Ten Tips for Comparing Health Care Policies

Susan M. Davis August 28, 2024

Australians already know that health coverage can provide security for individuals and families when a medical need arises. Many, however, do not know how to find the best value when comparing health insurance policies. Below are 10 tips everyone should read before shopping for private health coverage.

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1. Choose the coverage that concentrates on your specific health needs or potential health needs.

The first thing you should do before comparing your health plan options determines which policy features best fit your needs. A 30-year-old accountant, for instance, is going to need very different coverage than a 55year-old pro golfer or a 75-year-old retired veterinarian. By understanding the health needs that most often correspond to people in your age and activity level group – your life stage – you can save money by purchasing only the coverage you need and avoid unnecessary services that aren’t relevant.

For instance, a young family with two small children doesn’t need joint replacement or cataract surgery coverage. A 60-year-old school teacher isn’t going to need pregnancy and birth control-related services. Whether it’s high-level comprehensive care you’re after, or the least expensive option to exempt you from the Medical Levy Surcharge while providing basic care coverage, always make sure you’re comparing health insurance policies with only those services that make sense for you and your family.

2. Consider options such as Excess or Co-payment to reduce your premium costs.

When you agree to pay for a specified out-of-pocket amount if you are hospitalized, you sign an Excess or Co-payment option that will reduce your health insurance premium.

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If you choose the Excess option, you agree to pay a predetermined, specific amount when you go to the hospital, no matter how long your stay lasts. With a Co-payment option, you agree to pay a daily sum up to a pre-agreed amount. For example, if Joanne has an Excess of $250 on her medical coverage policy and is admitted to the hospital, regardless of how long her stay turns out to be, she will pay $250 of the final bill. If Andrew has signed a $75×4 Co-payment with his provider, he will pay $75 per day for just the first four days of his hospitalization.

For younger individuals who are healthy and fit with no reason to expect to land in the hospital anytime soon, either of these options is a great way to reduce the monthly cost of your medical insurance premiums. Keep in mind that different private insurers have their own rules when it comes to Excess and Co-payments, including how many payments you will need to make annually on either option.

It is important to read the policy thoroughly and ask questions in advance to have a clear understanding of what you are paying for and what you can expect coverage-wise if you are hospitalized. Also, make sure you choose an Excess option greater than $500 if you’re purchasing an individual policy or $1,000 for family coverage to be exempted from the Medicare Levy Surcharge.

3. Pay your health insurance premium in advance before the cost increases.

Each year insurance providers increase their premiums by approximately five percent sometime around the first of April, a practice approved by the Minister of Health. By instituting these annual increases, your health insurance provider retains the ability to fulfill its obligations to policyholders despite increasing medical costs.

Most private medical policy providers allow policyholders to pay for one year’s premium in advance, which locks them into the previous year’s rate for an additional 12 months – a great way to save money. To take advantage of the savings offered, most insurers require payment in full be made within the first quarter of the year, between January and March.

4. Lock into low-cost health insurance at an early age.

The most obvious advantage any Australian can take when saving money on your insurance premiums is to buy in early to the least expensive rate available. And by early, we mean before age 31. Everyone eligible for Medicare will receive at least a 30 percent rebate from the government on the price of their health care premium, no matter what age they are. However, by purchasing hospital coverage before July first, following your 31st birthday, you can be ensured the lowest premium rate available.

After age 31, your health insurance rate is subjected to a two percent penalty rate increase for every year after age 30 that you did not have health insurance. Therefore, if you wait to purchase private health coverage until age 35, you will pay 10 percent more annually than you would have if you had purchased it at age 30.

There are exemptions for some people who were overseas when they turned 30, new immigrants, and others under special exception status. However, if you purchased private insurance after age 30 and paid an age loading penalty on your health coverage, you will be relieved of the excess penalty after 10 years of continuous coverage. The earlier in life that you lock into a private health plan, the more money you will save both immediately and over your lifetime.