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Why are Health Insurance premiums rising?

Why are Health Insurance premiums rising?

Over the past decade, the cost of health services in Australia has been steadily increasing; in response, health funds have, for the most part, been required to increase their premiums.

By law, private health insurers must apply to the Australian Health Minister for approval of any changes to their premium prices, which take effect each year on the 1st of April.

In 2017 Health Minister Greg Hunt signed off on an average premium rise of 4.84 per cent, which will see the cost of private health insurance for Australian families increase by as much as $2001.

The top tier of family hospital cover will rise to about $4500 annually and singles cover will jump by about $100, to $1250.

The hike was the lowest in a decade, which Mr Hunt attributed to pricing changes on some procedures, including hip and knee replacements and some prostheses.

But it was still three times the rate of inflation. And it comes on top of cumulative increases of 28 per cent since 2012.

Why are premiums rising?

Two of the main drivers of Australia's surging healthcare costs are its ageing population and the rise of chronic disease.

Two major reasons for surging health insurance premiums in Australia are our ageing population and the rise of chronic disease2.

The Australian Institute of Health and Welfare (AIHW) reports that the population aged 65 and over has more than tripled in the past 50 years, with Australians aged 85 and over increasing ninefold — trends that are predicted to continue, particularly as the baby boomer generation ages3.

These two key drivers of healthcare demand, according to the AIHW, have led to an average annual spend on healthcare by government in excess of $6,200 per person4. This represents a 74 per cent increase in health spending in state and federal budgets over the past decade.

The nearly five per cent average increase in private health insurance premiums in 2017 comes on top of cumulative increases of 28 per cent since 2012.

Some spending categories cost more than others, especially hospitals, medical services/primary care (including Medicare) and pharmaceuticals. But what is clear is that, overall, we are accessing healthcare more often; and those services, while improving in quality, are also increasing in price.

Spending more on health is to be expected in a prosperous, first-world economy – and it’s not necessarily a bad thing. With extra costs come extra benefits.

Australia has high life-expectancy rates and a standard of healthcare well above many other nations. As medical technology progresses, we’ll enjoy better treatment in the future too.

However, these improvements have a flow-on effect on insurance providers, resulting in higher premiums for consumers.

While it’s important to be aware of the average price increase nationwide, it’s what it means for your specific policy that is the real question: Before the 1st of April, your health fund is required to inform you in writing about how much your premiums will rise5.

Not all health insurers are the same

Private health insurance allows you to choose who treats you, when and where.

It’s become increasingly clear to the federal government that the status quo for Australian healthcare is far from perfect or even sustainable, yet major cuts to health funding can have serious and far-reaching consequences.

As mentioned above, private health insurance premiums will rise in 2017 by an average of 4.48 per cent.

While there’s not much you can do about the overall annual rises in health fund premiums, there’s plenty you can do to reduce your personal health insurance costs — and that’s by comparing the market.

While on the surface there may appear to be little separating the different health funds, if you dig a little deeper you’re likely to find incentives for switching to another insurance provider

If you already have private health cover, the month of March is an ideal time to assess your current policy and how it stands independently and in comparison to other insurers’ policies: Are you getting the cover you want? Are you possibly paying for cover you don’t need?

The health insurance industry is ultra-competitive. While on the surface there may appear to be little separating the different funds, if you dig a little deeper you’re likely to find incentives for switching to another insurance provider, such as discounts for signing up online, policy add-ons, bonus deals, extra services, and referrals.

If you’re looking to buy private health insurance for the first time, now is the right time: Unexpected illnesses and injuries can happen to anyone at any time and private health insurance can give you the ability of choose your doctor and hospital and help you avoid public hospital queues.

Health insurance can also assist in payments for specialist medical services like dentists, chiropractors, podiatrists, physiotherapists and optometrists, which are generally not covered by Medicare.

Australian Health Minister Greg Hunt has highlighted mental health as an area of focus and expects it to be a ‘critical part’ of his role6; private health insurance can also assist with payments for psychologists and psychiatrists.

Ways to reduce your healthcare costs

One of the ways to reduce your healthcare costs is to pay your annual insurance premium before April 1 to avoid potential price hikes for 12 months.

Keeping yourself healthy is by far the easiest way to beat the rising costs of healthcare, as so many of the current burdens on our national health system are caused by diseases and conditions that could be prevented by simply adopting healthier lifestyle choices.

Though Australia’s health system is highly accessible, often the most difficult part of  preventative health is making the time to visit your doctor. However, by being checked sooner rather than later, you can potentially save a considerable sum in treatment costs by catching a problem early. In some cases, a rapid diagnosis might even save your life.

When assessing which private health insurance policy is right for you, there are some important points to consider. An insurer’s FAQs web page and member guide are good places to start for information about what you will be covered for and, just as importantly, what you won’t be.

An insurer’s FAQs web page and member guide are good places to start when assessing which private health insurance policy is right for you.

If you’re looking for a new insurance provider in order to reduce costs, questions to consider include:

  • How long have they been in business?
  • What independent industry awards have they won?
  • What’s their complaints record like?
  • How many testimonials from happy customers have they received?

The Australian Private Health Insurance Ombudsman also provides useful annual reports on providers, to help you make a more informed decision.

Other ways to reduce your health care costs with your current healthcare provider include:

  • Pre-pay your annual premium upfront before April 1 to avoid potential price hikes for 12 months.
  • Assess your level of cover — you may be paying for more than you need for your stage of life or circumstance.
  • Ask if your provider offers discounts for direct debit payments.

And always read the member guide thoroughly so you know what’s covered and what isn’t – this will prevent surprises when it’s time to make an insurance claim.

If you’re looking for great health insurance, be sure to get a quote from Budget Direct.


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