A guide to obtaining cheap private health cover and reducing the cost of your health insurance premium to save money
The cost of health care is expensive, as Australian’s however we are quite lucky; the Government subsidises and helps us with our medical costs in many ways. Ranging from funding public hostpitals to reducing the costs of prescription medicines; no Australian is completely out of reach when it comes to offering medical support in some way.
In saying that, the Government can only go so far with their help; this is why people need private health insurance.
Put simply, private health insurance is a safe guard that covers us financially should we need medical assistance; this means we are not left unable to receive treatment or support should we be unable to afford the treatment (that is above and beyond Government funded assistance).
Ways you can save money on health insurance
For those wishing to either apply for health insurance or simply reduce their ongoing health insurance premium, here are some of the more popular ways to save money.
Remember, everyones circumstances are different so you must discuss any ideas you get about saving money directly with your health fund or financial planner so you continue to make smart choices for yourself.
Reduce your extras cover
Extras cover refers to items that aren’t particularly ‘life or death’ when it comes to medical treatment. Things like; massage, optical, physiotherapy, natural therapies and more.
The best way to pay less for health insurance is to remove extras you don’t need; there is no point paying for natural therapies if you don’t indeed intend to claim for them.
Popular extras that often get used are minor dental, optical and ambulance cover. Before completely removing your extras cover, check whether you can instead pick and choose with your health fund so you get the extras you need, without the ones you don’t.
Check if paying in advance saves money
Similar to other forms of insurance, some health funds offer a discount for upfront payment (of a full year). This means you may get a percentage discount if you pay a full 12 months in advance.
Increase your excess and co-payments
Your excess is how much you must pay to ‘activate’ your claim. Essentially if you have to claim via private health insurance, you will need to front the excess up front before they pay the rest of the claim.
Some health fund providers let you slide your excess higher or lower; the higher your excess, the lower your premium is in most cases. This means you need to weigh up the probability of making a major claim in the short term, versus the longer term savings you receive by upping the excess.
Your co-payment is how much you agree to chip in towards your daily hospital costs should you need to claim. The higher the amount you are willing to chip in, the lower your health premium will potentially be.
Use your health funds approved provider list when seeking treatments
For those wishing to utilise their private health insurance to the max, check with your health provider and obtain their list of approved providers that offer ‘gap free‘ treatment.
Most health funds have a list of ‘agreed providers’ that they work with; this means you might be able to receive treatment and not have any out of pocket expenses.
Avoid the 2% penalty (a long term way to save)
Long story short; the Government wants all Australian’s to take out private health insurance. To do this, they created a schemed called ‘Lifetime health cover’ which results in a 2% penalty loading on top of your health insurance premium if you don’t take out health insurance prior to the age of 30.
The 2% penalty will apply to people over 30 years of age until they hold health insurance for 10 years; it will then cease. This scheme is to encourage people to take out health insurance younger and maintain it for life.
Compare health funds (before buying and ongoing)
Before applying for health insurance, always shop around. Premiums will vary amongst providers, much the same as car insurance or home and contents insurance.
Health insurance can be very confusing so it might pay to compare with a health insurance expert or comparison service to simplify the process.
For those already holding health insurance, it never hurts to shop around once a year to check your existing provider is still competitive and giving you the cover you desire.
Government rebates that may save you money
The Government also offers an initiative to help Australian’s afford their annual health insurance premium and it is reffered to as the ‘Private health insurance rebate‘.
It is a tier based approach that looks at how much you earn, whether you have singles cover or family cover and in turn applies a discount to your health insurance premium.
Basically it gives you a percentage discount on your premium.
How do you receive this rebate?
You can have this rebate refunded to you when you lodge your tax return, or alternatively ask your health fund to apply the percentage discount immediately to your regular health insurance payments to improve your cash flow and reduce your premium from day one.
Calculating your health insurance rebate
The Medicare levy surcharge: how it works & ways to save money
The Medicare levy charges you a penalty of between 1% and 1.5% of your total annual income and is only charged if you do not have sufficient private health insurance cover.
This is a Government initiative to once again push Australian’s into using private health care and taking our private health insurance.
You can simply avoid this charge by taking out private health insurance. In some cases, it’s not much more to have health cover and you may actually save money.
See the Medicare levy tiers and where you fit in here or simply use the Medicare levy calculator.