The cost of health insurance is generally considered the factor that separates the 50/50 split of Australians with and without policies.
People need to feel reassured that what they are paying as a monthly premium is not above the cost of their medical expenses, otherwise what's the point? This balance is threatened when the cost of premiums rises sharply, as it has done in recent years.
According to UBS insurance analyst James Coghill, projected annual premium increases of around 6 per cent will be almost double the rate of inflation. However, with incremental changes to the private health insurance rebate, Mr Coghill believes the overall price of health insurance could rise by as much as 10 per cent in the coming years.
Of course, one of the main reasons for this is due to the increasing cost of more advanced medical treatments. Technology is playing a huge part in improving health care, though this too needs to be balanced with the potential risk of putting health insurance out of reach for lower-income families.
We look into the prospects of a sharp rise in health insurance premiums, and discuss ways that policyholders and those hoping to buy health insurance can limit their expenses.
Rising health insurance premiums
Mr Coghill's comments, reported this month in the Sydney Morning Herald (SMH), suggest that the annual 6 per cent premium rise will impact the availability of health insurance. However, an equally impactful factor will be the recent changes to the way the private health insurance rebate is applied
Since the rebate began in 1999, it has worked to improve the accessibility to Australia's private health insurance market. An immediate success, the number of people with health insurance rose from 31 per cent to 45 per cent in only one year, the SMH reported.
Now, a July 2014 policy change means the rebate is proportionally smaller than it has been in the past – and it is expected to shrink even further, meaning insurance premiums could climb by around 10 per cent, as Mr Coghill explained.
"At this rate of PHI (private health insurance) inflation, premiums would increase from 1.7 per cent of disposable income (i.e., gross income less tax and Medicare levy), to 2.3 per cent by 2019-20 and 2.8 per cent by 2024-25," he said.
All this means that an estimated one in five policyholders could face a large increase over the next three years.
Lowering the cost of health insurance
Those looking to stay or enter the private health insurance market still have options. With such a competitive industry, buyers can look across the breadth of Australia's insurers to find a selection of policies that suit their budgets.
For instance, the average premium rise back in April 2015 was 6.18 per cent, though some policies increased by as little as 3.98 per cent.
"Shopping around" is one of the most widely used methods for finding an affordable health insurance policy, though there are complimentary methods that could also prove advantageous.
Mixing health insurers for different products is possible, though not all policyholders take advantage of this. Your insurer's hospital cover premium may be great, but that doesn't necessarily mean their dental cover costs are similarly low.
Buyers can also include an excess into their policies and agree to pay some of the cost of any benefits they receive. In return, the monthly or annual premium is usually lower.
What's more, policies can be limited, if the buyer feels comfortable doing so, with some benefits restricted if the policyholder feels like they won't need such benefits in the future – such as maternity cover, for instance.
If you are concerned about the cost of your health insurance, contact HICA on 1300 44 22 01. Our experts are well-versed in finding policies that strike a balance between quality and cost, meaning the impact of any expected rises can be softened.