Opinion
How to manage now private health insurance costs are (seriously) rising
Victoria Devine
Money columnistAustralia is undoubtedly the lucky country when it comes to our public health system, but for the 14.7 million Australians who do have private health insurance, you might have received a letter in the mail this month reminding you that, just like clockwork, your fees are going up by an average of 3.03 per cent.
For those of you reading along and thinking, “What’s 3.03 per cent in the grand scheme of things?” stay with me.
If you want to keep your private health cover but can’t find the extra money, a number of options are available to you.Credit: Dionne Gain
The first and arguably most important thing to know about the annual rise in private health insurance premiums is that 3.03 per cent is the average increase, not the maximum.
For the uninitiated, this happens every year on April 1 (not a great April Fool’s joke, if you ask me), but the amount our insurance increases varies annually. Last year, the average increase was 2.74 per cent, the lowest in 20 years. This year, the average increase across 31 insurers is 3.03 per cent, the biggest increase in five years, but still well below inflation.
The reason this happens every year is that the cost of providing private healthcare continues to rise as people live longer and we have more complex medical needs. But, in a bid to stop runaway increases, the federal government has guard rails and protections in place.
Chief among these are annual consultations with the federal health minister of the day to negotiate and set the yearly premium rises.
If you’re able to afford health insurance and feel like it’s beneficial to you and your personal circumstances, more power to you.
When negotiations for the 2024 increase began in December last year, the private health insurance companies initially requested that premiums rise by 6 per cent. But federal Health Minister Mark Butler rejected this, citing the current cost-of living crisis affecting millions of Australians as a major factor in reducing the increase.
However, if inflation now sits at 4.1 per cent and wages have risen by 4.2 per cent, isn’t an increase in private health insurance premiums of 3.03 per cent a good deal? To go back to what I said earlier, 3.03 per cent is the average, not the maximum.
Among the top five of the country’s biggest private health insurance companies, the premium rise plays out like this: HCF is below the curve, passing on a 2.89 per cent increase, which is great news for its customers. At the same time, NIB is lifting premiums by 4.1 per cent, HBF is passing on a 3.95 per cent increase, Bupa follows with a 3.61 per cent rise and Medibank is going up by 3.31 per cent.
That means that, for some policyholders, the increase they’re now paying is much closer to (or on par with) the current rate of inflation, and just below wage increases. And if you’re feeling the pinch financially in other areas of your life, as so many of us are, that’s an important thing to know.
Of course, even with a rise at the higher end of the scale, for many the benefits of shorter waiting times, access to private hospitals and being able to claim extras are worth it. And, depending on your income, having private health insurance and avoiding paying 2 per cent of your annual income to the Medicare Levy Surcharge come tax time might be the better option.
A figure of 14.7 million people with coverage equates to just over 56 per cent of all Australians, which is a significant cohort of people. Of those, a fair chunk are experiencing financial stress or hardship right now, and might be seeing yet another increase to the household budget as the deciding factor on whether to cancel their policies.
If you consider your options and ultimately decide that’s the right decision for you currently, you deserve some credit for being so proactive with your finances and for making informed decisions. But if you want to keep your coverage but can’t find the extra money, there are a number of options available to you.
The first is to speak to your provider and see if you can downgrade your hospital or extras coverage to take the pressure off slightly. Another option, if you hope to keep your coverage where it’s at or your policy is already the entry-level coverage, is to look at your policy’s excess options.
Private health insurers provide a range of excess options, but for people with singles coverage, the maximum permitted amount is $750, while for couples and families, the maximum is $1500. An excess is the out-of-pocket amount you pay if you’re admitted to hospital for a planned treatment throughout the course of the year your coverage spans. The lower the excess, the higher your weekly private health insurance bill. But the higher your excess, the lower the premium.
Of course, having the option of paying less should you require a surgery is always great. But depending on your health and your circumstances, increasing your excess (an amount you may or may not ever actually pay) to reduce the amount guaranteed to be dedicated from your bank account every week (or fortnight or month) can have a significant impact. The great thing about excess options, too, is that they can be changed at any time.
I’m not advocating for anyone to have private health insurance or not. If you’re able to afford it and feel like it’s beneficial to you and your personal circumstances, more power to you.
But if you feel that you don’t need it, won’t use it or can’t afford it, that’s also fine because our public health system is so robust compared with many other parts of the world, and that’s something we should all be grateful for.
Victoria Devine is an award-winning retired financial adviser, best-selling author and host of Australia’s No.1 finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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