Insurance Shopping Improves Financial Health

Sun Herald

Sunday February 26, 2006

Debra Cleveland

It's time for a check-up, writes Debra Cleveland, to avoid paying for things you don't need.

WITH health fund premiums set to increase yet again, it's time to give your policy a health check. Chances are you're paying more than you need to, and you could save hundreds of dollars a year by switching policies or ensuring you're not paying for what you don't use.

Overall, health funds are likely to charge 6 to 7 per cent more but the rise in individual policies could be much higher, so check the size of your increase. Most of the increases should come into effect from April 1, so you have some time to make changes.

Comparing health funds is complex, but there are shortcuts. Using our 10-point health check, compiled with the help of expert advisers, you can make sure you're squeezing the last drop from your health fund - and that you're covered for that unexpected procedure that would otherwise leave you out of pocket.

1 Mix and match

If you have hospital and extras cover, it can be cheaper doing both via separate insurers. "We often arrange hospital cover with one fund and extras cover with another to suit the needs of a member - funds are reluctant to make this known," says Peter Scullin, director of health insurance broker Health-Link Consultants.

It's an approach also followed by another broker iSelect. "You don't need to have hospital and extras cover with the same insurer," says Roger McBride, marketing manager. "Often you can get a better deal on ancillaries with a different provider. With premiums rising at up to three times the rate of inflation it's vital to review whether your policy is competitive."

2 Switch and pay in advance

Because premium increases won't take effect until April 1, if you switch funds and pay the new premium in advance you'll be paying the old rates. Health-Link Consultants' Scullan adds: "If consumers transfer health funds beforehand - say by March 24 - and pay their premium yearly or half-yearly, they will be given rate protection at the old rates for the next 12 or six months. It can be a positive way of using a credit card."

What about prepaying with your current fund? Some sources say you can avoid the premium rise if you pay ahead of April 1, but only if you now pay your premium monthly and you agree to switch to a yearly payment via direct debit. Obviously, the funds are not promoting this, though, so check whether yours gives the OK.

3 Talk to your doctor

McBride suggests a chat with a doctor can help to work out what you should be covered for. "Looking at family history issues and your own 'life stage' and lifestyle may help determine what problems may arise and what the risks are," he says. For example, you could exclude obstetrics if children are no longer on the cards. Or if you're 25, he adds, and your policy covers you for hip replacement, you may be better off with knee surgery as an option. "Typically, you should adjust the policy to suit your needs at your life stage - excluding some obvious, but hidden, coverage areas can reduce your premium substantially," McBride says.

4 Ask the right questions

Make sifting through the fine print easier by asking the following, suggests McBride:

* What waiting periods apply, and for what conditions?

* What excess (the first $100, say, of the hospital bill) or co-payment (often the first $50 a night of the hospital charge) applies, and is there an annual limit per person or membership?

* Are any treatments excluded, or are you covered for procedures you're unlikely to use?

* Are any treatments restricted to public hospitals?

* Does the policy limit you to being treated as a private patient in a public hospital?

* What hospitals are covered by your fund and are there any treatment restrictions at your preferred hospital?

* Are you covered at your preferred hospital by your preferred practitioner?

* What are the out-of-pocket expenses?

5 Use a broker

The service is free to you and usually involves a phone call or filling in a form on the internet. Brokers are paid a commission by health insurers but they say the differences between the insurers' kickbacks are negligible so they won't steer you in one direction hoping for a bigger cut. "Most health funds are run on a not-for-profit basis and pay us on low margins, so we are not aligned with one fund or another," Scullin says. Brokers can help cut costs by finding similar cover with a different insurer for lower premiums.

Brokers provide clients with a list of recommendations depending on the type of cover they need. The table below shows Health-Link's top six health funds for hospital cover with higher excesses. Brokers also provide similar lists for clients who want to pay lower or no excess.

6 Cut out extras

Do you really need ancillary cover? The first thing you need to work out is how much extra you're paying for it - as opposed to having hospital-only insurance. Then look at your medical bills for the past year to see what ancillary services (such as physiotherapy, dentistry and so on) you've used. After that, figure out what you received from your health fund and what you've had to pay in to cover the shortfall or gap.

For example, if your ancillary cover costs $800 a year and you've spent $800 at the dentist and chiropractor and you got back only, say, $350, it's probably not worthwhile.

7 Tailor your policy

Choose your cover according to your "life stage", iSelect suggests. Some tips for doing this include:

* Singles: look for hospital cover with excluded procedures such as hip replacement. Cut costs even more by taking a higher excess or making co-payments

* Young couples: you may want hospital cover that includes obstetrics. Fertility treatments will mean higher premiums. The focus should be on top hospital cover with basic extras that don't include prosthetics or hearing aids, McBride says.

* Families with children: taking hospital and extras cover with different insurers is often cheaper. There's probably less need for hip and knee replacement and cataract surgery in the hospital cover, but perhaps the extras cover should include orthodontics for children.

* Empty-nesters: policies should include hip and knee replacement, heart disease, eye surgery and more serious conditions because there are increased risks of these occurring. Although comprehensive insurance is more expensive, you can cut costs by up to 30 per cent if you shop around, McBride says.

* Retirees: think twice about dropping private cover because after three years you'll have to pay an extra 2 per cent for each year you're over 30 if you want to come back. If you're over 65, iSelect says, the Government pays a 35 per cent rebate and 40 per cent if you're over 70.

8 Understand what's excluded

As pointed out by the Consumers' Health Forum of Australia, a cheaper policy may mean a reduced rebate or no rebate at all for certain conditions such as heart and circulatory diseases, hip and knee replacements, mental illness and pregnancy. It may also mean you can't get treated at your preferred hospital, which may mean your family has to travel much further to visit you.

When it comes to cutting premium costs, Health-Link's Scullin is more in favour of taking a higher excess than going for a policy with exclusions. "You're more likely to be able to come up with an $800 excess than $15,000-$20,000 for cataract surgery that's excluded from your policy but which you may suddenly need," he says.

9 Review your policy

Just like other cover, such as life or car insurance, health fund policies should be reconsidered each year, says financial adviser Laura Menschik, principal and managing director of Millennium Financial Services. "Sometimes people are over-insured. For example, the kids have left home and they should eliminate the maternity clause - and they don't realise they're being covered for things they may not claim for." Read the fine print and don't pay for more than you need.

10 Save on excess

Paying an excess - financing the first $100 to as much as $1000 for a hospital stay - can substantially cut premiums. Some insurers favour co-payments instead, asking you to cough up the first $50 a night (to a certain limit). Ask whether these apply to day surgery and when you're a private patient in a public hospital.

CASE STUDY

More for less if you look around

The Daggmarr family is saving almost $500 a year by switching health funds. Liz, 35, and Carl, 34, say they felt forced into health insurance because of the Government's penalty for joining a fund after the age of 30 - for every year after 30 when you first join a health fund you pay an extra 2 per cent of the premium. So for some time they had a Medibank Private policy, for which they paid $1440 a year but never used. When Liz had her two children she chose a public hospital over private because it was cheaper. Irritated by the rising premium, she contacted health insurance broker iSelect and switched to another insurer, Australian Health Management, where the family is on the same level of hospital-only cover.

"For the price we were paying before we could have had extras cover as well, but we don't need it," Liz says.

© 2006 Sun Herald

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