Watch Out For Health Insurance Premium Rises On April 1

It’s no joke: on April 1, health insurance premiums will rise across the board for Australians. As such, if you can afford to pay in advance, this week is a good time to do it.

Health insurance is a tightly regulated industry, and the premiums which insurers can charge are closely monitored by the Federal Government. Each year, insurers apply to the government with details of how much they plan to increase their premiums in order to ensure they remain a solvent, viable concern. Once those rates are approved, they are applied from April 1.

The government now publishes an online summary of how the rates have changed for each provider. While the average increase is 5.56%, this varies widely between insurers. For instance, premiums at the Railway & Transport Health fund will rise by an average of 14.38%, while the Reserve Bank Health Society premiums are only going up by 1.5%.

The key thing you can do to avoid these increases is to pay your premiums in advance ahead of the rate change. If you’ve paid for 12 months of cover prior to April 1, you’ll be covered by the rate that applied when you paid in advance, not the post-April 1 rate.

It’s worth pointing out that it’s not compulsory to take up health insurance in Australia — in theory, you can rely entirely on Medicare. However, quite aside from whether you get stuck on waiting lists or get no choice about who treats you, that decision has financial consequences. If you earn more than a certain amount and you don’t have private health cover, you’ll be liable for the Medicare Levy Surcharge. That’s assessed at 1% of your taxable income (fringe benefits and super contributions above the defined minimum are also included).

For the 2009-2010 financial year, the surcharge applied for incomes of above $73,000. So if you earned $75,000 a year, you’d be liable for $750. Assuming you can find a health insurer that costs that amount or close to it, then the theory is that you’ll sign up for the insurance rather than pay the surcharge. Most working Australians are also eligible to receive a 30% rebate on the cost of the insurance, though note that this is usually factored into the quoted price from major insurers. (There’s also rules which make insurance costlier if you don’t sign up to it at a young age, but that’s a topic we’ll examine another time.) The government-run PrivateHealth site lets you compare the full range of available private health plans.

Private health insurance premium increases [Department of Health and Ageing]

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