This week, I managed to eke out yet another saving by reviewing my health insurance arrangements, and I’ll tell you how.
You have until Wednesday to act and nab a significant saving on your premium.
Health insurance is a major expense for many families, running into thousands of dollars each year.
Insurers hike their premiums every April 1, usually by a percentage well above the inflation rate.
This year, many insurers skipped the usual price hike date because of the COVID-19 pandemic – a fair move, given most members were unable to claim on services such as dental and optical during lockdowns.
But mercy is not an open-ended thing and those delayed increases are now set to kick in for many this Thursday, October 1.
Each time I mention how much I pay for health insurance, people invariably comment that the amount seems low.
So, this week I rang my health insurer to check on my premium increase. The line was busy and I was redirected to a messaging service, where a lovely fellow called Scott responded to my queries with all the courtesy and eagerness of an early stage internet dating exchange, minus the pictures.
Scott informed me that, from October 1, my health insurance premium was set to increase by 3.3 per cent from my current monthly sum of $94.33, to $97.41.
A quick aside. Each time I mention how much I pay for health insurance, people invariably comment that the amount seems low. To which I say thank you, I know.
Over the past year, I have carefully weeded and pruned my cover back to the bare essentials I need for a fit, healthy 39 year old.
The policy I pay for gives me Bronze-level hospital cover, with a $750 excess, and budget-level extras cover. I am the only person on the policy.
Were it not for the certain tax-time slug, I would seriously consider ditching my private cover and just going public for treatments. But at an annual cost of $1131.96 a year, for me, it’s still much cheaper than paying the 2 per cent Medicare Levy Surcharge at tax time.
To avoid the tax hit, you don’t need extras cover, just hospital cover. However, I regularly conduct a rigorous evaluation of all my claims – mostly dental and optical – to ensure I receive more back in benefits than the cost of the extras cover. Which I do.
Anyway, back to Scott.
I could, he advised, choose to pay a year’s worth of premiums in advance, at the old premium rate, saving me about $37 a year.
There are two potential problems with this strategy.
Firstly, you have to have money sitting around to throw at the payment. Not everyone does. Particularly not this year.
Secondly, paying in advance means giving up the benefits that come from having that money sitting in your pocket for more of the year.
For me, with a mortgage, I had to consider whether the saving would be worth the extra interest I would pay on my mortgage by not having the money sitting, instead, in my offset account.
My mortgage has an average interest rate of about 2.5 per cent, across the fixed an variable portions of my loan. Using a spreadsheet, I calculated I would gain about $15 a year by keeping my health insurance premiums sitting in my bank account instead.
Still, take the $37 annual saving, minus the $15, and I’m still ahead by $22 a year by prepaying.
I made sure to check with Scott that I could still cancel my policy at any time, and switch to a cheaper insurer, should I find one during the year. Scott agreed we could go our separate ways at any time, no hard feelings. So I paid and nabbed the saving.
So, early this week, I urge you to also review your health insurance arrangements. Prepay if you can, if it’s worth it for you. Be sure to ask, as I did, if there are any other potential discounts available.
If you have been affected by COVID-19, now is also a great time to check what hardship provisions are available, such as premium pauses or discounts. Some insurers are offering discounts of 50 per cent. And remember, if your income has fallen, you may be eligible for a higher rebate from the government on your premiums.
Good luck. And tell Scott I said hi.
You can follow Jess’ money adventures on Instagram at @jess_irvine_pics
Jessica Irvine is a senior economics writer with The Sydney Morning Herald.