Surprised by the cost of your private health insurance?

Private health insurance helps people avoid long wait times for non-urgent procedures and lets them access services that Medicare does not cover. But out of pocket costs may be a deterrent for many people to use it to pay for their medical costs.

Private health cover premiums have significantly increased recently and many customers have had “bill shock”.

What can you consider to ensure your policy is right for you?

Check the extras

Hospital insurance helps pay for private patient treatment when you're admitted to hospital (For example, fixing your broken leg), while extras cover helps pay for services outside of hospital (For example. going to the dentist).

Hospital cover is covering you for treatment that may have a major impact on your financial situation.

The cost of extras cover depends on your lifestyle. If your money is tight and you don’t think you will have the money for these services then it may be worth retaining your extras cover.

If you have plenty of money in savings then you could consider paying these expenses out of pocket, and opting for Hospital-only cover which could cover you for the major health treatments, and reduce the cost of your cover significantly.

Check your excess

Having an excess on your Hospital cover is a way of making your health insurance cheaper. Generally, the higher your excess is, the lower your premiums will be. Just like with your car or home insurance, an excess is a contribution you're required to pay towards a Hospital claim you make on your policy.

Compare the pair

You can compare your policy online, preferably via an independent source such the Australian government free website.

https://www.health.gov.au/resources/apps-and-tools/compare-health-insurance-policies

There are other options such as comparison sites however it is important to note that these can be sales sites, many websites receive payments from the insurers and can limit the policies shown depending on these agreements.

Check your payslip

There is potentially a cost to not having private health insurance dependant on your income.

Singles earning over $90,000 and families over $180,000 have to pay Medicare Levy Surcharge between 1 and 1.5 per cent of their taxable income if they don’t have private hospital cover.

Check your birthday

Another cost to not having cover is the penalty called the Lifetime health cover (LHC) which is a government initiative that encourages you to purchase and maintain private patient hospital cover earlier in life.

The ATO provides the following summary of this penalty: “If you have not taken out and maintained private patient hospital cover from the year you turn 31, you will pay a 2% LHC loading on top of your premium for every year you are aged over 30, if you decide to take out hospital cover later in life. For example, if you take out private patient hospital cover when you are 40 years old, you could pay an extra 20% on the cost of this cover per year for 10 years. If you wait until you are 50 years old, you could pay 40% more per year for 10 years.”

Think about your preferences

Consider your lifestyle preferences and what standard of care you would prefer.

Consider if you were buying a car today, some people drive sports-cars with all the bells and whistles, others drive simple practical cars that get you from A to B.

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The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional.  We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.