Every year, Australian health insurance rates can increase but 2020 will see the lowest average increase to premiums within the field in 19 years.
The past two decades have seen health cover premiums go up anywhere from 3.25% to 6.2% per year. This year, the request from the industry was for a 3.52% rise, but the final government-approved increase came in at just 2.92%. The increase will go into effect 1 April 2020.
Will my premiums go up 2.92%?
Average industry increases can be confusing. Your premium increase is extremely unlikely to go up exactly 2.92%, because the annual rate rise is merely macro-statistical. The average uptick does not account for the relative value of an individual insurance policy. Actual premium increases can range from 1.98% to 5.58%, based on the fund and the level of services provided.
The Department of Health typically accompanies the data on industry average increases with a disclaimer, stating that consumers' experiences will differ depending on their insurer. Specifically, higher or lower increases to the average are not indicative of the relative value of a particular policy to any individual.
"It is absolutely correct that the industry weighted data of a fund may bear no resemblance whatsoever to the actual increase experienced by an individual insured policy composition," said Jethro Still of HICA. "But more than that, this sort of average increase data does not necessarily indicate relative value of a fund, its products, services, nor indeed premiums."
My premium is increasing: Should I switch funds?
Australians across the board are likely to see an increase in premium, but that increase may be higher or lower than the industry average. How much your rise in premium is isn't necessarily relevant to the actual value of your policy or the services your insurer delivers. It's also not a good indicator of whether or not you should switch policies.
"To illustrate this important point, let's assume that Fund A and Fund B have comparable cover in terms of benefits and services offered for a particular policy," continued Mr. Still. "Fund A's premium for this cover is set to increase by 10% in April. Fund B's equivalent cover is set to increase by 5%. Is it reasonable to assume that Fund B's policy is better value? Not necessarily. It all depends on the base premium to which the percentage increase is measured and applied.
"For example, Fund A's current premium is $90 per month. Fund B's current premium is $100 per month. A 10% increase to a $90 premium is $99, while a 5% increase to a $100 premium is $105. Fund A's product still offers better value for a comparable product compared to Fund B, despite the considerable differential in this year's increase."
Compare before you switch funds
There are 38 registered private health insurers in Australia, and each one will have their own ultimate rise in premium. Before switching insurers, you need to ensure the alternative policy is genuinely more appropriate for your needs. Consider the whole picture of an insurer before deciding to change funds, and compare policies to find the right fit.
To find out more about your insurer and the increasing premiums scheduled for 1 April, contact a HICA representative today and book in for a free consultation.