All health insurance premiums increase each year on April 1, and some Australians with private health insurance may be confused as to why this needs to happen, or if it's even necessary at all – after all, you want the best deal possible when it comes to health insurance, both in price and cover!
Here we outline the reasons for this practice and what you can do at this time of year when it comes to your health insurance, courtesy of the Private Health Insurance Ombudsman (PHIO) and their publication, the Health Insurance Insider.
Why do premiums need to increase?
Health insurance premiums require reviewing and increasing annually in order to keep up with and match the amount paid out to health insurance holders in benefits. More Australians are investing in private health insurance each year, which can also mean an increase in benefits that require paying out.
In addition, rising costs of medical and other health-related costs, such as doctors' charges and health professionals' wages, contribute to the need to subsequently raise health insurance premiums. The Health Insurance Insider points out 2012 to 2013 saw an 8 per cent increase in benefits paid out to members of health insurance schemes – hence the need to raise the cost to purchase.
How are the increases decided and what does it mean for me?
If you're wondering whether health funds simply add an extra charge without much review on April 1 each year, rest assured that potential increases are subject to rigorous processes before approval. Health funds must provide substantial evidence that the increase is required to cover the benefits paid out to members in the coming year.
Firstly, the health fund must provide the Minister for Health detailed information about finances, including cost and benefit projections. From this point, the increase is reviewed by the Private Health Insurance Administration Council, and certified by an accredited professional actuary.
The requested increase by a health fund can be rejected if sufficient evidence is not provided.
For the 2014 premium year, private health insurance holders can expect a weighted average annual increase of 6.2 per cent. However, certain health funds may have higher increases than this, so be sure to speak with your provider if you have any queries – this could be because your fund has proven a higher increase is required to cover the benefits offered by your particular policy.
It may seem that an increase in price is simply a tactic to squeeze more money out of consumers – but really, the premiums are purely to ensure health funds can afford to cover you should things go awry!