Private health insurance is the biggest challenge for retirees.
The recent YourLifeChoices Retirement Income and Financial Literacy survey shows that around 72 per cent of retirees retained private health cover, but 25 per cent said their health insurance bill was the single biggest challenge to being able to live within their budget.
In just four days, private health insurance premiums will increase by an average of 3.95 per cent. Some funds will increase their premiums by as much as eight per cent.
Regardless of the premium increase applied by your health insurer, every Australian over the age of 65 will have their health insurance rebate reduced. This means that if you are a pensioner you’ll either have to pay more upfront or receive a lower tax offset, and that’s on top of the increased premium cost.
If you want to save money, you will have to shop around for the best deal. No private health insurers reward loyalty, in fact the opposite is true, so you have to get out there and find the best deal.
You don’t have long to act, either. With the private health insurance price rise falling right in the middle of the Easter weekend, if you are going to switch funds you only have today and tomorrow to get it done.
One of the reasons people are hesitant to change funds is because of the complexity built into the system. According to the Retirement Income and Financial Literacy Survey, 50 per cent of respondents said health insurance policies were too complicated to understand properly and there was a high degree of dissatisfaction at what was being offered. Many believed that policies were too expensive and that there were too many gaps.
Switching funds, though, is not as difficult as it sounds, and in the final days before the hike takes effect, you may be able to negotiate a deal that sees you avoid a price rise altogether.
When you change funds, as long as the procedure is covered by your new provider, you carry over all your previously served waiting periods.
You are also entitled to a refund of any premiums you have paid in advance, and can still claim procedures up to two years after they happened regardless of which fund you’re with now.
There are also many health-care comparison sites that can take some of the grunt work out of your hands, but be sure to check if they compare all of the options available and investigate their commission structure so you understand if they are a reliable source of information.
Earlier this year, Labor announced a policy that would cap private health insurance premium price rises at two per cent a year for two years.
Prime Minister Malcolm Turnbull attacked the move as “policy on the run” and accused Labor of trying to destroy private health insurance.
The simple fact, though, is that a cap on premium increases is nothing new. In 2000 and 2001, the Howard government implemented an effective ‘freeze’ on private health insurance premium increases.
The fact that it was a Liberal Government that last saw the need for a cap on premium increases shows that this does not need to be an ideological battleground. This is clearly a solid policy aimed at stopping soaring premiums.
Since 2013, when the Liberals came into office, health insurance premiums have risen by 27 per cent, private hospital coverage has dropped and the profits of these companies have sky-rocketed.
As our members have told us in our Retirement Income and Financial Literacy Survey, price is not the only concern when it comes to health insurance, with many retirees struggling to deal with the complexity of what is and isn’t covered by their policies.
At the same time as announcing its premium-cap policy, Labor also announced that it will get the Productivity Commission to conduct a full review of the private health insurance system.
In reality, this could have a much bigger impact than simply stopping out-of-control price rises. It could force insurers to clarify their lists of confusing exclusions, while tackling the lack of competition in the sector.
It is clear to most that something needs to be done to address the problem in the sector. The only question is if we need to wait until the next election before someone is willing to tackle the problem.
Do you welcome Labor’s proposal to cap private health premiums? Do you struggle to maintain your private health cover?
All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.
Are you eligible for an Age Pension? Do you know your rights? The RetirePlanner tool has all the information you need.
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