Switch Health Insurance

Don't get stuck with a health fund that's not giving you what you want – Compare your options and switch funds today.

Switching health insurance funds is easier than most people realise. Portability legislation means that your benefits travel with you to your new fund and in most cases, you are not required to serve new waiting periods.

This guide looks at the reasons you might have for switching, common factors to take into account if you do and what your rights are as a consumer when you switch health funds. Keep reading to find out more about switching health funds.

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How do I switch health insurance?

If you’re considering switching health insurance funds, don’t put off doing so out of fear that it will be too difficult and time-consuming to switch funds. In reality, the process is actually quite quick and easy.

As there are no lock-in contracts when it comes to private health insurance, you’re free to compare your options and check to see whether another fund offers a better deal. If you want to switch health insurance funds, follow these free simple steps:

  1. Find a suitable new health fund and submit a membership application. During the application process, you’ll need to provide details of the health fund you are currently with
  2. Your new fund will request a clearance certificate from your old fund on your behalf
  3. That’s it! You have now switched to a new fund, but it may be a good idea to check that the direct debit arrangement you had with your previous fund has been cancelled

If you’re switching to a new fund with an equivalent or lower level of cover, in most cases you will not have to re-serve any waiting periods. So if you’re thinking of switching health fund, start comparing your options at finder.com.au today.

Why are you switching?

Once upon a time, people stuck with the same health insurance policy for most of their lives. Nowadays, health insurance is a highly competitive market and if you don’t regularly review your policy, it’s quite likely you’re missing out on a better deal. There are a number of reasons why you might decide to switch health insurance:

  • You might be unhappy with the service you are receiving from your current fund
  • Your current policy may no longer be meeting your needs because your personal circumstances have changed (e.g. marriage, divorce, pregnancy, children leaving home etc)
  • You might have found a more afforable policy with another fund that offers the same or better coverage
  • Your health needs may be changing as you get older and you may now require more comprehensive cover
  • Due to changed financial circumstances, you may need to lower costs by finding a policy that offers better value for money.

Want to know how to save on insurance? Check out these end of financial year deals

Where switching could be important

There are several sets of circumstances where the flexibility and freedom to switch health funds may be very important to you, including:

Health funds can decide to exclude or restrict services on a policy at any time, which can obviously have a huge impact on policyholders. If you’re planning to start a family in the next couple of years but your policy no longer offers full cover for pregnancy and birth related services, you might want to consider switching to a policy that suits your needs.

If you want to receive treatment at a private hospital with which your health fund does not have an agreement, you may consider switching to a fund that does have an agreement with that hospital to avoid paying any extra out-of-pocket costs.

You might want to switch to a health fund that has a ‘no gap’ or ‘known gap’ arrangement with a fund whose services you want to access.

From getting married and having kids to getting divorced or simply growing older, your circumstances are changing all the time. While a policy might meet all your cover needs now, it might be completely inadequate in just a few years.

Because Australian consumers have the ability to switch health funds whenever they wish, this helps to ensure a competitive market.

How do I decide on a policy?

Reviewing your current policy involves re-evaluating your cover needs and to do this is to ask yourself why you have health insurance in the first place.

  • Is it solely to protect your Lifetime Health Cover (LHC) status, so you won't have to pay a loading later in life?
  • Is it to avoid paying the Medicare Levy Surcharge, which is payable by those earning above a certain income?
  • Is it more for extras cover such as optical and dental than for hospital cover?
  • Is it to protect your family’s health and do they still require that level of protection?

If you decide that your needs have changed and your current policy is no longer meeting them, you don’t necessarily have to switch funds. You could of course try negotiating more appropriate coverage with your current fund, which would ensure you didn’t lose any loyalty bonuses you may have built up with them over the years.

If they can’t provide the cover you need then switching to another fund becomes one possible option and this involves comparing a number of policies to see which offers the best* value. The most convenient way to do that these days is online at an insurance comparison website, where multiple policies can be compared in the one place.

How can side-by-side comparisons help?

When comparing health insurance policies and funds, consider things like:

  • Benefit limits. Is the annual benefit limit high enough to cover most of the costs you expect to incur?
  • Discounts. Does the fund offer discounts for paying your premium upfront or by direct debit?
  • Waiting periods. Are the waiting periods minimal and will the fund waive shorter ones altogether on things like extras cover?
  • Loyalty. bonuses Will the new fund honour any loyalty bonuses you have accumulated with your old fund?
  • Incentives. Does the new fund offer any benefits or incentives such as access to Wellness Programs or discounted health-related products and services?
  • Reputation. Does the new fund have a good industry rating, high customer satisfaction and a consistent claims record?

What are the benefits and downsides of switching?

The benefits of switching funds include:

  • The new fund may be offering a better deal for the same or less money than your current fund
  • They may provide better service than your current fund
  • They may offer more benefits and incentives than your current fund.

On the other hand, there can be some disadvantages to switching as well:

  • You may lose any loyalty bonuses you have built up with your old fund
  • Despite portability laws, you may still have to serve a waiting period, if your new policy provides a higher level of coverage than your current policy.

What happens to my benefits?   

As mentioned above, one of the downsides of switching funds is that you will lose any loyalty bonuses you have accumulated with your current fund. Loyalty bonuses are benefits a fund provides to policyholders to reward them for their long-term patronage.

These bonuses can include things like accumulated credits that help reduce the excess you pay on your hospital cover or higher annual limits for some extras benefits. They can be worth quite a lot of money and the longer you have been with a fund, the more of them you will have earned over the years.

When you switch funds, your new fund is under no obligation to honour these loyalty bonuses and indeed, most funds will not. So, depending on how long you have had your current policy, this will need to be a serious consideration when looking to switch funds.

Want to know more about extras cover?

Is there any kind of protection when I switch fund?

Also mentioned above was the possibility of having to serve further waiting periods when switching to a new policy. However, this is only the case if you are moving to a policy that provides a higher level of cover than your current policy or if there is a significant gap between when you cancel your old policy and when you take out your new one (more than seven days).

If you are changing to an equivalent policy, then portability legislation protects you from having to re-serve any waiting periods you have already served with your former fund. However, portability only applies to hospital cover and not to general treatment (extras) cover.

Can I switch health insurance while pregnant?

Switching health insurance funds while you are pregnant is not an option. This is because the maximum waiting period imposed by health funds for obstetrics and pregnancy-related services is 12 months, so changing funds mid-pregnancy means you won’t be able to access the cover you need.

If you’re planning on falling pregnant and you want to be covered by your health insurance, you’ll need to arrange an appropriate level of cover for yourself and your newborn in advance – i.e, before you actually fall pregnant. It’s worth remembering that you’ll need to serve a waiting period before cover applies, and that some hospital covers either do not include obstetrics or only pay restricted benefits.

How do I avoid paying for two funds simultaneously

In order to ensure that you don’t end up paying premiums for two health funds at the same time, you will obviously need to ask your previous fund to cancel your cover. However, it’s important that you don’t cancel your existing coverage until your new coverage begins – if there’s more than seven days between the date your old coverage ceases and the date your new policy commences, portability protections no longer apply and waiting periods may be reinstated.

So when you ask your current fund to cancel your cover, make sure the cancellation date is the same as the date the new cover starts. You can ask your old fund for a clearance certificate and then provide that certificate to your new fund, and also make sure to cancel any automatic deductions that you have set up from your bank account or credit card to pay health insurance premiums.

Changing your hospital cover?

As long as you switch from a complying policy and there is no significant coverage gap, portability laws mean you can avoid waiting periods for a comparable level of hospital cover.

Portability laws protect you from having to serve any benefit limitation periods a fund might normally impose on new policyholders. These are periods during which only minimal cover is provided for certain types of hospital care.

Exceptions to portability laws include excesses and co-payments (amounts you must contribute at the time of receiving hospital treatment). If these are lower in your new policy, you may not become eligible for them immediately and may have to serve a waiting period before receiving them. If you did not fully serve the waiting period with your previous fund, you would also be required to serve the remainder of the waiting period with your new fund.

Under portability laws, your Lifetime Health Cover (LHC) status would normally not be affected by switching to a new fund, as it would travel with you. The LHC is the amount of loading you may or may not be paying for every year over the age of 30 you were without adequate hospital cover.

The only exception to this is if you allow your health insurance to lapse. You are allowed up to 1094 days without cover during your lifetime before your LHC is affected. Once this time has been used up, you will have to pay a 2% loading when you purchase new hospital cover, which increases each year you remain without cover.

Does switching affect your extras cover?

Portability laws only protect you for hospital cover. If you switch health insurance to a new policy primarily for the extras cover, you may have to re-serve the waiting periods before becoming eligible for those benefits. The waiting periods for extras cover vary slightly depending on the fund, but typically they are:

  • General dental services – 2 months
  • Physiotherapy – 2 months
  • Glasses and contact lenses – 6 months
  • Major dental procedures – 12 months
  • Hearing aids – 3 years
  • Orthodontic treatment – 3 years.

However, many funds voluntarily waive the shorter waiting periods as a means of attracting new business and will give you immediate cover for those extras benefits you had under your previous health fund. If you add any new extras though, you may have to serve the waiting periods they entail.

What does portability mean?

If you’re researching the possibility of switching health funds, you may have come across the term ‘portability’ once or twice. The Private Health Insurance Administration Council defines portability as “the process that enables competitive movement of consumers seeking the best* value product for their particular circumstances.” In other words, it refers to giving private health fund members the freedom and flexibility to shop around for a better deal.

Under the Private Health Insurance Act 2007, portability rules were introduced to protect the interest of consumers who want to switch health funds. These rules apply to hospital cover only, not extras cover, and they prevent health funds from imposing new waiting periods when a person switches their hospital cover from one health fund to another.

If these portability rules didn’t exist, the inconvenience of re-serving waiting periods would act as a substantial barrier to consumers considering switching health funds.

Have your circumstances changed?

If you switch to a policy that provides a higher level of cover than your current policy, you will have to serve the waiting periods involved before being eligible for benefits. Reasons you might move to a higher level of cover could include:

  • Getting married – in which case you would be looking at upgrading from singles to couples insurance.
  • Planning to have a baby – in which case you must serve a 12-month waiting period before being eligible for pregnancy-related services.
  • Having a dependant child who is no longer covered by your policy because they are over 25 – in which case you must pay an extra premium to cover them and they must serve a waiting period before they are covered.

Conversely, if you move to a policy providing a lower level of cover, you will not have to serve any waiting periods. You might move to a lower level of cover if:

  • Your dependants have moved out and you no longer need to cover them under your policy
  • You are past the age of needing pregnancy cover
  • Your financial circumstances have changed and you need to save money on your premiums.

However, switching to a lower level of cover can affect you negatively in terms of your eligibility for the Medicare Levy Surcharge (MLS). This is an additional tax of between 1% and 1.5% imposed on high income earners who don’t have adequate hospital cover.

High income earners ($90,000 for singles or $180,000 for families) are only exempt from the surcharge if they have a minimum level of hospital cover that does not have an excess of more than $500 for singles and $1,000 for couples or families. So if you are a high income earner and you reduce your level of cover to reduce your premium (i.e. by increasing your excess from $500 to $1,000), you could end up having to pay the MLS.

Switching health insurance after birth

So you’ve just welcomed a little bundle of joy into your family and you’re wondering what you should do with your health insurance cover to ensure that your growing family is protected. It’s essential to have cover in place for the new arrival from birth – if your newborn needs immediate hospital treatment, it’s important to know they will be able to access the highest level of care available.

However, it’s important to remember that waiting periods apply when you switch health insurance policies or make changes to cover, and rules differ between funds as to how far in advance you will need to make changes to your policy and insure your newborn baby. For example, if there’s a sufficient time gap between when you purchase cover and when your baby is born, many family health insurance policies will include cover for your baby.

But if you have a singles or couples health insurance policy that covers pregnancy and childbirth, your health fund will most likely only provide cover for the duration of your pregnancy. This means that after birth, you may not have any cover in place for your newborn baby. With this in mind, it’s essential to plan ahead and get your health insurance sorted well in advance of the baby’s arrival. Switching from a singles or couples policy to family cover well before your due date is the most effective way to protect your newest family member.

Finally, remember that a waiting period of 12 months usually applies to pregnancy cover. So if you’re switching cover and planning on falling pregnant again in the future, keep this in mind.

Switching health insurance after marriage

Walking down the aisle is a joyous occasion for any couple, but marriage also brings with a range of important financial decisions for you and your partner. One of those decisions is whether or not to obtain a couples health insurance policy rather than sticking with a policy designed for singles.

There are advantages and disadvantages to switching to a couples policy. On the plus side, it’s generally more affordable to pay for couples cover than it is to pay premiums on two separate single policies. And if you switch to a policy that offers a similar level of cover, you won’t have to re-serve any waiting periods.

You can also take advantage of combined annual cover limits for a range of treatments and services. This allows you and your partner to pick and choose the services you want to use, and enjoy the benefits of a higher level of cover.

However, there are a few important issues to consider before switching to couples cover. These include:

  • Your prior health insurance history. The Lifetime Health Cover (LHC) rules mean that Australians who don’t take out health cover before their 31st birthday must pay a premium loading when they do purchase health insurance. So if your spouse was previously uncovered, this will have an impact on the cost of joint cover.
  • Change in household income. If your household will be going from a single income to two incomes, this could have an impact on your health insurance requirements and on the amount of tax you have to pay thanks to the Medicare Levy Surcharge.
  • Pregnancy. If you and your spouse are thinking of starting a family in the not-too-distant future, you may be better off switching to a family policy rather than a couples policy to get the 12-month waiting period for pregnancy cover out of the way.

Start comparing quotes for couples health insurance today to find a policy that matches all your cover needs.

Which funds are consumers switching from?

The table below shows results from a survey conducted by Roy Morgan Research on satisfaction among private health insurance policyholders. Satisfaction with health funds is down almost 2% from 76.3% in September 2015 to 74.4% in September 2016.

Looking to switch? Compare health insurance from 30+ funds

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* The offers compared on this page are chosen from a range of products finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your personal financial circumstances when comparing products.

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