Australian citizens are entitled to free basic healthcare and necessary medical care under Australia’s Medicare system. Even so, many people choose to take out private health insurance cover through an authorised private health fund.
Private health insurance has certain advantages over Medicare. It is less limited, allowing you more say in which hospital you attend and which doctor you see. Private healthcare may also pay for things that Medicare doesn’t cover, such as elective surgery and complementary therapies.
Government Regulation of Private Health Insurance Rates
As well as offering a rebate to private health insurance holders, the Australian government is able to exercise a certain amount of control over the cost of healthcare. Private health insurance is community rated, meaning that premiums are set at the same level for the same cover, for everyone in a particular state.
Health funds are not allowed to charge higher premiums based on risk factors like age, lifestyle, or pre-existing conditions. Nor can they refuse coverage for similar reasons. In order to comply with legal requirements, it is sometimes necessary for insurers to put their premiums up; however, insurance companies must apply to the Government when they want to raise premiums. Premium increases occur in April of each year.
Private Health Insurance Rates in 2012
For 2012, the average private health insurance premium increase is 5.06%. Health Minister Tanya Plibersek reports that the percentage increase in health insurance rates for 2012 is the lowest in four years. This was partly achieved by querying many insurers’ applications for an increase in premiums, asking for evidence and insisting that some insurance providers accepted a lower increase.
Premiums for health insurance policyholders vary across different insurers and different products; how much you pay will depend largely on your policy type. The same applies to any increases in your premiums. However, the cost of premiums is kept within a narrow band set by the Government, and increases in the cost must be justified before they are permitted.
Applications regarding private health insurance premiums are scrutinised and assessed by the Government to make sure that the increases requested are at the minimum level necessary to allow companies to meet their legal obligations. If the increase is deemed excessive, the Government can query it, requiring that the company provides information and evidence to justify it.
Excessive premium increases can be refused by the Government, leaving the insurance provider to set a more modest rise. In the case of the 2012 round of applications for an increase in premiums, 24 of a total of 34 private health insurance providers were required to resubmit applications with further evidence. Some insurance providers — seven in all — lowered their premiums in response to the Government’s insistence that they reapply.
The lower premiums from those seven companies results in an overall decrease in premiums for approximately four million people, representing 38% of all private healthcare customers. The increase for 2012 is down from 2011′s increase — 5.56% — by half a percentage point. This is actually less than the rise in the amount charged by doctors and hospitals for their care.
Your health insurance provider will contact you to let you know if your premiums are increasing, and by how much. You can easily compare your insurance provider’s increase with the percentage rise in other providers’ premiums, as the average increase for each individual provider is made public by the Government at www.health.gov.au. So k eep an eye on your health insurance premiums, and remember that the Government authorised increases are announced every April.
This article is opinion only and should not be taken as financial advice.
Filed Under: Industry News