Health insurance rebate vs premium increases
The gulf between health insurance premiums and the private health insurance rebate is growing.
Health insurance premiums aren't the only thing changing on 1 April 2017. The private health insurance (PHI) rebate for those on under the age of 65 and earning under $90,000 as a single will decrease from 26.79% to 25.93%.
While this decrease may not seem like much, it becomes significant when you look at how much the PHI rebate has decreased when compared with how much health insurance premiums have increased.
The PHI rebate is decreasing by 0.86% in 2017, while private health insurance premiums are increasing at an industry average of 4.84%. This means that you're actually paying 5.70% more for health insurance in 2017 than you were in 2016, since you're not getting back part of your premiums in the form of a refund.
This gulf between health insurance premiums and the rebate has been widening since 2014, which was the first year the rebate decreased since the initiative was introduced in January 1999.
Originally, the private health insurance rebate for those under the age of 65 was set at 30%, meaning that between 2014 and 2017 the health insurance rebate has dropped by roughly 4% after remaining at 30% from 2000 through to 2013.
In the same period since the PHI rebate began to drop, health insurance premiums have increased by 22.81%. Ostensively, this means you're paying a combined 26.81% more for health insurance than you would have if the rebate had stayed fixed at 30%.
For example, let's say you have a single combined hospital and extras policy that costs $200 a month. Not taking into account anything other than the rebate, the rebate you'd get on your policy in 2017 would be $622.42, down from $720.00 in 2013.
| Policy cost (per month) | Yearly rebate | |
|---|---|---|
| 2013 | $200.00 | $720.00 |
| 2014 | $200.00 | $696.96 |
| 2015 | $200.00 | $667.68 |
| 2016 | $200.00 | $642.98 |
| 2017 | $200.00 | $622.42 |
As you can see in this example, there is a $97.58 difference in what you would be getting back from PHI rebate now compared to 2013. And that's if health insurance premiums had stayed level over that period of time. Now when you contrast this with how much health insurance premiums have risen in that same time, the situation looks much worse. Here is how much that same $200 policy would cost you if its premiums went up inline with the industry weighted average each year.
| Policy cost (per month) | Policy cost (per year) | |
|---|---|---|
| 2013 | $200.00 | $2,400.00 |
| 2014 | $212.40 | $2,548.80 |
| 2015 | $225.57 | $2,706.83 |
| 2016 | $239.51 | $2,874.11 |
| 2017 | $252.90 | $3,034.77 |
Incredibly, a policy that would have cost you $2,400 a year in 2013 would cost about $3,034 in 2017, an increase of $634.77.
It's clear why you should never just set and forget your health insurance policy. A recent survey found that the average Australian stays with their health fund for 11.8 years.
Make sure you review your health insurance policy to ensure you're getting the best deal, whether that's finding a with a fund that repays the largest percentage of its contributions back in benefits, finding a fund that pays the highest benefits for your favourite extra or finding a fund that offers the best value for money.
Even if you can't beat the price hike, there are ways for you to save money on your health insurance policy. Many health funds are offering a range of deals and discounts in March. You may be even able to find a fund that offers you a discount for paying by direct debit.
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