Cutting the cost of health cover

It's that time of year when health cover costs make headlines, and sure enough, from 1 April, health insurance premiums are set to rise.

According to comparison site Finder, families pay an average of $392 per month for health insurance, and it’s unlikely premiums will fall any time soon.

The combination of an ageing society and more advanced (and more costly) medical treatments mean that in just five years, families could be paying as much as 10% of their disposable income on health insurance compared to 8.8% at present.

The problem is, health insurance isn’t one of those products you can walk away from and simply pick up again later in life. The system is geared to maintaining cover, and fund members are only allowed up to 1,095 days without cover before loadings apply if you want to rejoin.

This can make it worth looking at ways to save on premiums rather than opting out altogether.

Save on cover

An important step is to go through your policy to see if you’re paying for inclusions that aren’t relevant to your needs. And, be prepared to think outside the square.

If you have a couple’s policy for example, it could be worth taking out two single policies if only one of you requires top hospital cover for, say, obstetric care. The same applies to extras cover. One person may want major dental cover, while the other may rarely need to see a dentist.

If you have the cash available, it’s possible to lock in prices for the next 12 months by paying a year’s worth of premiums before 1 April.

However, on the average monthly premium of $392 this would only result in a total saving of $143. Unless the fund offers additional perks for paying in advance, which some do, you could be better off using the money to pay down high interest debt like a credit card balance.

Your adviser can crunch the numbers to determine the best use of your spare cash.

Could you get a better deal?

A smart move is to check if you could get a better deal by switching to another fund. I realise this involves some hassle and paperwork, but we tend to stick with the same health fund for an average of 12 years, so there’s a good chance you could save by shifting to a different fund. You shouldn’t have to re-serve a waiting period if you transfer to a policy with the same or a lower level of cover.

Alternatively, check if you’re eligible to join a restricted membership fund. These are open to members of particular occupations, and the annual premium increases for these funds tend to be more modest.

The key is to speak with your financial adviser to identify strategies that let you save while enjoying the reassurance of health cover.

 

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.

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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.