Sometimes cancelling your cover is a good idea. I'm not here to lecture you about why you should keep it. In fact, I cancelled my hospital cover a few years back and I regularly switch my extras cover. That's a story for another time, but my point is this: Your situation is unique, and you need to figure out what makes sense for you.
To cancel health insurance is to take a calculated risk. In this guide I'll give you the things to consider before making that decision for yourself.
There are some great reasons to cancel your health insurance. Here are just some that might apply to you.
Health insurance can be really expensive, especially if you're on a comprehensive plan. For gold hospital cover, the cheapest premium is $172.8 a month – that's for a single earning less than $93K in Sydney, with a $750 excess. All that stuff matters by the way, as I'll talk about later. My point is, health insurance can get more expensive than you can manage sometimes.
For extras especially, if you're not getting back the price of your premiums as benefits each year, you might decide you're better off paying fully out of pocket. You do open yourself up to having a big expense suddenly pop up though, so you need to be careful here.
If you're in good health, health insurance may seem like an unnecessary cost that you don't need to deal with yet. If you're not likely to claim in the coming decades, then you're potentially paying for years of coverage you never need. This is as good a reason as any, despite what some people might say! There are some important caveats to consider though, which I lay out below.
In Australia, a truly lucky country thanks to progressive social spending, we're covered by Medicare, the public health system. Medicare is far from perfect, but it will keep you alive for free. Plenty of Australians feel confident enough with the public system to opt out of private coverage for this reason. There are absolutely some benefits of private cover that you might want to pay for, but they're not for everyone.
| Response | WA | VIC | SA | QLD | NSW |
|---|---|---|---|---|---|
| I never compare or switch insurance | 24.53% | 14.44% | 17.33% | 15.74% | 16.61% |
| About once a year | 13.21% | 15.93% | 12% | 15.23% | 16.93% |
| About every 2 yrs | 9.43% | 13.7% | 4% | 9.14% | 8.95% |
| About every 3+ yrs | 8.49% | 6.67% | 9.33% | 4.57% | 9.27% |
| More than once a year | 0.94% | 2.96% | 4% | 2.54% | 4.79% |
Okay, time to put on my responsible adult hat and tell you the downsides of ditching your health cover. Any one of these could be enough to seal the deal for you, so give them some thought – especially numbers 2 and 3.
If you cancel private health insurance, you won't be covered anymore. Seems obvious, but give it some though. This means no cover for treatment in a private hospital, which can offer faster treatment and shorter surgery waiting lists, your choice of surgeon, nicer facilities and more. For extras cover it also means you'll have to pay completely out of pocket for services like dental, optical, physio and more. Ditto for ambulance cover, with a few exceptions I'll cover later. You ready to give that up?
The MLS is an extra tax you'll pay if you earn more than $93,000 per year ($186,000 for couples) if you don't have a hospital policy. It starts at 1%, or $930 a year at a minimum. You can get a bronze hospital policy for about that price, which offers pretty decent cover for basically nothing, because you wouldn't be paying the tax. Look – if you're earning more than $93,000 a year, it's financially worth keeping some hospital cover.
The LHC loading is the "turning 30" thing you vaguely remember you should think about. For every year after you turn 31 you don't have hospital insurance, your premiums will increase by 2% per year when you eventually get it. So if you waited until 41 to get hospital cover, it'd cost you 20% more than your base premium. Mind, this only lasts 10 years and then resets. From a policy perspective, it doesn't really offer enough financial incentive as the MLS, but if you think you'll need hospital cover in the coming years, it could make the difference.
If you cancel your health insurance, you'll reset all your waiting periods. That's a problem if you decide you need private cover again in a few years. For extras, it could mean anything from 2 months to 3 years before you can claim for some services. For hospital cover, the waiting periods you'll reset are:
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Great question. Unfortunately I can't give you an easy yes or no answer. I do have a calculator for you though, which takes some of your personal circumstances into consideration. If this isn't enough, read this guide on whether health insurance is worth it. It covers a lot of this stuff in more detail.
If you're ready to cancel, you're in good company. In 2023 we ran a survey finding over 3 million Aussies planning on cancelling or switching health funds. Did all of them switch or cancel? Probably not. But you're not alone in thinking about it.
To cancel your health insurance, just call your provider and cancel. In Australia you can cancel health insurance at any time, for any reason. There are no direct financial penalties that the health fund can issue, though there are the financial impacts I covered above. In fact, the government mandates that funds must refund you for any premiums you've paid in advance.
When you call your provider it'll probably try to sell you on a different policy. Just push through that. Or maybe give the alternatives a thought. Up to you.
Real talk – don't cancel your ambulance cover. Medicare doesn't cover ambulance, crazy as that seems! Queensland and Tasmania cover ambulance for residents, though Tassie won't pay when you're on the mainland. So if you're not a Queenslander or a Tasmanian that never leaves the island, you really want some ambulance cover. Standalone ambulance policies start at like $5 a month, but a single ambo trip can cost thousands. It's so so worth it!— Tim Bennett, health insurance expert
If you've decided you'd like to hold onto cover for now, but still need to save some dosh, you have options.
Downgrading your cover will cover you for less, but it will cost less too. Sometimes this is a no-brainer – for example if you're done having babies, you don't need cover for pregnancy or IVF on your hospital policy. Similarly, if you have perfect eyesight (I'm very jealous) then you probably don't need extras with a big optical limit. Other times, downgrading your cover is great to keep the tax incentives of hospital cover, while saving some money every month. The hospital cover tier system helps a lot here, making it a bit easier to understand what is and isn't covered at every level.
Switching health funds is pretty easy and gives you the ability to find a policy that's better suited to you. You also get to benefit from the sign-up offers funds have going. For hospital cover, any served waiting periods will all be honoured by your new provider. For extras, most providers will also recognise already-served waiting periods, but it's not mandated like hospital. Switching is the smart-money approach to saving on health insurance, as well as most other financial products.
If you're overseas, or sometimes if you're unable to keep up with your premiums, your fund may let you suspend your health policy temporarily. Generally this is available for a few months, sometimes up to 2 years. You won't be able to claim while your policy is suspended, but you won't have to re-serve any waiting periods when you start it up again. Note that a suspended policy will impact whether the MLS will apply to you, and it could affect your LHC loading.
If you don't want to mess with your hospital cover, you could consider just cancelling your extras. If you're not regularly claiming on your extras, you're often better off just paying out of pocket for services like dental when you need them. Of course, having extras can often give you a little incentive to get those check-ups done more regularly, so it might not be so simple!
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