Saying goodbye

Switching health insurance policies

Leaving your health fund? Find out what you need to know about switching your current fund, clearance certificates, portability and more.

Your personal circumstances and health insurance needs change over time, so it’s important to regularly review your health cover and decide whether it still suits your situation.

If you find better cover elsewhere and are considering switching funds, don’t put it off – switching health funds is easy and relatively hassle-free.

Read on to find out what you need to do when you want to leave your health fund and join another.

Compare your health insurance options with help from an adviser or online

Why are you switching health funds?

Some of the reasons you may want to switch health funds include:

  • Your current policy no longer meets your health cover needs, for example you may no longer require cover for pregnancy or you may need to upgrade from a singles to family policy.
  • You are unhappy with the service offered by your current health fund, or are disappointed by its benefit limits.
  • You have found a cheaper policy from another health fund that offers the same or better benefit limits than your current insurer.
  • You wish to take advantage of the additional member benefits offered by another health fund, for example benefits for gym memberships and discounted movie tickets.
  • You want to find a more affordable policy that offers the best value for money.

What should you think about before switching your fund?

It’s essential that you keep the following factors in mind before making the decision to switch health funds:

  • Services covered. Whether you’re choosing hospital cover, extras cover or both, check the list of services and treatments covered by the policy you’re considering switching to. For example, if you need cover for pregnancy and assisted reproductive services, is this provided? Does the new policy cover all the extras you’re most likely to use, such as dental and optical?
  • Benefit limits. Next, take a closer look at the benefit limits that apply to extras cover. Are they annual limits or lifetime limits? Also check whether the limits listed apply per person or per policy, and bear in mind that some policies list the amount they will cover as a percentage of the provider’s bill.
  • Waiting periods. If you’ve had a comparable level of hospital cover for at least 12 months, you shouldn’t have to worry about serving any extra waiting periods. However, you need to check the waiting periods that apply to extras policies. These are usually 2 months for most services, but 12 months for procedures such as major dental. Many funds will waive most or all of their waiting periods when you switch from another fund.
  • Discounts. Keep an eye out for any discounts the new fund offers, for example a discount for paying your premiums by direct debit or prepaying annually.
  • Loyalty bonuses. Bear in mind that some funds offer loyalty bonuses, such as increased benefit limits and discounts, to long-time members. Check to see whether you will miss out on any loyalty bonuses offered by your current fund if you switch to another health insurer.

Why is April the peak time for people to switch funds?

On 1 April each year, the premiums charged by Australian health funds go up. These increases reflect the increasing amount of benefits paid in recent years and the rising cost of health care services. In 2016, health insurance premiums rose by an average 5.59% across the board, with 8.81% the highest average increase implemented by a health fund.

This annual price rise means that April is a very popular time of year for Australians to compare their health cover options and see whether they might be able to find better value for money elsewhere.

If you switch before the 1 April cut-off and prepay your annual health insurance premium, it is locked in at the premium that was charged prior to the price hike.

Recognising that this is a huge initial outlay for most Australians, many health funds offer discounts and a range of other incentives to encourage people to switch funds including:

  • Waived waiting periods on extras benefits
  • Gift cards from partner retailers
  • Discounts for customers who have an existing policy (e.g. car insurance) with the same insurer
  • One month of free cover
  • Discounted premiums if you pay annually in advance
  • Automatic entry into competitions, such as the chance to win a new smartphone or tablet

What are clearance certificates?

A clearance certificate is a document you need to obtain from your current insurer when switching to a new health fund. Also referred to as a clearance letter or transfer certificate, this document provides a record of your private health insurance cover. It includes:

  • The type of cover you hold (hospital, extras or combined)
  • The level of cover
  • The commencement date of cover
  • The cancellation date of cover
  • Your LHC certified age of entry
  • Your claims history

Clearance certificates are designed to stop people defrauding the system by signing up for a health fund, lodging a claim almost immediately and then canceling their membership. Regardless of which private health fund you are switching from or to, you must obtain a clearance certificate as part of the membership transfer process.

What is portability?

The Private Health Insurance Act 2007 offers important protection for Australians who want to switch health funds. This includes portability rules, which ensure that consumers have the freedom to shop around for health insurance that offers a better deal without being slugged with additional costs or unfair waiting periods.

In the words of the Private Health Insurance Administration Council, portability is “the process that enables competitive movement of consumers seeking the best value product for their particular circumstances”.

Portability rules apply to hospital cover only, not extras cover, and ensure that consumers don’t have to re-serve waiting periods when switching funds.

Ready to switch?

If you’re sure you want to switch health funds, here’s what you need to do to move from one private health insurer to another:

  1. Get a quote. Make sure you get a quote from the fund you want to switch to. Ensure it is as detailed as possible and includes figures such as the government’s private health insurance rebate and any Lifetime Health Cover (LHC) loading.
  2. Apply for cover. Fill out an application form for your new fund – this can typically be done online. Make sure to specify that your new membership will start only when cover from your old fund ends.
  3. Gather documentation. Request a clearance certificate and itemised claims statement from your current health fund, then forward this information to your new fund.
  4. Cancel your old cover. Remember to cancel any direct debits you have set up with the fund.
  5. Start your new cover. Contact your new fund to let it know you are ready to start your new health cover.
  6. Check that everything is finalised. Check your bank statement to make sure that premiums for your new fund have been paid, and that you are no longer paying premiums to your old fund.
  7. Relax. Now you can sit back, relax and enjoy the peace of mind and savings offered by your new health fund.

Speak with an adviser or compare cover online

Picture: Shutterstock

Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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