Last Updated on 2 September 2020

A guide to health insurance premium increases


Australian couple in their backyard: health insurance comparison

Every year, the government approves a rate increase for health insurance premiums. This increase usually goes into effect on 1 April each year – however, due to the COVID-19 crisis, most health funds have deferred their premium increases until October 2020.

If you have private health insurance, your fund should tell you if your premiums are increasing and by how much.

If your premiums are going up, it’s worth comparing policies as switching to a new health fund could save you money.

Have more questions? This guide covers how the health insurance rate rises work, average yearly increases by health fund and how to get value for money if you’re thinking about switching funds.

Key points
  • Every year, the government approves a rate increase for health insurance premiums
  • In 2020, most health funds deferred their 2020 rate increase from April until October as a result of COVID-19
  • Switching your health insurance policy could save you money if your premiums are going up..

Why do health insurance premiums increase each year?

Before we get into what you can do about the rate rise, here’s a bit more information on why you see your premiums go up every year. The most common reasons why private health insurance funds increase their premiums annually include:

  • More people are accessing our health services each year.
  • More older Australians and higher rates of conditions like cancer or heart attacks places a bigger strain on our health services.
  • Improved treatments often cost our healthcare system more.

These factors help explain why providing insurance is more expensive for our health funds each year. They don’t always pass on the additional costs to us, the customers, but when our premiums go up, this is generally why.

Rate rises aren’t ideal but in theory they allow health funds to continue to be competitive in what they offer their customers, such as additional services and benefits.

Who approves health insurance premium increases?

The federal government is responsible for health insurance premium increases. Although the Department of Health is responsible for approving rate rises each year, it doesn’t directly dictate how high or low the increase should be.

This means rate increases can vary from health fund to health fund, and from policy to policy.

When are premiums increasing in 2020?

As it stands, some health funds are due to increase rates on 1 October 2020. The increase was deferred from 1 April as a result of the COVID-19 crisis and its impact on the health sector.

This impact included many elective surgeries being cancelled or postponed, while people found it harder to access extras providers due to social distancing and isolation rules.

Want to know how you can still get value from your health fund during the pandemic? We’ve put together a guide to the most common extras you can access remotely.

How do I know if my health fund is increasing premiums?

Your health fund will let you know about your premiums increasing by letter, email or SMS. You can also use our private health insurance rate rise calculator to check how much your fund is expected to increase average premiums by.

Check your estimated premium increase.

?
Your premium is likely to rise by
9.4%

For instance, you can expect an annual premium of $1,000 to increase to $1,178. That's an average increase of X for singles, Y for couples and Z for families. Don't want to be stuck paying for more health cover? Save money now.

How much are the health insurance rate increases in 2020?

The rate rise originally scheduled for April was an average of 2.92%* across all funds. This made it the lowest average increase in nearly two decades. However, some insurers were planning on increasing their average premiums by as much as 5.63%

For example, if you normally pay $100 a month for private health insurance, a 2.92% rate rise would see your monthly premium increase to $102.92.

That doesn’t sound too much, but when you add up the costs over the course of a year, it can make a huge difference to how much of your income you’re spending on health insurance.

And if you’ve not switched policies for several years, you could be paying hundreds of dollars more for the same policy.

Based on our data, five years ago the average family policy was $4,268.90 annually. If that family is still on the same policy – and had the annual rate rise applied every year – they’d be paying $5,219.09 on the same policy after October.

That’s an extra $950.19 for a policy that’s essentially the same as it was five years ago.

So how much will your policy increase by this year? The truth is, this will vary between funds and even policies. If your fund has said their average rate rise is 4%, that still means some people will see their premiums increase above that average.

This makes it even more important to check your policy costs if your health fund tells you that your premiums are going up. You could actually be at the top end of their rate rise.

You can use our private health insurance rate rise calculator to check your fund’s expected average premium increase for this year.

Can I get help paying my premiums if I’m on JobKeeper or JobSeeker?

In addition, some health funds have taken extra steps to help customers affected by COVID-19. Some funds will defer premium increases if you’re on JobKeeper or JobSeeker^, while others may only apply the rate rise to hospital cover rather than extras.

It could still pay to compare with other funds though, especially if you’ve not compared or switched cover recently.

Can I claim health insurance premiums on my tax return?

Possibly. If you have private health insurance, you may be eligible for a rebate on premiums. If you haven’t claimed the rebate through reduced premiums throughout the year, you may be able to claim it as a tax offset.

In these cases the rebate is calculated as a percentage of the cost of your premiums and claimed as a tax offset by reducing the amount of tax payable on your taxable income.

The rebate amount is calculated based on your age and household income.

Guide to what rebates you can get on private health insurance

 

You can use our private health insurance rebate calculator to calculate your rebate for 2020.

Can I avoid higher premiums on my private health insurance?

The short answer is yes, although you’ll need to put in a bit of legwork. Fortunately, this is where our team at Health Insurance Comparison can help. We can compare policies and provide you with options that fit within your budget.

Last year, our team saved our customers, on average, $380.79 when they compared and switched policies with us.

Remember, though, cheapest isn’t always best. Often the private health insurance policy that’s right for you is one that fits your budget while also offering the right level of cover for your needs.

With this in mind, there are a few things you can do to save on health insurance premiums:

Bundle your insurance

If you’re thinking about buying more than one type of insurance, you can often save by bundling policies or choosing a policy that covers the whole family.

Compare quotes from multiple health funds

Everybody’s situation is different, and comparing your options can help you find the best health insurance rates with a policy that suits your circumstances.

Consider switching funds

Keep in mind that you aren’t locked into one health insurance policy or fund forever. Generally, you can switch at any time without incurring additional charges. If your health fund is raising premiums this year, it’s worth seeing if you can get a better deal from another provider.

Just remember that your unserved waiting periods will transfer to your new health fund. So if you end up switching health insurance on an equivalent cover, you may need to finish these waiting periods before you can make a claim.

If you’ve already completed your waiting periods, you’ll generally be able to switch to an equivalent cover with no new waiting periods… so you’ll be covered straight away.

You can find out more about switching your health insurance here.

There are lots of options to consider when choosing or switching private health insurance – but fortunately, you don’t have to go it alone.

You can talk to one of our health insurance specialists by clicking on the live chat button on this page or compare health insurance quotes to see what you could save on your health insurance premiums.

*Department of Health, Average annual premium price change by insurer, March 2020.
** ATO, Income thresholds and rates for the private health insurance rebate.
^ Insurance Business Australia, Bupa announces further premium hike deferral, 21 Aug

This guide is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.


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