Suspending your health insurance policy

Without health insurance you may not be able to afford many ongoing medical bills that are not covered by medicare. However, sometimes the ongoing cost of maintaining your policy can seem like an added financial burden you just can't justify. You may have had a significant change in your financial situation or you may just be looking to make some savings on your bills but don't throw away your health insurance without first looking at your options.

You may be able to have your premiums suspended while you decide what to do with your policy. This guide takes you through some of the options you have when considering suspending your cover.

How long can you suspend cover for?

The minimum and maximum times for which you can suspend cover differ between funds. However, the following limits commonly apply:

• You can suspend your membership for a minimum of two months
• You can suspend your membership for a maximum of two years
• The number of suspensions allowed per calendar year is usually limited to one or two
• A separate limit may apply to the maximum suspension allowed for financial hardship, for example three months
• There may also be a lifetime limit on the number of financial hardship suspensions permitted

Check the fine print with your health fund for full details of any limits that apply.

Why would I want to suspend my health insurance policy?

People suspend their health insurance for many different reasons. Financial hardship is a major reason people do this. If you've lost your job or are battling debt problems and struggling to meet your premium payments, your health fund may agree to let you suspend your membership for a temporary period.

Another common reason for suspending a policy is overseas travel. Australian private health funds are unable to provide any cover for medical expenses you incur overseas – you’ll need overseas travel insurance for that sort of protection – so if you’re going to be out of the country for a couple of months or more, suspending cover makes good financial sense.

Why not just cancel my policy?

When your health fund agrees to allow you to suspend your membership for a temporary period, you will not have to re-serve any waiting periods when you resume cover at a later date. You will also be able to maintain the level of cover that suits your needs and keep the current benefit limits that apply to your policy.

But if you opt to cancel your current cover and then take out a new policy sometime in the future, you will have to serve the full waiting periods set by the fund before you can claim any benefits. This could have a serious impact on your ability to access the health care you need, especially if you develop any health problems which will then be classed as pre-existing conditions by your new fund.

In addition, temporarily suspending your health insurance policy does not have any effect on your Lifetime Health Cover (LHC) loading. However, if you cancel cover this can have serious implications for the cost of cover when you take out a new policy.

Who is eligible to suspend cover?

Eligibility rules for temporarily suspending your health insurance policy vary between funds. However, to qualify for this option you will typically need to:

• Have been an active member of the health fund for at least 12 consecutive months
• Have all your premium payments up to date

If going overseas, you will also need to apply for a suspension prior to your departure date as you cannot retrospectively apply to suspend cover.

Are there any other conditions?

Individual health funds usually impose a range of other conditions on your eligibility to suspend cover temporarily.

• You will need to get permission from your fund to suspend cover, so you’ll need to have an acceptable reason to ask for this option. Financial hardship and overseas travel are the two most common reasons for taking a break from cover, but your health fund may also allow a suspension in other specific circumstances.
• There may also be a limit on how many times you can suspend your membership in a calendar year – either once or twice are the limits most commonly imposed. Check with your health fund to find out if there are any other special conditions you need to meet.
• If you’re a high-income earner and you suspend your policy, you may have to pay the Medicare Levy Surcharge in your tax return for that financial year.

How do you suspend your cover?

It’s usually quick and easy to temporarily suspend your health fund membership. If you’re suspending due to financial hardship, you will need to get in touch with your health fund by phone, email or post, or potentially fill out an online application form. Once the suspension ends, you’ll need to start making premium payments again within 30 days.

If you’re suspending cover while you travel overseas, make sure your travel dates are locked in and then contact your health fund by phone, email or post, or by filling out an online application form if available. You will usually be sent a confirmation letter or email when your application for suspension has been approved.

Finally, remember that your membership suspension must be approved before you depart on your overseas trip, as you can’t apply for a backdated suspension.

Am I covered while my policy is suspended?

You will not receive any cover for health care expenses you incur while your policy is suspended. This means that you will not be able to make any hospital or extras claims, but also that you will not be required to pay any premiums during this time.

However, despite the fact that no cover is provided, you are still considered to be a member of the fund during this time. As a result, you will be able to easily resume cover when the suspension period ends.

How do I restart my policy?

You’ll need to restart cover within 30 days of the end of the suspension date, otherwise your policy could be cancelled. Your fund will most likely remind you when cover is due to be resumed or automatically reinstate cover at your requested date.

If you’ve been overseas with an unconfirmed return date, inform the health fund that you are back in Australia within 30 days of your return (you will usually need to provide a passport, flight ticket or boarding pass as proof). If you are no longer experiencing financial hardship and can afford to resume cover, you can let your health fund know at any time.

Once you’ve restarted your policy, your level of cover, benefits and waiting periods will all be the same as they were before the suspension.

What if my fund won’t suspend my cover?

The rules for suspending your membership vary from one health fund to the next. So if your fund refuses to let you suspend your policy, contact other funds to find out whether they would be willing to grant a suspension.

If suspending your membership is not an option, remember that you may be able to let cover lapse for a limited period – remember, you’re allowed a combined total of 1,094 days without any cover without it having any effect on your LHC loading.

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