Should You Switch Health Insurance Funds?
With health insurance premiums increasing every year on the 1st of April, you might be considering cancelling your policy.
However, this might be an excellent opportunity for you to review your health cover and decide if it’s still providing you and your family with value at this stage of your life. Maybe, you’re planning to start a family, or nearing retirement and need a different type of policy and would like to know what other companies have to offer.
You are not bound by a contract when you purchase health insurance, meaning you’re free to switch health funds at any time.
Why people change health funds
Generally, Australians either cancel or downgrade their health plan or switch companies because of:
- Premium increases: Health insurance premiums rise every year on the 1st of April, with some funds increasing their fees well above the average. The 2019 average premium increase is 3.25%.
- Changes to their provider list: Your health insurance company may have changed their list of participating providers so that you might have higher out-of-pocket costs when visiting your chosen doctor or specialist that's no longer on their list.
- Relationship changes: People often switch health funds because they're in a committed relationship and want family cover from a different company or they've split up and want their own policy.
- Medicare is just as good: Some people downgrade or cancel their health insurance policy because they feel they don't need private health care and would rather pay the Medicare Levy Surcharge (MLS).
- A bad experience with private health insurance: There has been a year-on-year increase in complaints to the Private Health Insurance Ombudsman (PHIO).
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Will health insurance waiting periods be waived when you switch?
You can generally switch health insurance with no waiting period if the policy you're changing to offers the same or a lower level and type of coverage as your current policy. If you have not yet completed the required waiting period before switching, your new fund will generally give you continuity for the waiting periods you have already served.
However, should your new policy include higher or different benefits than your previous plan, you will have to wait the specified amount of time before you can claim those benefits.
Example 1: Pregnant and changing health funds
If you want to switch from a Silver Hospital plan to a Gold Hospital policy because you want pregnancy and birth-related services, you'll have to serve the mandatory 12-month waiting period that is generally required.
On the other hand, should you have already served part of your waiting period and want to switch, you'll only be required to serve the remainder of your waiting period before you’ll be able to claim.
Example 2: Changing to a health company with different benefit limits
Should you change health funds where your previous provider offered a $250 annual limit on dental, while your new health insurance provider that has a $500 yearly limit, then you'll have to serve the required waiting period before you can claim on the additional $250 that was not available from your previous health fund.
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What to consider before switching private health insurers
1Whether your needs have changed: Consider the stage of life you're in now and the type of health services and products you might require. For example, seniors might want to make sure the health fund they're switching to has a policy that includes coverage for hip and knee replacements.
2What the plan covers: Make sure your new fund provides the right type of coverage for your requirements as you’ve determined per your needs-analysis.
3The premium: Can you afford to pay the premium in the long-term. You might want to review the health fund's history of yearly increases to get an indication of their continued affordability.
4Out-of-pocket expenses: Consider what services are not fully covered, for example, you might have had full coverage for joint reconstruction, but with the new fund this service is only partially covered – restricted.
5Annual limits: Annual limits differ between health funds. Get clarity on the benefit percentage and yearly limits of services you know you’ll claim on.
6Provider networks: Check if your preferred dentist, doctor and specialist are covered under the new fund's network of providers.
7Loyalty bonuses: Select companies rewards loyal customers with bonuses or discounts. Make sure you're not worse off when transferring to a new company.
8Customer reviews: Have a look at what other people have to say about their experience with the health fund you’re reviewing. Ideally, you want to find an insurer that is liked by their customers.
6 Steps to changing health insurance companies
Step1: Gather quotes: Review a variety of quotes from leading health insurance companies and compare which is best suited to your requirements.
Step 2: Apply for cover from your new fund and ensure premium payments of your old policy are up to date. Make sure to specify that your new membership should start once cover from your old fund has ceased.
Step 3: Request a clearance certificate, also known as a transfer certificate from your previous insurer. This certificate provides a record of your current health insurance coverage and must be completed within 14 days of a request. If your new insurer is handling the transfer, check to make sure your old policy details have been sent.
Step 4: Check the paperwork from your new health insurer carefully to confirm that your purchase matches what you expect to be covered for.
Step 5: Cancel your previous health cover and check your bank statement to make sure the deductions have stopped.
Step 6: Start your new cover: Contact your new fund and permit them to deduct premiums from your bank account.
Frequently asked questions and answers
How can I change my health insurance plan?
If you decide to stay with your current provider but want to downgrade or upgrade your policy, you can generally go to their online membership portal or call them directly and request that they change your plan. If you switch to a higher level of cover or a policy with different benefits, you usually have to serve a waiting period before you can claim those benefits.
Can you change your health fund at any time?
Yes, you are not bound by a contract and don’t have to remain with a health fund that you can’t afford or that no longer provides what you with value. Your new health insurer will usually assist you with the switching process. Your job is to make sure you know what you want from a new health fund and compare quotes from Australia's most significant health insurance companies before deciding.
Will switching funds affect my payment of the Medicare levy surcharge (MLS)?
As long as your new health plan includes a sufficient Hospital policy, you do not have to pay the MLS fee.
When should I change my health insurance plan?
The best time to change your health insurance plan is before the 1st of April, which is when health premiums increase. You might also consider switching when you've experienced a significant life change, for example, got married, started a family or retire.
How do I cancel my health insurance?
If you want to cancel your private health insurance policy, you will generally need to:
- Be up to date with your premiums
- Call, email or log onto the online membership portal and request a cancellation.
- Make sure you receive your clearance certificate within 14 days of cancellation.
Can I suspend my health insurance policy?
Yes, you can usually put your health insurance policy on hold if you’re experiencing financial strain or travelling overseas for longer than 2 months. Generally, while your policy is suspended no premiums are payable, and you won’t be able to claim on any benefits.
Do I have to have Hospital cover and Extras from the same provider?
No, you can choose to have Hospital cover with one insurer and Extras from another. Some people prefer this option as a way to find better value or save on premiums. However, it might require some more admin from your part. Make sure you know precisely which fund covers which policy type and keep records of your benefits, co-payments and annual limits.
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