Research from UBS analyst, James Coghill, suggests health insurance premiums are set to rise by up to 10 per cent per year, for the next five years.
Whilst the usual annual increases are likely to account for a rise of approximately six per cent, they will also be affected by a change in the way the health insurance rebate is indexed, resulting in a reduced rebate and even higher premiums. With the rate of inflation in Australia currently sitting at less than three per cent, such high increases mean many low wage earners and pensioners will struggle to continue to pay their premiums. For older Australians, relinquishing health insurance is a difficult call at a time when health needs can often increase.
Read more at the Australian Financial Review
Private health insurance coverage rose from 31 per cent to 41 per cent of the population in the year following the introduction of the rebate and lifetime cover rules.
Those who choose private health insurance do so for the unforeseen – an unexpected diagnosis of a chronic condition, accident or perhaps a stroke. Many keep health cover in order to be able to have more choice in relation to their medical team and where they might be hospitalised. So to have the rate of premiums rising at double, triple or even four times inflation is a matter of great concern.
It is clear that it is bordering on impossible for those on a full Age Pension to afford such cover; those who do must be going without nearly everything else. So what should be done about these increases? As the funds are required to seek approval for increases from the Federal Minister for Health, this is as good a place as any to start. Perhaps we should be asking why the funds usually get the increases they request?
However, maybe another answer is to be found in the detail reported in the Australian Financial Review (AFR) yesterday? According to the AFR, the current industry ‘switching rate’ is four per cent. With so many comparison websites now available to rate the various features of health policies, it shouldn’t be too difficult to measure the cost of your policy against others. And of course, to change if you feel you are not receiving value for money.
The difficulty, of course, lies in the fact that you won’t really know how your insurer performs until you test it by making a claim. And it may be that the best value health insurance is not the cheapest – but the one that truly covers you in a time of crisis. As always, buyer beware is the best policy and reading the fine print is the first step.
What about you? Do you have private health insurance? Can you afford to keep it if premiums rise at the predicted rate?