Australians are being urged to review their health insurance cover as insurers prepare to pass on higher prices to consumers – adding to the building pressure on household budgets.
Private health insurance premiums will rise by $125 on average in 2022, or 2.7 per cent, according to the latest Health Department data.
Some insurers have delayed the hike, but many households will still be forced to shell out a higher proportion of their income for the same level of cover as premiums outpace wages growth.
Experts said it was therefore a good time to work out whether your policy still offers value for money.
Consumers Health Forum chief executive Leanne Wells said the best place to compare private health insurance policies was the government-run website privatehealth.gov.au.
“Before switching, people should not only compare prices, but also policy inclusions to weigh up the costs and benefits,” Ms Wells said.
Health insurance price rises in 2022
Despite calls for consumers to review their policies this year, new data from comparison firm iSelect finds almost half don’t even know when their premiums will go up.
That could be because the timing of the premium rises this year differs from last year.
Generally, premiums rise on April 1 every year, but in 2022 some insurers have delayed their increases because of the pandemic.
Some of Australia’s largest health insurers – Medibank, NIB and AIA – have delayed their hikes until September 1, while HCF has delayed theirs until November 1.
It means most consumers still have time to work out whether their cover fits their needs before being slugged with higher rates.
That’s the good news. The bad news is the cost-of-living pinch will worsen for many households when these hikes do eventually occur.
Although the 2.7 per cent average premium rise in 2022 is much lower than previous years, it is still faster than the current rate of wages growth, which means the real cost of health insurance will rise.
Making matters worse, some of the largest insurers plan to raise premiums by much more than the industry average, including Bupa and Medibank, which together insure more than half of the entire market.
Medibank will raise prices by 3.1 per cent, while Bupa will pass through a 3.18 per cent hike.
It comes despite healthy profits for insurers, with the latest Australian Prudential Regulation Authority data showing industry profits rose 5.8 per cent to $26.4 billion over the past December quarter.
In fact, as the below table shows, most insurers across the industry will raise prices above the average.
How to review your cover
With those price hikes in mind, experts said it’s a good time for consumers to ensure their health cover is fit for purpose.
iSelect data shows almost four out of 10 consumers (39 per cent) who reviewed their cover and then switched providers over the past two years saved at least $100 a year on their premiums.
About 18 per cent of customers surveyed said they saved about $300 a year after switching.
iSelect spokesperson Sophie Ryan said customers who haven’t reviewed their policy in years could find that it contains cover they no longer need.
“We know many households are struggling financially due to the COVID-19 pandemic, so finding any extra savings or better value could be very beneficial,” Ms Ryan said.
Ms Wells said anyone looking to review their private health cover must consider the stage of life they are in and how this relates to their health needs.
For example, if you plan to have children you may want cover for all pregnancy-related costs, or if you are nearing retirement you may want options for joint replacements.
“Before switching, people should not only compare prices, but also policy inclusions to weigh up the costs and benefits, and ask questions like: Are they looking for a combination of hospital and general cover, or just one or the other?” Ms Wells said.
iSelect has five other tips for those looking to get a better deal:
- Review your policy regularly – Ask yourself what you need to be covered for, and review your policy to ensure you aren’t paying for things you don’t need
- Ask yourself if a higher excess could save you money – Higher excess costs or co-payments generally result in lower annual insurance premiums. If you think it’s unlikely you’ll be admitted to hospital in the near future, you could opt to pay a higher excess to achieve a lower premium
- Check offers, deals and freebies – Some funds offer incentives to customers before the hikes on April 1. You could therefore lock in a much cheaper price if you shop around and take advantage of these deals. But be careful: The cheapest insurance often doesn’t deliver the best cover
- Review the extras – Many insurers offer extras and rebates for extras cover (think dental or allied health services). Before signing up, ask yourself if you need these extras. Consider flexible products that combine separate extras limits into a single annual limit that you can use across different health services
- Know your rights – Don’t be punished for switching. Any hospital benefit waiting periods you’ve already served will be protected by law if you switch to an equivalent or lower level of hospital cover.