Health insurance premiums are growing much faster than wages
Wage growth is still at a record low as health premiums continue to rise.
Are you dreading the health insurance premium increase? You're not alone. As the calendar moves ever closer to 31 March, many Australians will try to lock in their rate before it rises by an industry average of 4.48%.
Over the past seven years health insurance premiums have risen by an industry weighted average of 44.81%. This has outstripped the inflation rate by a wide margin, which has only increased by a mere 15.87% in a similar period (March 2010 to December 2016) .
It has also outpaced wage growth, according to the latest data from the Australian Bureau of Statistics (ABS). The seasonally adjusted Wage Price Index (WPI) stagnated over the past 12 months, rising by just 1.96% across all sectors through the year to the December quarter 2016, an historic low for wage growth series. Since the December quarter 2010 through to December 2016, wages have only risen by a paltry 20.03%.
With premiums rising so much faster than inflation or wages, it's little wonder that Australian consumers are getting fed up with their funds and looking to make a change. Recent survey data found that 36% of Australians were willing to leave their current fund, with 22% prepared to ditch their cover all together.
Are you thinking about moving funds?
If you're looking to switch funds to avoid the health insurance price hike, you'll have to do so before 1 April 2017. Remember, to lock in your premium at the previous years rate you will need to pay your premiums for the next year in full, which is quite the initial outlay – an average full year's premiums for a single combined hospital and extras policy at 2016 rates is around $3,972.
However, if you lock in those rates, paying them in full, you may be entitled to an annual payment discount. Some funds offer a discount of up to 4% for those choosing to pay their premiums up front, which means someone on a single combined hospital and extras policy could save (in addition to the savings had by locking in premiums at the previous years rate) roughly an additional $160.