Rise and dime: How does the upcoming rate rise affect your wallet?
Private health insurance premiums are going up by an average of 2.92% in 2020. That’s a rate higher than wage growth, which means health care costs are poised to take up a larger proportion of your income.
The rate rise will take affect on 1 April 2020, giving you limited time to take action.
The Federal Government has approved this rate rise in order to help support the cost of increased health services. As the cost of health care goes up, health funds absorb some but not all of these expenses.
The rest of the costs come out of pocket for fund members, ensuring that funds are able to offer the same level of coverage.
Individual Aussies will be affected differently by the rate rise, but one thing’s for sure—if you don’t take action, you’ll be paying more for the same amount of cover.
First, let’s look at the average costs associated with the rate rise. Health minister Greg Hunt says that singles will pay an average of $0.68 extra each week, while families will pay an average of $1.99 extra each week.
While this may not seem like much, it translates to an extra $35.36 per year for singles and $103.48 for families. And this rate rise isn’t the first, nor will it be the last.
It’s true that this is the lowest rate rise since 2001, which is good news for Aussie families. But when you look at the bigger picture, Aussies paid 35.49% more for premiums in 2019 than they did in 2014, thanks in part to these incremental rate rises.
Rate rise example
So we know that the 2020 rate rise will cost families an average of $103.48 per year, but over time that number is significantly higher. Families who have remained on the same policy since 2014 could be paying over the odds for their cover.
Here’s how the cost of a $2500 family policy would have been affected by rate rises from 2015 to now:
- +5.59% in 2016 = $139.75 increase
- +4.84% in 2017 = $127.77 increase
- +3.95% in 2018 = $109.31 increase
- +3.25% in 2019 = $93.49 increase
In 2020, that family policy will cost an average of $3,057.05. That’s roughly $557.05 more than the same policy cost in 2015!
The actual effects of the rate rise
Although the figure of 2.92% is easy to focus on, it’s important to remember that it only represents the industry average. Your fund may increase its premiums by more than this number or less.
Health funds are required to let you know in writing about any premium increases. Each fund has it’s own average increase, as each policy may be affected differently.
The highest fund average for 2020 is 5.63%, while the lowest is 1.98%. When your fund gives you the details on how your premium will be affected, you have a choice to make.
Put simply, you have the option to stay with your fund and pay the higher price, or shop around for a better deal. There’s no requirement that you stay with your current fund, no matter how long you’ve been with them.
The months leading up to the April 1st deadline are a good time to review your health cover, especially if you haven’t done so over the last 12 months.
What to look for when reviewing your cover
The rate rise can be a good motivator to look over your health cover, but price isn’t the only reason to compare policies.
When you stay with the same policy for years, you’re missing out on the opportunity to find cover that better meets your needs. Health insurance is a competitive industry, which means that new products and services are being rolled out all the time.
When you compare policies regularly, you can gain peace of mind that your current cover is still the best one for you. If it’s not, you can get more value by making the switch to one that is.
Here’s what to look for when reviewing your cover:
- Your policy offers cover for features you use
- You’re not paying for cover that you don’t need, like pregnancy
- Your cover suits your family situation
- Your fund offers the best price for what it covers
Use our comparison tool to compare policies side by side while focusing on what’s important to you: price, level of cover, excess, and more. You’ll find out pretty quickly whether or not your current policy is up to scratch.
If you find a better deal, our friendly experts will help you switch over. It’s that easy!
Visit healthinsurancecomparison.com.au today to get a quote on a range of policies, before the rate rise comes into effect.