you will have to pay the LHC Loading.
Preexisting conditions.
If you’re taking out other insurance, like travel or life insurance, any pre-existing conditions can impact both the cover you’re eligible for and the price you pay for your policy.
But health insurance doesn’t work like this.
In Australia, insurers can’t charge you extra for having preexisting medical conditions, thanks to our community-rated system, which means premiums are not based on your age, your medical history or your claims history.
You might have waiting periods for treatment, but your condition or existing illnesses won’t affect how much you pay.
Which, to circle back to the beginning of this story, is going to be more in April than you were paying previously, because of the Famous Annual Health Insurance Price Rise.
Wait – why does health insurance increase every year anyway?
