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 now have access to a range of discounts. 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.
As soon as you purchase hospital insurance, insurers can now 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?
The government has introduced this change in an effort to get more young people buying private health cover and hopefully keep this cover into their old age. Australia's health care system relies on private health insurance and private hospitals to help take some of the burden off Medicare and the public system.
This is one way to help keep the private system, and therefore the public system, healthy.
When's it changing?
This aspect of the reforms has already gone into effect, 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 from the reforms. Rather, these improvements are part of a major overhaul by the government targeting private health insurance more generally.
- Hospital insurance tiers. A new four-tier system has launched, aimed at simplifying PHI.
- Improved first-time access to mental health services. There is now improved access to mental health services, with waived waiting periods for certain customers.
- Better care for those in rural areas. Access to accommodation benefits through hospital cover.
- Removal of some natural therapy benefits. Cuts to some natural therapies designed to help stem rising insurance costs.
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