10 ways to cut your health insurance premiums without being underinsured

For many Australians, private health insurance feels like one of those bills that just keeps going up every year. The instinct is often to cut back on cover or shop for the cheapest option available.

But there’s a catch: the cheapest policy is rarely the best one. The goal is to pay less while still being covered for the things that could seriously impact your finances. Consider these simple steps to save your hard-earned money while maintaining peace of mind.

1. Review your hospital cover level

Most health insurers offer four levels of cover: Basic, Bronze, Silver, and Gold, with corresponding higher premiums for the upper levels. Before they turn 31 years of age, taxpayers must have at least Basic cover with a mandated maximum excess payment to avoid the Medicare Levy Surcharge.

However, many Australians choose to pay more for Bronze, Silver or Gold cover. If you are on a higher level of cover, you could potentially save hundreds of dollars a year by reviewing the procedures you are paying for that you are unlikely to use in your current life stage (such as pregnancy, joint replacement, cataracts) and dropping to a lower cover that does not include them. You can return to a higher level of cover when your needs change.

A popular choice is the Silver Plus tier offered by some insurers, which covers you for standard services in a private hospital, plus one special service of your choice from the Gold tier (such as pregnancy, joint replacement, or cataracts, as mentioned above).

2. Consider increasing your hospital excess payment

If you have emergency savings, you can considerably reduce your premium cost by accepting an excess payment, payable only if you are admitted to hospital, and usually payable only once per calendar year, no matter how many times you are admitted. Typical excess options are $250, $500 and $750 per person for singles, and double that for family policies. The higher the excess you can afford, the lower your premium will be.

For more on potential premium savings by accepting an excess payment, see the Australian Government’s private health insurance reforms overview.

3. Remove extras you don’t use

Most insurers offer optional ‘Extras’ cover for non-hospital procedures not covered by Medicare, such as optical, dental, and physio.

If you don’t expect to use these services, ask yourself if you need to pay for them. And even if you do use them, check how much you typically receive annually in rebates from your insurer. It may be less than the additional premium you are paying.

4. Don’t pay for duplicate cover

Your health insurance extras policy may duplicate health benefits you already receive from other sources, such as Medicare, NDIS, employer wellness programs, or loyalty schemes from pharmacy chains, credit cards, and retailers. You may even get health discounts from your own insurer (for example, Medibank Live Better, Bupa Plus, HCF Thank You) without paying more.

5. Combine policies and save

Instead of each family member having their own policy, opt for a couple or family policy to reduce premium costs. Most insurers also offer lower premiums for single-parent policies that cover only one adult and their children.

6. Compare policies annually

Check that you are getting the best deal by comparing policies via PrivateHealth.gov.au. In addition to premium costs, be sure to check for waiting periods, benefit limits, and exclusions.

7. Use the government rebate

Many people will qualify for the means-tested Australian government rebate on health insurance premiums. You can claim this upfront as a premium rebate from your insurer, or at the end of the year via your tax return.

For more information, visit the ATO’s private health insurance rebate page.

8. Dodge the Lifetime Health Cover loading

Make sure you have taken out and maintained private patient hospital cover from the year you turn 31, if you expect to need it later in life. Otherwise, you’ll pay a government-mandated 2% Lifetime Health Cover loading on top of your premium for every year you are aged over 30, up to a potential 70% loading payable for 10 years.

Learn more at the ATO’s Lifetime Health Cover page.

9. Avoid underinsurance, exclusions, and restrictions

Before downgrading your policy, carefully check for any additional exclusions and restrictions associated with the lower-level cover. If you are likely to need heart treatment, joint replacement, psychiatric care or ambulance services, these may be excluded or restricted in a less expensive policy.

10. Reassess

Insurance cover should change as your life changes, so reassess your needs at key milestones. For instance, after marriage, the arrival of children, reaching your fifties, retirement, or being diagnosed with a chronic illness.

For a detailed comparison of policy options, visit the ATO’s guide on appropriate levels of private patient hospital cover.

Speak with an expert

When done properly, these steps can lower your premiums while still protecting you from costs that could disrupt your financial plans. It’s highly recommended to consult with your financial adviser to consider what’s best for your circumstances and guide you through the process.