The financial strain caused by factors like skyrocketing energy bills and rising petrol and food prices has led many Australians to view insurance as a non-essential expense that can be cut from their budgets. As a result, rates of underinsurance may rise in the coming months as individuals struggle to afford the coverage they need, explains Tim Bennett, a health insurance expert at Finder.
While some Australians have yet to make changes to their private health cover, recent data on membership numbers suggests others are actively seeking value for their money. The Australian Prudential Regulation Authority reports a 2.2% increase in hospital treatment memberships, or 257,797 individuals, in the year leading up to March. Hospital coverage now stands at 45.1% of the Australian population.
However, those who have opted for hospital coverage are looking to maximize their benefits. Claims have increased by 4.9% during the same period, indicating higher utilization of healthcare services.
Consider Your Health Needs When Choosing Coverage
In deciding whether to obtain, switch, or drop private health cover, it is crucial to assess the services you are likely to utilize. This consideration is especially relevant for extras cover, where some individuals may be paying more in premiums than they receive in refunds.
Uta Mihm, a health insurance expert at Choice, highlights that many Australians end up losing money on extras cover due to this mismatch. It is important to evaluate whether certain levels of cover are relevant to your individual circumstances. For instance, 'gold' tier policies often include coverage for pregnancies, hip or knee replacements, which may not be necessary if you have completed your family or already undergone such procedures. In these cases, switching to the silver tier or lower can result in cost savings.
If both you and your partner are covered under a couples plan, it is advisable to assess individual needs. If you primarily require dental and eye check-ups while your partner has a chronic condition that demands constant medical attention, it may be more cost-effective to switch to single plans.
Potential Opportunities for Savings
While private health cover can be a significant expense, it may yield monetary benefits for individuals in higher tax brackets during tax season. Those above a specific income threshold without private health insurance are subject to an additional tax called the Medicare levy surcharge. For the 2023-24 fiscal year, the thresholds are set at $93,000 for single individuals and $186,000 for families.
To avoid this surcharge, Uta Mihm suggests that even individuals who do not desire private health insurance can opt for the cheapest policy, which is often more affordable than paying the tax itself.
An additional factor to consider is the lifetime health cover (LHC) loading. This government initiative incentivizes the uptake of private patient hospital cover at an earlier age by imposing a 2% loading on top of premiums for every year an individual is over 30.
In situations where continuous private health cover may be difficult to sustain financially, Mihm explains that it could still be cheaper to obtain cover only when needed, despite the additional loading. This approach is particularly cost-effective for individuals who require coverage sporadically, such as for childbirth and hip replacements. It is essential to evaluate your personal risk profile in making an informed decision.
For young and healthy individuals seeking the peace of mind and security that private health cover can provide, Mihm recommends exploring 'bronze' tier cover. These policies often include coverage for broken bones, the flu, and surgeries like breast and prostate cancer, making them suitable for those who desire coverage just in case of unforeseen circumstances.
