The 3 steps to cheaper health insurance

Health insurance premiums have been rising at an average of 5 per cent a year in recent years and can add up to quite a big bill. If affordability is becoming an issue, there are a few things you can do to save money while still retaining the cover you really need.

1. Forgo “extras” cover

Don’t even think about touching something important like your hospital cover if you have ancillary or “extras” cover that you can attack first. Make sure the extras you’re paying for are the ones you’re likely to use – you may be able to save money with an extras policy that has fewer but more relevant benefits. You could even consider dropping extras cover and just setting money aside for expenses such as contact lenses. It might hurt to hand over the cash up front, but you’re likely to come out ahead over the long term by not paying premiums every month of every year for something you need perhaps once a year – if that often.

2. Wear a higher excess

You’ll save money by offering to pick up more of the burden yourself by paying the maximum “excess” or “copayment”. This is amount you agree to pay out of pocket before the insurer chips in. It might be a one-off excess for a hospital visit – $500, say – or a daily copayment – perhaps $50 a day up to a limit. But do be aware of the Medicare rules: to stop people taking out rubbish insurance just to avoid paying tax, policies with excesses above $500 per person don’t exempt you from the Medicare Levy Surcharge payable by high-income earners.

3. Go for a lower level of hospital cover

Finally, consider whether you need basic, medium or full hospital cover. If you’ve finished your family do you need obstetrics and IVF? Having more “exclusions” will lower the cost of your policy – just make sure you don’t end up with so many exclusions that the policy ends up being hard to claim against, because that’s a false economy. Do think through any exclusions: cosmetic surgery isn’t just for vanity, for instance, it might be required in cancer recovery. Are you happy to be treated by your chosen doctor but in a public hospital? That type of cover is cheaper too. Ask your fund how you can keep costs down without losing your hospital cover.