Young Australians can save up to 10% on private health insurance.
There is now added incentive for young Australians to get private health insurance. If you're aged between 18 and 29, you'll have access to a range of discounts come 1 April 2019. This includes the introduction of a lifetime health cover discount (LHCD), which will save you lots of money now and in the future.
The move comes as part of a host of new reforms being introduced by the Australian government aimed at simplifying the current system and getting customers better value for money.
From 1 April 2019, there will be a range of improvements for anyone aged 29 and under. As soon as you purchase hospital insurance, insurers will be able to offer premium discounts on hospital cover of 2% each year for every year you're aged 29 or under with a maximum of 10% for 18- to 25-year-olds. If you stay on that same policy, the discount will remain until you turn 41. If you do transfer between products or funds, you'll be able to confirm beforehand whether your existing discount will continue to apply to the new product.
It's worth noting that while insurers are eager to get younger people on board, the discount is voluntary so they're not obliged to supply you with it.
How will this affect you?
The move will have a positive impact on everyone, from you the consumer to medical professionals and even insurance companies. That's because it allows private health insurers to keep excessive premiums from becoming commonplace, something that ultimately doesn't benefit anybody. It also provides private doctors with more patients and allows them to treat conditions earlier in life, before they become serious or life threatening.
Significantly, if an insurer chooses to offer the discount with a particular product, it must offer the discount to new and existing policyholders as well. It's really important then that you know whether your insurer offers the discount or not, as you could be entitled to some big savings.
Will it impact your wallet?
Yes, especially if you hold on to the discounted policy. Let's say for example you took out a hospital policy that cost $1,500. If you're under 25 you're eligible for a 10% ($150) discount. That 10% discount remains in place until you hit 40 years of age. And it doesn't stop there as your discount goes down by 2% each year after your 40th birthday until there is no discount being applied.
If we factor in the average price increase since 2010 (5.6%), without the discount on your policy, you'd be looking at having spent $50,665.73 on health insurance by the time you're 44 but with the discount you're looking at $46,347.38 – that's a savings of $4,318.35 or $269.90 every year.
Why is it changing?
Old policies encouraged people to get cover before their 31st birthday or risk getting a lifetime financial penalty. Anyone who took out private health insurance later than the first day of July following their 31st birthday received a 2% surcharge for every year they didn't have cover, up to a maximum of 70%. This system clearly doesn't work because it provides no incentive; rather, it simply penalises you, which is why the new reforms make sense.
Unfortunately though, because the discount is voluntary, insurers don't need to offer it to people. However, evidence suggests that is unlikely to happen.
In the past, Bupa has urged the government to consider a lifetime health cover discount so that the cost of private health insurance doesn't rise excessively. After all, Australians have seen their premiums go up by almost 50% in recent years. This is simply turning people away from getting private health insurance because, at a certain point, it simply becomes unaffordable.
When's it changing?
The changes are set to come in on 1 April 2019, which means you could be entitled to the discount should your current insurer adopt it. If it doesn't, it's worth reassessing your options. You may be able to save more by switching to a provider that offers the discount.
What else is changing?
Teenagers, students and young professionals are not the only people to benefit in the coming months. Rather, these improvements are part of a major overhaul by the government targeting private health insurance more generally.
- Hospital insurance tiers. 1 April will also see the introduction of a new four-tier system aimed at simplifying PHI.
- Improved first-time access to mental health services. There will also be improved access to mental health services, with waived waiting periods.
- Better care for those in rural areas. Access to accommodation benefits through general cover.
- Removal of some natural therapy benefits. Cuts to some natural therapies designed to help stem rising insurance costs.
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