Nicole Pedersen-McKinnon* shares her strategies for keeping private health cover but at lower cost.
In barely over a month, the cost of all our private health insurance will go up, again.
Hooray for the 15 funds that have delivered a deferment of a few months (at time of going to press), but every other member in the country will be slugged with a health insurance hike on top of an everything-else-in-our-lives spike.
The average premium is set to go up by 2.9 per cent (it was 2.7 per cent last year) but much medical cover will shortly jump even more, as much as 5.38 per cent.
It might be tempting, but I know from personal experience that no one can afford to drop their health insurance.
As of Thursday this week, I’ll be two years breast cancer-free… an achievement I thank my health insurance for.
Without it, I may have had a different story.
Instead, look to get it cheaper.
One effective strategy – detailed in part one of this series – is to pay your annual premiums before the April 1 official rise applies, which can lock in 2022 prices for up to the next two years.
But, let’s face it, right now not everyone can find the extra money to pre-pay.
So, let me explain how you can cut your insurance costs (which are, don’t forget, tax deductible) in five more ways.
Saving strategy 1: Up your excess
An excess is a small amount you pay for a hospital visit before the health fund’s funds kick in.
It is only once a year and only for the adults on the policy; no excess is payable for kids.
Now, a single person can have an excess as high as $750 and a couple, $1500, and still be exempt from the Medicare Levy Surcharge (a penalty of up to 1.5 per cent of your salary if you earn over $80,000 as a single and $160,000 as a couple and don’t have private health insurance).
A higher excess means an instantly lower premium.
Just be wary of agreeing to a related but oh-so-different money ‘saver’.
A, maybe, $50-per-night-in-hospital co-payment could end up, if you are unfortunate enough to have to spend some time there, costing a small fortune.
Saving strategy 2: Mop up the extra years
Amid the repayment pain in the pandemic, when many people were abandoning private health to save money, the government passed legislation to allow older adult children still living at home to be covered by family policies, from age 24 to 31.
It’s up to the individual insurer to choose the age, but this could be a welcome ‘freebie’.
And there is another age-related potential policy saving of which to be aware.
Buy cover between the ages of 18 and 29 and an insurer may also choose to give you a discount of up to 10 per cent.
You’ll also retain that discount until you turn 41, after which it will be gradually phased out.
But be wary of waiting until age 31 to get health insurance over.
A premium penalty of 2 per cent applies for every year you delay thereafter, up to a 70 per cent ‘lifetime loading’.
And if you decide to get medical cover later in life, you might wear both the Medicare Levy Surcharge and then up to 10 years of the above premium loading.
Which makes no financial sense.
Saving strategy 3: Take advantage of ancillaries
When you take out health cover, you have the option of just basic hospital – all you need to obtain an exemption from the Medicare Levy Surcharge – or hospital and extras.
Yes, the latter option costs more but not many people realise that payouts on ancillaries or extras cover, can sometimes combat the entire cost of the policy.
It ‘helps’ if you need physiotherapy, to visit an osteopath or a chiropractor, or a number of other regular treatments.
In this case, you are often able to claim something for exercise rehabilitation… and possibly gym membership.
If you have kids, you could even claim $200 of their swimming lesson.
Look up an allowance called something like ‘health management’.
Then there is optical assistance for anyone who needs glasses or contact lenses, two free annual dental checks for everyone on the policy and it’s ‘happy days’ if someone needs orthodontic treatment and you have good limits.
Paying extra upfront can pay for itself!
Saving strategy 4: Pick and mix your medical services
Done having kids but still paying for obstetrics? It’s probably costing you $500 extra a year.
Similarly, are you covered for kidney dialysis and hip replacements, but still young? See if you can pick the exact services that may be relevant to you.
If your fund won’t let you select like this, and some cynically don’t, select a fund that will!
Savings strategy 5: Get the best, forget the rest
If none of the above saves/makes you enough money, it may be that it’s time to move funds.
The excellent and independent privatehealth.gov.au lets you put in your specific parameters and requirements, and tells you the best-value policies for your needs.
Remember, you don’t need to re-serve hospital waiting periods and a new fund will probably also waive waits for extras for which you have already qualified.
And here’s the thing: the lead up to April 1 is the very best time to ditch and switch.
At this time of year, rival health insurers give all sorts of concessions – and even cash rewards – to seal your health insurance deal.
And what better time, purse-string and personal safety-wise, to get more cover for less cost.
*Nicole Pedersen-McKinnon is a financial educator and commentator, and the author of How to get mortgage-free like me.
This article first appeared at au.finance.yahoo.com.
