Private Health Insurance Premiums Set to Soar
The Federal Government today announced they have approved an average 5.78% rise in Private Health Insurance premiums. The increase means the price of Health Insurance will increase by around 2.7 times the inflation rate and continues the trend of 'medical inflation' outstripping the CPI. Families are likely to be slugged up to an extra $200 a year from 1st April. Today's announcement will again leave families struggling to balance the household budget.
Premiums have risen by around 73% since 2002. Over the same period the CPI has risen 29% meaning that the real cost of Private Health Insurance has increased by around 44% in real terms above the inflation rate.
Price increases are a fact of life and the reality is that hospitals and doctors continue to increase their fees each year. Pharmaceutical costs rise and medical technology improvement's contribute to the cost increase and these increases are ultimately passed on by the funds to the consumer.
Roger McBride from iSelect, Australia's largest private health insurance comparison and advisory service, said that "despite the cost increases we have seen a increase in consumers taking out Private Health insurance with adoption levels now reaching 44.7% of the population (as at December 2009). This high adoption rate is driven in part by a lack of trust in the public system. Consumers are looking at the public system and they are rightly concerned, they are willing to dig deep, even in tough times, for the peace of mind of having Private Health Cover. This is despite rising costs and tax changes to the Medicare Levy Surcharge" he said.
Roger McBride says "consumers more than ever must look at how they can cut the cost or increase the value of what they are getting from their health cover. Afterall, it's a competitive market with 37 health insurers out there vying for your health insurance business".
It seems you can't change rising health premiums. But you can change to a smarter plan, Roger McBride of iSelect explains "we often see people that are paying a higher premium than they need to just because they don't have time to trawl through the myriad of policy options out there, let alone understand the fine print or terminology".
Need to Review Your Policy
Rising private health insurance costs have consumers increasingly reviewing Private Health Insurance, however, according to iSelect a massive 54% of people have never reviewed their Private Health Cover and a further 19% have not reviewed their cover for between 5 and 10 years.
"With ever changing circumstances and large variances in costs between funds it's vital to review your cover to ensure its right for your current health and family circumstances" Roger said.
The 54% or around 5 million consumers may be either over or under insured, but importantly they may have been paying for inappropriate cover for many years.
iSelect's top 5 tips for dealing with the Private Health Insurance Premium increase
Cut your premium
Don't pay for unnecessary benefits or cover you may not use or want. Also premiums can vary significantly between similar policies and it's important to shop around. Optimise your level of excess balanced against your likelihood of hospital visitation over the net two years as different excess levels will impact your premium significantly, potentially wiping out the the effect of the latest increase.
Give your policy a health check
Shop around and compare what else is available - another similar policy may provide a greater level of benefit suited to your needs. Services like iSelect compare a range of health insurers and rank the features and benefits between selected funds and help you to understand the important things to consider before choosing a policy. Remember your right to switch between providers is protected by law and can be done at any time. When moving to a similar or lower level of cover you generally wont have to re-serve waiting periods.
Avoid taxes and penalties
Dropping hospital cover may expose you to penalties such as the Medicare Levy Surcharge (1% additional tax charge) and Lifetime Health Cover loading applied as a 2% price increase to the cost of your Hospital policy for every year you're without cover above the age of 31. It's also important you keep abreast of any changes to government incentives and penalties that apply to Private Health Insurance.
Plan ahead -- especially for babies
When selecting the policy that's right for you consider not just your current needs but your likely circumstances over the next two years. Remember waiting periods apply to such things as pregnancy or pre-existing conditions. When your circumstances change it is time to review your Private Health Insurance. iSelect fields thousands of enquiries each year from couples failing to take out cover before starting a family.
Maximise your extras
Consider the need for both Hospital and Extras cover. Extras is where you can claim on everyday out of pocket expenses on things like dental, optical, chiro, physio and other items, so you need to maximise the benefits and minimise the cost.
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