If you are thinking of purchasing private health insurance in the coming weeks, you may find ample reason to do so.
Recently, the Australian Government announced a premium rise of 6.18 per cent for private healthcare policyholders – though experts say this can be lowered by as much as $1,500 per year by changing your insurance provider.
The increase comes into play on April 1, so many people will be looking to pay in advance to receive cheaper health insurance premiums over the next 12 months.
A rates increase also makes it important to look at other factors, too; one of which is lifetime health cover (LHC).
What is lifetime health cover?
LHC is an initiative to encourage people to use the private health insurance. Those aged 30 and under will receive a flat rate on their hospital cover with no added loading to their premiums, though anyone over that age range will begin to see their premiums rise for each year they delay.
This is done at incremental levels of 2 per cent for each year a person does not have hospital cover, starting on July 1 following their 31st birthday.
So, for instance, if a 35-year-old decides to contact his or her health insurance broker and finds a deal with any one of Australia's 34 health funds, they will pay a 10 per cent loading on their premiums.
This is no small amount, and many people find it necessary to get onboard with private health insurance to avoid the ?so-called LHC loading. However, many others do not know about it, and this puts them in a difficult position should they decide on private health insurance later in life.
To give another example, if you are 65 years of age and take out private health cover, you will pay the maximum 70 per cent on top of the existing cost of your policy – no unsubstantial amount. What's more, it will remain at this level until you have held your policy for 10 years.
Even if a policyholder has extras coverage, such as dental, they will pay the added amount should they upgrade to hospital cover once they've crossed the 31-year threshold.
Why is now a good time to consider LHC?
This year, insurance premiums are actually rising below the cost of providing private health insurance. On average, the amount paid out by health funds rose by 7.4 per cent in the December 2014 quarter from the previous three-month period, reached a total of $17.28 billion. That's some way above the average 6.18 per cent premium increase to policyholders.
However, this is unlikely to be too much of a consolation to someone looking to get into private hospital care now. It's important to consider how quickly the loading fee and annual premium rises can combine to cost a policyholder more should they delay their move to private health insurance.
How to avoid lifetime health cover
If you are looking to purchase private health insurance hospital cover, you can avoid the LHC loading by taking out a policy before reaching 31 years of age.
Those already past that milestone will find it advantageous to get on the insurance ladder as soon as possible – and before April 1 if they wish to do this prior to the annual premium increase.
Both sets of people can also look to reduce their overall hospital policy costs by doing this through their health insurance broker. A broker's network of insurance providers gives them the ability to find a competitive deal, passing savings on to you.
To discuss this and more, contact HICA on 1300 44 22 01.