Paying for health insurance

One of the important issues to consider when taking out health insurance is how to pay your premiums. There are several payment methods and also payment frequency options available, and the premium payment choices you make can even affect the total cost of cover.

Let’s take a closer look at the payment options available and any benefits and drawbacks associated with each one.

What health insurance payment options are available?

There is usually a number of ways your fund will accept premium payments. Although not all funds will offer support for each of the payment types mentioned below, you can typically choose from the following options:

• Direct debit from bank account. When you sign up for a policy, all you have to do is provide your bank account details (account name, account number and BSB) to your health fund. The fund will then automatically withdraw the necessary payment from your account whenever the premium is due.
• Direct debit from credit card. This works the same as above except that instead of providing your bank account details, you provide your credit card details (name on card, card number, expiry date and CVV). Your health fund will then automatically debit your card whenever payment is due.
• BPAY online or over the phone. When you need to pay a premium, you can do so via BPAY through your bank’s Internet or phone banking service. You’ll need to provide your health fund’s biller code and quote a reference number.
• Online from your credit card. Most funds will allow you to pay your premium by logging into your health insurance account online and entering your credit card details into the payment section.
• In person at a retail centre. You can visit your health fund’s nearest retail centre to pay via credit card, cheque or any other method of payment your fund allows.
• In person at a post office. You can visit your local post office to pay your health insurance premium in the same way you might pay a utility bill.
• By mailing a cheque or credit card details. Some funds will provide a postal address to which you can send a cheque to cover your premium amount, or to which you can send a credit card payment slip.

What are the pros and cons of each payment option?

There are benefits and drawbacks to each of the health insurance premium payment methods listed above. Check out the table below to work out which of these payment options is the right one for you:

Can you salary sacrifice your health insurance premiums?

If your employer and health fund allow it, you may also be able to use salary sacrificing to cover your health insurance premiums. Also known as salary packaging, salary sacrificing allows you to pay your health insurance premiums using your pre-tax income. It can be an effective way to ensure that you get the cover you need and at the same time minimise your tax bill.

You may be able to salary sacrifice your health cover premiums if you work for one of the following organisations and your employer offers salary sacrificing as part of its employee benefits program:

• A private or public not-for-profit hospital
• A charity or other not-for-profit organisation
• A private school, club or association

Why would you want to pay your premiums upfront?

As well as the payment method, you will also need to choose how often you pay your premiums. Depending on the fund, the available options may include fortnightly, monthly, quarterly, six-monthly or yearly. However, most funds require you to pay at least one month in advance.

The most affordable premium payment frequency is usually to pay your annual premium in advance. This is because many funds offer sizable premium discounts, sometimes as high as 4%, to those customers who pay a full 12 months of membership in advance.

What is rate protection?

Paying for 12 months of cover in advance also allows you to take advantage of a feature known as rate protection. As you may be aware, Australian health fund premiums increase every year on 1 April.

If you’ve already paid your yearly membership fee, rate protection means you won’t have to pay any additional premium if your health fund increases its rates during the period you have already paid for.

For example, let’s say your health fund raises premiums by 5% just three months into your 12-month membership. Thanks to rate protection, you won’t have to worry about this 5% increase until the full year is up and it’s time to renew cover.

However, if your health fund is one of the few that doesn’t offer rate protection, you will have to either pay the balance owing on the new premium rates or reduce the length of time your premium payment covers.

Make sure you cancel your direct debit

If you opt to pay your health insurance premiums by direct debit, make sure you don’t forget that you have this payment arrangement in place. If you switch to a new health fund and forget to cancel your direct debit, you could end up paying premiums on two separate health insurance policies.

Your fund will provide information and advice on what you need to do to cancel a direct debit, so make sure to complete this important task before beginning a membership with your new fund.

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