What happens if you cancel health insurance?

So you want to cut ties with your insurer? Whether you're looking to reduce your monthly expenses, or not happy with your current provider it could be worth reviewing your options first.

There are over 30 funds offering hundreds, well, actually thousands of options in Australia - prices can range from $80 to $180 per month.

If you want to straight out cancel - just keep an eye on things like the Medicare Levy Surcharge or Lifetime Health Cover Loading which could make your policy far more expensive if you decide to take it out again in the future.

Take a quick look at health insurance prices with our free online tool

If you want a cheaper option, you may want to consider a hospital only or extras only policy.

Why are you cancelling your health insurance?

It's important to understand why you need to cancel your insurance. Once you cancel your cover you won't be able to restart it, so it's best to make sure that it's the best option for you.

Cancelling because it costs too much

You’re not alone. Health insurance costs are rising and many Australians are looking for a better option.

• If you’re actually happy with your policy but simply can’t afford it right now, it may be better to freeze it. This is like a temporary cancellation, giving you a break from paying premiums but maintaining loyalty bonuses, waiting periods served and similar benefits. Maximum lengths for freezes can differ, and while some providers allow it at any time, others may require proof of financial hardship.

Joining your partner’s health fund

Good move. It’s often more cost-effective to get cover under a family or couples plan rather than multiple singles policies.

• Make sure your partner’s health fund is actually preferable before switching. Compare it alongside other options to see how much you would benefit from each one. If one of these plans is better value than your partners would be, you could both change to that policy instead.

Going overseas

Typical health insurance policies will cover you in Australia only, so if you’re going overseas for an extended period, there’s probably no point paying premiums for cover you can’t use. Many insurers will happily freeze your account while you’re overseas, so may not actually need to cancel.

• Insurers may have requirements around the duration of your trip which determine whether or not you can freeze your account.

Fed up of your insurer

Fair enough. If your insurer has ticked you off, consider calling them first to try to find a resolution. It’s a competitive marketplace, so you may be surprised how willing they are to make accommodations and offer discounts.

• If you think your insurer has unreasonably refused claims, violated their own contract or otherwise failed to live up to their obligations, consider contacting the ombudsman first. They can settle disputes and make rulings, but you may not be able to take action if you’ve already cancelled your policy.

How to cancel health insurance

When you cancel a health insurance policy your insurer usually has the right to charge an administration fee. This varies between insurers, policies and cancellations, but should generally be a small, affordable sum. On the whole it's pretty easy to cancel, this can normally be done on the phone or sometimes with a few clicks via your online health fund.

Refunds

You can only get your premiums refunded if you are cancelling within a cooling-off period. This is a window, typically 30 days, during which you can cancel your policy for a refund.

• Cooling-off periods apply when you take out a new policy, either with a new insurer or a different policy from the same provider. Often a cooling-off period will also apply when you upgrade your cover, such as switching from a singles to a couples policy.
• The details of cooling-off periods are clearly laid out in all legitimate health insurance policies.

If you cancel a policy within the cooling-off period you are entitled to a full refund of all premiums paid in the policy period to date, unless you’ve already made a claim. Administration and other fees may still be levied during the cooling-off period.

What does cancelling health insurance do to waiting periods?

You will not have to start new waiting periods for treatments that were covered by your old policy, but you will for benefits that were not part of your old policy.

Waiting periods relate to how long you have to wait between taking out a health insurance policy and being able to make claims for certain treatments. Sometimes you will have to start serving your waiting periods from the beginning, and sometimes they will transfer across to your new policy.

• If you switch your policy to one with equivalent or less cover, you will not have to restart the waiting period on any treatments that were also part of the old policy.
• If you upgrade your cover, such as switching from basic to comprehensive health insurance, then you will have to start serving new waiting periods on anything that wasn’t covered by the old policy.

Is it better to cancel or switch health insurance?

• The preferable option depends on your personal situation. If you do not want and do not need any kind of private health insurance at all, then cancellation is naturally the way to go.
• If you do not plan to spend the rest of your life without health insurance, then it is generally more advisable to switch rather than cancel.

Private health insurance in Australia is not mandatory, but is strongly encouraged through regulation. Not having private health insurance usually means you pay more taxes, which might end up costing even more than health insurance in the long run. Regulations are also designed to make it easier for you to switch, and to give you more control over your health insurance. Recognition of waiting periods served with other providers, and a mandatory cooling-off period with refunds, are both legal requirements that health insurance providers must fulfill.

Australia’s private health insurance system is designed to make it easy to cancel and change policies. If it’s time to switch, you can take full advantage of this fact.