Australian Health Insurance Changes

[Guest The Pom Queen]

It's been called the biggest health shake-up in decades. So you might be wondering what this means for you as a consumer.

Well, that depends on your circumstances, but especially your age.

The Government wants to make health insurance more attractive to under-30s, because young people (who don't tend to claim as much) effectively subsidise the payouts to older people (who tend to claim more frequently). 

So let's see what's in it for you.

Under 30, never had health insurance

You're the group the Government is targeting with this overhaul.

To do that, they've offered discounts if you sign up for a policy. You could save 2 per cent on your premium for every year before you turn 30, capped at a saving of 10 per cent. 

That means if you decided to take out a policy under these new rules, it could be a lot cheaper than it was before.

Rachel David, from Private Healthcare Australia, says this is designed to help people avoid getting into financial trouble through illness or injury.

"We know that right now, younger people are struggling with a lot of issues: housing affordability, the costs of education, energy and child care," she said.

"One of the biggest financial challenges [young people face] is if they get admitted to hospital unexpectedly. 

"So we are looking at every way possible, including discounts, to get younger people into the system."

The ratings system might also make it easier for you to assess what the best plan is. 

Health insurance products will be categorised into four levels of cover — Gold, Silver, Bronze and Basic. The Government says this will make it simpler to understand the value you're getting out of your policy.

You would also be covered for mental health services even with a basic policy, which at the moment isn't that common, despite the fact that mental health treatment is top of the list when it comes to procedures claimed on private health by men and women under 30.

Under 30, have health insurance

If you've already got a health insurance policy, now might be a good time to shop around. You may get a better idea of what competitors are offering you with the policy categories.

No waiting periods for mental health treatment means that even if your current policy doesn't include cover for mental health services, you should be able to upgrade without a fuss if you need to.

It is not yet clear whether those 2 per cent discounts for under-30s would apply to all existing policies, so it would be best to check with your provider about discounts.

But you could also benefit from the reduced annual premium increases. Over the past few years, premiums have been rising by 5-6 per cent each year. Next April that should only be about 3 per cent. 

 

Over 30, never had health insurance

Unfortunately, it's too late for you to take advantage of those sweet, sweet discounts.

But you could still take advantage of the ratings system to better assess your options. 

 

Is health insurance worth it?

If you're about to hit your 30s and you haven't yet got private health insurance, the time to decide is now.

The Australian Medical Association's Tony Bartone says this new ratings system is going to make what's generally a really tricky process quite easy.

"You'll be able to make proper, informed decisions about the level of cover you want, the extent, and the value of the policy you're choosing," he said.

Keep in mind that the longer you wait to take out private health insurance cover, the more expensive it'll be if you do decide later on down the track that you want it. 

You'll need to pay an extra 2 per cent for each year you didn't have hospital cover over the age of 30.

It adds up. By the time you're 40, that's an additional 20 per cent.

So yes, the Government really, really wants you to use private health insurance if you can afford it.

Over 30, have health insurance

Like everyone, you should be able to assess what your other options are a bit more easily thanks to the new ratings system. 

You could also see reductions for some claims. Things like pacemakers, implanted defibrillators, hips and knees implants will be cheaper under the Government's new rules.

Ms David says that's been a massive sore point in the past.

"Almost $1 billion has been wasted of health fund members' money on this particular issue."

The Government has also promised to ensure the reduced costs of those devices will get passed on to consumers.

They're doing that by strengthening the powers of the ombudsman. 

So, what should you do with this information?

If you aren't covered at the moment, use this as a chance to assess whether private health cover would be helpful for you. Make sure you shop around before signing up. 

Don't forget to consider the Medicare levy surcharge when you're doing those sums. 

If you don't have private health cover and you're earning more than $90,000 (or $180,000 if you're in a family unit), you're paying this surcharge at tax time.

It starts at 1 per cent of your income and rises to 1.5 per cent for the highest earners.

So if you're single and your taxable income is $90,000, that's an extra $900 that you have to pay in tax.

You don't have to pay it if you've got private cover. So it's probably worth doing the sums to see what works best for you.

You can use the ATO's income tax estimator to see if you need to pay the Medicare levy surcharge (and it will also tell you how much it comes to).

If you've already got cover, take a look at your current policy and find out whether it's changing. If you think you're getting a rough deal, see what else is out there.