10 Smart Ways to Cut Your Private Health Insurance Costs Without Sacrificing Cover

For many Australians, private health insurance feels like one of those bills that just keeps going up every year. The instinct is often to cut back on cover or shop for the cheapest option available.

But there’s a catch: the cheapest policy is rarely the best one. The real goal is to pay less while still being covered for the things that could seriously impact your finances. So follow these simple steps to save heaps while maintaining peace of mind.

1.      Review your hospital cover level

Most health insurers offer four levels of cover: Basic, Bronze, Silver and Gold, with corresponding higher premium costs for the upper levels. Before they turn 31 years of age, taxpayers must have a minimum of Basic cover with a mandated maximum excess payment, in order to avoid the Medicare Levy Surcharge.

However, many Australians choose to pay more for Bronze, Silver or Gold cover. If you are on a higher level of cover, you could potentially save hundreds of dollars a year by reviewing the procedures you are paying for that you are unlikely to use in your current life stage (such as pregnancy, joint replacement, cataracts) and dropping to a lower cover that does not include them. You can return to a higher level of cover when your needs change.

A popular choice is the Silver Plus tier offered by some insurers, covering you for standard services in a private hospital, plus one special service of your choice from the Gold tier (such as pregnancy, joint replacement and cataracts mentioned above).

2.      Consider increasing your hospital excess payment

If you have emergency savings, you can considerably reduce your premium cost by accepting an excess payment, payable only if you are admitted to hospital, and usually payable only once per calendar year, no matter how many times you are admitted. Typical excess options are $250, $500 and $750 per person for singles, and double that for family policies. The higher the excess you can afford, the lower your premium will be.

3.      Remove extras you don’t use

Most insurers offer optional ‘Extras’ cover for non-hospital procedures not covered by Medicare, such as optical, dental and physio. But if you don’t expect to use these services, why pay for them? And even if you do use them, check how much you typically receive annually in rebates from your insurer. It may be less than the additional premium you are paying.

4.      Don’t pay for duplicate cover

Your health insurance extras policy may be duplicating health benefits you already receive from other sources, such as Medicare, NDIS, employer wellness programs, or loyalty schemes from pharmacy chains, credit cards and retailers. Costco, for example, offers member discounts on hearing aids. You may even get health discounts from your own insurer (e.g. Medibank Live Better, Bupa Plus, HCF Thank You)­ without paying more. 

5.      Combine policies and save

Instead of each family member having their own policy, opt for a couple or family policy to reduce premium costs. Most insurers also offer lower premiums on single parent policies covering only one adult and their children.

6.      Compare policies annually

Check that you are getting the best deal by comparing policies via PrivateHealth.gov.au. As well as premium costs, be sure to check for waiting periods, benefit limits and exclusions.

7.      Use the government rebate

Many people will qualify for the means-tested Australian government rebate on health insurance premiums. You can claim this upfront as a premium rebate from your insurer, or at the end of the year via your tax return.

8.      Dodge the Lifetime Health Cover loading

Make sure you have taken out and maintained private patient hospital cover from the year you turn 31, if you expect to need it later in life. Otherwise you'll pay a government-mandated 2% Lifetime Health Cover loading on top of your premium for every year you are aged over 30, up to a potential 70% loading payable for 10 years.

9.      Avoid underinsurance: exclusions and restrictions

Before downgrading your policy, check carefully for additional exclusions and restrictions attached to the lower-level cover. If you are likely to need heart treatment, joint replacement, psychiatric care or ambulance services, these may be excluded or restricted in a less expensive policy.

10.   Avoid underinsurance: life change assessment

Insurance cover should change as your life changes, so reassess your needs after marriage, the arrival of children, reaching your fifties, retirement, or being diagnosed with a chronic illness.

Your financial adviser can help you review your needs

Done properly, these steps can lower your premiums while still protecting you from the kinds of costs that could disrupt your financial plans. You can consult your financial adviser to guide you through the process.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.