Health Insurance Rate Increase – What Do I Need To Know?
The Australian Health Minister, Peter Dutton, has approved for health insurance premiums to rise again on April 1st 2014 by an average of 6.2 percent.
The smallest rate increase weighs in at 3.14 percent, with the top end rate rises reaching a whopping 7.99 percent. The biggest increase in almost a decade will see the average family on a combined hospital and extras policy pay at least $200 more per year. With more claims being made in 2013 and health care costs growing in general, this move from Mr. Dutton is designed to “absorb” the damage for health funds.
The bars in this graph show the constant rate increases that have been approved each year since 2010. Notably 2014 with a 6.2% increase, the highest in more than 5 years. Above that you can see that a policy costing $2,433 in 2010 will now cost $3,026 in 2014, that’s $593 more per year on the same policy.
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Why Rate Rises Are Happening
New rate rises are announced every year and usually come into play every April. Since 2002, premiums have risen by an average of 6.5 percent and are well above the rate of inflation. This year’s increase is up from last year’s 5.6 percent rise and is almost three times higher than inflation.
The rising costs of premiums are influenced by factors such as more expensive overhead costs for health funds, the advancement of medical care and a greater number of claims being made. It is claimed that these costs have grown by around 8 percent in the past year.
All health funds must have their premium rises approved by Mr. Dutton. This involves submitting a proposal, which justifies their intended increases. They must be able to prove that a rise of this level is necessary for continuing to pay benefits to their members. Some health funds are asked to modify their proposed increase but it is thought that this has not been the case this time around.
An ageing and growing Australian population who are now needing health care for longer is putting increasing pressure on the health care system. There has also been an increase in chronic conditions such as heart disease, obesity and diabetes, all of which require long term and expensive health care. The increasing sophistication of medical technology means that such conditions do not necessarily prove fatal but it adds further to the growing costs of health care.
Mr Dutton has blamed the former Labor government for the extent of the premium increases for putting unnecessary strain on the healthcare sector. Measures such as means testing the health insurance rebate have been put forward as culprits for raising the cost of premiums.
The Impact on Health Care
Many Australians have already dropped their health cover or have significantly downgraded it to keep premiums lower, with more consumers following suit in the coming months. This means that many families will be underinsured due to the premium increases, which adds to growing pressure on Medicare and the public healthcare system. With less being covered by private health cover, more Australians will turn to this for more of their healthcare needs.
How to Negate the Impact
Your health fund will write to you to notify you of the forthcoming changes to your premiums. This is an ideal opportunity to review your health insurance so that you are not paying more than you need to.
Shopping around will help you to ensure that your policy will still be the most cost effective option for your needs. You may be able to find a similar level of cover for less elsewhere.
Pre-paying a year’s worth of premiums upfront will lock in this year’s rate so that you can postpone the inevitable for another year. The downside is that you will need to have a lot of freedom in your budget to pay this amount in one go. Starting a policy before April 1st will lock in the current rate but you may need to make your payment before this to qualify. Check with the health fund as to whether there is a cut-off date that you need to be aware of. Your payment may need to be both paid and processed before the cut-off date.
Locking in a cheaper rate does not guarantee that there will be no changes to your policy. Coverage levels, benefits and annual limits may still be affected when the rate changes come into play. With this in mind, it is always smart to regularly shop around for alternative health cover policies.
With average premium rises ranging from 3.14 to 7.99 percent in April and some policies significantly more than others, many Australian families will be seeing their health cover increase by at least $200 per year. This is the one of the steepest rises in recent memory and is designed to “absorb” the increasing costs of health care. Premium rises are being blamed on increasing overhead costs for health funds, the increasing sophistication of medical care and treatments and the growing number of claims. A growing and ageing population with a greater tendency towards chronic conditions is also having an impact on healthcare costs.
Households who will be hit hard by the rate rises can look to cut costs by shopping around for a more affordable policy and pre-paying next year’s premiums to lock in the current rate. With funds competing heavily for your custom, there has never been a better time to shop around for the best health insurance deal.
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