Although health fund costs usually increase on the first of April each year, COVID-19 created a rather unusual situation where most health insurers delayed their 2020 premium hikes until October, to help customers cope with the pandemic.
As a result, the average health insurer increased premiums by 2.92% on October 1, and this April Fool's day, the average increase will be 2.74%, which is the lowest in 20 years according to Health Minister Greg Hunt.
"Australian Government reforms designed to make private health insurance more affordable, simpler to understand and attractive for all Australians are working, and this record low change continues the current trend of low premium changes," Mr Hunt said in February.
"The pandemic has shown us all the importance of a world-class health system. The Australian Government’s partnership with the private health sector ensured full resources were available in our response.
"Private health insurance is an important part of that system."
Because of the unique delayed increase in 2020, this had led to the majority of insurers effectively increasing the cost of their policies twice in six months, which could well put a strain on household budgets.
According to Department of Health data, the average six-month increase is 5.66%.
Based on the average annual premium for a single adult with a basic hospital and extras policy of about $1,334, that's an extra $75 a year.
Only HBF and TUH cancelled their 2020 premium increases entirely. Most are charging both, and some are hiking costs by well above that average.
While CBHS Corporate Health claims the largest 2021 increase at 5.47%, Health Insurance Fund of Australia has the highest combined increase over six months with 9.36%.
The smallest belongs to HBF Health, which has raised premiums by just 2.92% altogether.
The larger funds - Bupa, Medibank and NIB - are all raising prices by more than the 5.66% average.
Health insurance costs are still outpacing wages, inflation
Even though this is the lowest premium increase in 20 years, premiums have increased by 57% in the last decade, while inflation grew only 20%.
Real wages, by comparison, grew just 7% in the decade to June 2018, and recent numbers are no better.
YouGov research from 2019 meanwhile revealed more than two million Australians dumped their private health cover in the previous five year period, with premiums being the main concern.
CHOICE senior campaigner Dean Price said this latest increase will see more people question their need for expensive health insurance.
"This will be the second increase in most people's private health insurance premium in six months. The average increase may be lower than other years but people should check how much their specific policy is going up as it will vary," Mr Price said in February.
"The federal government needs to take real action to address issues that industry is unwilling or unable to fix themselves - we need a full review of the private health system.
"People can shop around and lock in a price if they pre-pay before April 1, but that is a short term solution when people have been crying out for real action on price and value."
Average cost of health insurance by state:
| State | The average monthly premium for a Basic Hospital & Extras policy |
| ACT | $119.46 |
| NSW | $119.18 |
| NT | $74.13 |
| QLD | $120.30 |
| SA | $118.18 |
| TAS | $118.41 |
| VIC | $119.98 |
| WA | $99.56 |
Source: privatehealth.gov.au (17 February 2020).
Should premiums be increasing?
Analysis by University of Melbourne Professor of Health Economics Yuting Zhang in The Conversation said last year that these premium increases didn't stack up against the usual argument of 'rising healthcare costs'.
"Costs of hospital and health care paid by private insurers have reduced substantially in 2020, not increased, according to the latest figures from (APRA). That’s because many elective surgeries and routine extra care (such as dental check-ups) were suspended," she said.
"Private insurers paid reduced hospital treatment benefits in two consecutive quarters. They dropped 7.9% in dollar terms in the March 2020 quarter, compared with the December 2019 quarter.
"They fell another 12.9% in the June 2020 quarter."
"Increasing premiums twice in six months (October 2020 and April 2021) during an unprecedentedly difficult time can backfire, especially if the reasons to support the increase do not stack up."
However, more recent data from APRA shows claims per policy actually increased 3% in 2020, as business as usual activity resumed.
But it is still older people receiving the most benefits from health insurance, "continuing a longer-term decline in private health insurance coverage for younger people" in APRA's words.
Out-of-pocket expenses for hospital treatment was up 13% on the previous year.
Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest interest rates on the market.
| Bank | Savings Account | Base Interest Rate | Max Interest Rate | Total Interest Earned | Introductory Term | Minimum Amount | Maximum Amount | Linked Account Required | Minimum Monthly Deposit | Minimum Opening Deposit | Account Keeping Fee | ATM Access | Joint Application | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.00% p.a. | 5.50% p.a. Intro rate for 4 months then 5.00% p.a. | $1,046 | 4 months | $0 | $249,999 | $0 | $0 | $0 |
| Promoted | Disclosure | ||||||||
4.70% p.a. | 5.40% p.a. Intro rate for 4 months then 4.70% p.a. | $998 | 4 months | $250,000 | $99,999,999 | $0 | $0 | – |
| Promoted | Disclosure | ||||||||
0.00% p.a. Bonus rate of 5.50% Rate varies on savings amount. | 5.50% p.a. | $1,128 | – | $0 | $99,999 | $0 | $0 | $0 |
| Promoted | Disclosure | ||||||||
1.00% p.a. Bonus rate of 4.20% Rate varies on savings amount. | 5.20% p.a. | $1,065 | – | $0 | $99,999,999 | $1,000 | $0 | $0 |
| ||||||||||
0.55% p.a. Bonus rate of 4.95% Rate varies on savings amount. | 5.50% p.a. | $1,128 | – | $0 | $99,999 | $1,000 | $0 | $0 |
| Disclosure |
Is it worth paying for health insurance?
The COVID pandemic did lead to some extra health insurance benefits being tacked on, driven either by the government or by insurers themselves:
- Discounts of up to 10% to those aged between 18 and 29 are available
- Access to mental health services was improved, like not having to serve waiting periods and increasing the mental healthcare plan to up to 20 visits
- Expanded funding for at home and community based care
Depending on the fund, some customers who were on JobSeeker and JobKeeper in 2020 may have been eligible to waive their premium increase, and funds are offering ongoing support to those struggling.
Emily Amos, Managing Director of Bupa, says customers who think they may struggle to afford their new premiums as a result of the impacts of COVID-19 should contact their provider for support.
“Bupa is continuing to support customers experiencing financial hardship in 2021, with customers saving more than $184 million in 2020 alone. Around 50,000 Bupa customers did not pay any increases in 2020 as we worked hard to keep as many people insured as possible," she said.
Plenty of insurers are also offering discounts and benefits for joining or renewing: the likes of BUPA, Medibank, hbf, Health Partners and hif are promising six weeks free and waived waiting periods, while NIB and ahm are offering one month free.
Qantas Health Insurance meanwhile is offering as many as 140,000 Qantas points for new customers.
But with premiums increasing at the rate they are (and larger funds dominating the bigger increases), Consumers Health Forum of Australia chief executive Leanne Wells warned customers not to fall for these gimmicks.
"There are unlikely to be many people able to absorb a premium increase without further squeezing their budgets," Ms Wells said.
“Consumers should be aware that funds with the greatest share of the market have 2021 premium increases above this average. What matters to consumers is not only premium price, but policy inclusions and benefits paid.
"Once again, the message is shop around."
While some people can benefit from taking out private cover, others may not need it for a while.
Related: The pros and cons of private health insurance
Generally, private health is said to represent better value for older people and those who require regular ongoing treatment, while younger and healthier people may not need it as much.
Alternatively, the latter are often encouraged to consider getting a cheaper, more basic policy from a fund with lower premiums than the average.
As Queensland University of Technology Professor Gary Mortimer told Savings.com.au ahead of last year's premium increase, it's important to review your cover to see if it still meets your needs.
“Health insurance, like many other insurances, are considered ‘unsought products’. You buy it with the intention of never using it, but people could be saving a lot of money," he said.
“Ironically, people will drive an extra 10 minutes to a different service station to save a few cents per litre on their fuel, but won’t take 10 minutes to compare premiums, which might save them hundreds of dollars each year or be the difference between waiting a month or a year for an operation."
See also: 20 ways to save on your health insurance
National Cancer Institute on Unsplash
Ready, Set, Buy!
Learn everything you need to know about buying property – from choosing the right property and home loan, to the purchasing process, tips to save money and more!
With bonus Q&A sheet and Crossword!
Alex Brewster
Harrison Astbury
