What are private health insurance premiums?

Confused about the basics of private health insurance in Australia? Fear not! We’ve got the knowledge to break down everything into bite-sized pieces – from the most complex terminology to the most basic policy inclusions.

You’ve probably heard about premiums. ‘Premiums’ is just another word for the amount of money you or your family pay to your health insurance provider for cover. The premiums will change depending on various factors, and you can pay them in weekly, fortnightly, monthly, quarterly, half-yearly or annual instalments.

There are a few more things you should know about premiums, like the fact that they tend to go up every year. Let’s take a closer look at what you need to know about them.

Private health insurance premiums are the fees you pay to your health insurance provider in exchange for cover. You can make payments at basically any interval (i.e. from weekly right through to annually), which can be helpful if you have a fluctuating income. The amount you pay in private health insurance premiums will also vary depending on things like the level of cover you take out, the insurer, where you live in Australia, as well as government rebates you might be eligible for.

Like most things in life, what something is worth today will be different tomorrow, and the same is generally true for private health insurance. So you can safely expect your premiums to increase each year – you can blame inflation and rising healthcare costs for that!

Ultimately, it’s up to you to keep a close eye on your policy documents to understand exactly how your premiums might change over time and what factors could affect what you end up paying. You should also take the time to see whether you can take advantage of any government rebates or incentives to help reduce your premiums.

The average monthly premium for health insurance in Australia isn’t a static figure. Instead, you’ll have to accept that these estimates are just that: estimates and averages pulled from existing population data. The amount you pay on premiums every month will depend on things like your policy type, family size, location and more.

For argument’s sake, here are some helpful figures so you get an idea of just how much you might need to set aside for private health insurance. For singles, the annual cost for combined hospital and extras cover can range from $3,017 to $3,829, translating to monthly premiums of approximately $251 to $319.

If you’re solely interested in hospital cover, the annual cost ranges from $2,257 to $3,076, which are monthly payments of about $188 to $256. For extras-only plans, the annual average falls between $877 and $1,157, equating to around $73 to $96 every month.

Bear in mind that these figures are all based on a lower tier of cover, so if you want something more comprehensive then you can expect to pay higher than these averages. Always review your policy options and consider your individual healthcare needs and any budget constraints when selecting health insurance.

Premiums will be higher or lower according to the different tiers of hospital cover in Australia, which are Basic, Bronze, Silver and Gold, with a few extra ‘Plus’ mini-tiers thrown in.

As you’d expect, Basic hospital cover is where the lowest premiums are at, but you’ll also only get limited cover for the most essential hospital treatments. Bronze tier is a step up in cover (and premiums), but you get more extensive hospital benefits than Basic cover. Silver policies come with even greater cover and, consequently, higher premiums compared to Bronze. Finally, Gold hospital cover is the highest level of cover with correspondingly higher premiums – but plenty of Australians think the cost is well worth the comprehensive cover.

Your choice of tier should come down to your own healthcare needs, the budget you can afford, as well as your desired level of cover. Once you start comparing policies and see the prices, that should help narrow down your decision.

Compared to some other countries around the world, private health insurance in Australia operates on a community-rated basis. What this means is that everyone is entitled to buy or renew health insurance products at the same price, regardless of any medical conditions they might have.

That being said, health insurance premiums are calculated based on several factors. These include the type of cover you choose (hospital, extras or combined), the level of cover within each type (i.e. Basic, Bronze, Silver, Gold), your age, whether you are a single policyholder, part of a couple or a family, and other factors such as the:

• Australian government rebate (AGR)
• Lifetime health cover (LHC) loading
• Young adult discount
• Your state of residence
• Level of hospital excess chosen
• Any other applicable government rebates or discounts

Health insurance premiums rise every year because of:

• Healthcare costs: Rising healthcare costs related to medical treatments, hospital stays and technology advancements can all contribute to premium hikes. As medical expenses go up, insurers tend to adjust premiums to cover these higher costs.
• Inflation: Inflation affects all parts of the economy, including healthcare. General inflationary pressures can drive up the prices of medical services and pharmaceuticals, which means insurers have to raise premiums to maintain coverage levels.
• Regulatory changes: Any amendments to health insurance laws or reforms in the healthcare system can impact insurers’ operating costs.
• Demographic changes: An ageing population and changes in healthcare patterns can influence premium rates. Older people, for example, typically use more healthcare services, which can result in more claims for insurers to pay out – with general policyholders footing the bill with higher premiums.
• Investment returns: Some insurers invest their premiums to generate income, which helps offset the cost of claims. Fluctuations in the market can impact their financial performance and may end up influencing premiums.

As unfortunate as it may seem, the reality is that premiums go up every year to make sure your provider can continue to cover the costs of insured healthcare services, as well as maintain the financial stability of the Australian health insurance system overall.

Want to stop paying so much for private health insurance but still get the essential cover you need? Here are four tips to help you reduce your premiums:

• Review your cover: Assess your current health insurance policy to see if it still aligns with your healthcare needs. You might want to adjust your level of cover or opt for a higher excess to lower your premiums. Removing optional extras that you rarely use can also help here.

• Compare policies: Shop around and compare health insurance policies from different insurers to find the best value policy for your needs. Look beyond premiums and pay closer attention to coverage limits, out-of-pocket expenses, provider networks and more.

• Consider a higher excess: Choosing a higher excess – which is the amount you pay towards medical costs before your insurer starts covering things – can lower your premiums.
• Take advantage of discounts: Some insurers offer discounts for various reasons, such as paying your premiums annually or being part of a corporate health plan. Explore any and all incentives offered by your insurer (or a different one) to maximise your savings.

Managing your health insurance premiums doesn’t have to be a headache. Instead, think of it as being the price you’re willing to pay for a certain level of cover in the event you are sick or injured.

If you want to lower your premiums, think about reevaluating your coverage needs, comparing policies online, or exploring cost-saving options like adjusting your excess or taking advantage of discounts.

Keep in mind that your healthcare needs will probably change as you get older, so it’s a great idea to revisit your policy every so often to make sure it’s still meeting your needs.