Don’t take premium increases lying down
Funds are about to hit us with another big annual premium increase but there’s no need to take it lying down
Well, it’s almost that time of year again. Sad to say, this has nothing to do with the Easter bunny (if it did, he’d be a rather nasty rabbit indeed). Instead, April brings the annual doom and gloom of soaring private health insurance premiums – a growing strain on the average household budget.
It all starts in March with the dreaded letter from your fund notifying you of increased premiums and possible changes to your benefits. This year premiums are expected to go up by an average of 4.84% and have increased by more than 50% since 2010 due to rising medical costs. Funds also appear to have reduced their benefits for basic-cover policies. Australian Prudential Regulation Authority (APRA) statistics reveal that 38.5% of insurance policies contain exclusions, up from 36.4% a year ago and 26.7% three years ago.
Health insurance is complex as well as expensive but if you carefully read your policy statements and choose the right cover you can save money and avoid certain penalties.
Review and research
As your life changes, so should your cover. This is more important than ever now that funds are increasing their exclusions. Laura Crowden, a spokesperson for the comparison site iSelect, encourages fund members to review their policies and consider switching if the policy no longer contains the benefits they need. According to Crowden, in 2012 almost 80% of the policies bought through iSelect included pregnancy cover. Now only 22% do. So don’t ignore your fund’s letter or you could be in for a nasty shock.
“Funds have been shutting down existing products to new customers and instead replacing them with new products without specific features, such as no pregnancy cover or excluding psychiatry,” says Crowden. “They then put up the price of older products to shift existing
customers off it and onto new products with more limited features.”
iSelect has noticed an increase in policies that do not cover insulin pumps, cochlear implants, surgical dental implants and weight-loss surgery. Spinal and brain surgery also seem to be excluded from lower- and mid-range policies.
If you plan to have a baby or are simply getting older, it’s a good idea to re-evaluate your cover. Costs vary significantly depending on what you want. If you have obstetrics cover but decide it’s not the right time to have a baby, cutting it out can significantly reduce your premium, while adding top-level procedures such as cardiac treatment and joint replacement in your older age can significantly increase it. For example, a quick search on the website privatehealth.gov.au found a policy with top-level hospital cover for singles in NSW for $146.16 month with an excess of $500. To include coverage for a child with the same fund costs $364.80 a month – that’s a jump of $218.64. If you need to compare details, privatehealth.gov.au can help you look at all policies available in your state.
Aside from exclusions, you should also check your extras, waiting periods, co-payments and limits. You can change providers at any time and you don’t have to re-serve any waiting periods that you’ve already served with your previous fund, provided you’re moving to a policy with equal or less cover. On certain conditions – for example, if you’ve been in an accident – some funds may also waive the waiting period for new or higher-level cover, so shop around to see what you can get.
“If your current policy covers you for cardiac and spinal and you move to a different policy that also covers you for cardiac and spinal, you won’t have to re-serve that waiting period,” says Crowden. “A lot of people think that if they move they’re going to have to serve a new waiting period, and that’s not the case if you’re moving to an equal or lower level of cover.”
If you’re upgrading, there are a few things to consider. According to the Private Health Industry Ombudsman, if you opt for a higher level you will have to wait 12 months before you are fully covered for obstetrics or treatments for a pre-existing condition. Some policies also apply a benefit limitation period of 24, 36 or more months on certain procedures, which usually commences after you have completed your standard waiting period. Couples policies Did you know that couples policies have virtually no benefit to you at all? Well, aside from the convenience of having two people’s documents under one contract.
“There is absolutely no benefit to couples insurance other than from an administrative point of view,” says Crowden. “There’s no financial incentive to have a couples policy.”
If you are a couple and require different levels of cover, it will no doubt work out cheaper to take out two singles policies with varying amounts of cover. For example, if one person in the relationship wears glasses and the other doesn’t, the person with 20-20 vision won’t have to pay for those included services. You will save money if you split your cover and tailor each policy to your individual needs.
Family policies, however, are a different story (see table, below). “There is definitely benefit for a family policy if kids are part of the equation,” says Crowden. “It’s always cheaper to have a family policy with two adults than to have one single plus one single’s parent policy with the child.”
There’s no financial incentive to have a couples policy”
Mind the gap
If you are a private patient needing hospital treatment, Medicare will pay 75% of the Medicare Benefits Schedule (MBS) fee for each listed item if it’s part of your treatment. If you are eligible, your health insurer will pay the additional 25%, which most do anyway. But if your doctor charges above the MBS fee, you may have to pay the gap.
According to APRA figures, the average gap amount paid by patients in the September quarter in 2016 was $129 for medical services and $284 for hospital episodes.
Finding a hospital or a doctor with a gap agreement is a great way to cut costs, as you are more likely to end up
with no out-of-pocket expenses. It’s worth discussing gap cover agreements with your fund to find out what options you have. It’s also an important consideration when switching funds.
“Ask whether there are any hospitals or doctors that have a no-gap agreement, so if you change your hospital or change your doctor you may be able to pay less,” says Crowden. “A lot of the funds now have their own dental clinics or affiliated network of dental and optical. That’s where they’ll give you guaranteed no-gap on a pair of glasses or your dental check-up.”
Privatehealth.gov.au has a comparative table on funds’ gap agreements. It’s worth checking to see where you might be able to get cheaper treatment.
Incentives and perks
Premiums will rise on April 1, which iSelect estimates will cost families an extra $185 on average per year. Don’t panic – there are a few things you can do to reduce the impact.
Pre-pay and save. If you pay your annual premium upfront before April 1 you can beat the increase. Many funds provide extra incentives for members to pay their premium a year in advance. The Private Health Ombudsman says these incentives can include a discount on the premium or a deferral of the increase. And according to iSelect, you might also be able to wrangle a discount if you opt for a direct debit payment. This will also help you to pay on time and avoid any late penalties.
Choose a higher excess. Most funds allow you to increase your excess for a reduced premium. This, of course, means that you will have to pay more if you need to go to hospital. While you might think you can save by dropping extras and increasing your restrictions, the Private Health Ombudsman says opting for a higher excess is a more sensible way to reduce the premium.
Find out if you’re entitled to a corporate or restricted fund. Often their members enjoy exclusive discounts and perks, such as lower premiums for higher levels of cover or free gym membership. Talk to your employer and find out your options. You may also be entitled to join a fund that someone in your immediate family has access to.