Should I drop my private health insurance during the pandemic?

Many Australians, especially those experiencing financial hardship due to COVID-19, are asking whether they can afford to keep their private health insurance.

Others don’t know if they should drop or downgrade their cover, especially if they cannot or don’t want to access services they’ve paid for.

Now consumer group Choice is recommending people think about dropping extras cover, dropping or downgrading hospital cover and asking their insurance company for hardship considerations, which include waiving premiums or suspending their policy.

What options do you have? And what are the implications of dropping or downgrading your cover?

Read more: Do you really need private health insurance? Here's what you need to know before deciding

What services can I use?

Our research shows people take out private health insurance because of shorter waiting times for elective surgery, choice of doctor or hospital, access to a private hospital room, and extras like dental and physiotherapy services.

Although some elective surgeries are due to resume this week, it’s unclear how long it will take hospitals to clear the backlog, which surgeries will be performed and where. This raises questions about whether consumers will be able to access the benefits they value in having private health insurance.

Read more: What elective surgery will be allowed now the coronavirus situation has improved? It's up to your surgeon or hospital

While a key reason for taking out private health insurance is to avoid waiting times, people may now have to wait while hospitals and health care providers resume a staged approach to resuming elective surgery and general treatments impacted by the pandemic.

People may also be worried about whether they will receive the care they need if they have COVID-19. However, they should be assured that emergency treatment will be provided through the public system. Many private health insurance companies will also now cover COVID-19 related treatments.

How are private insurers responding?

Modelling by the Australia Institute shows private health insurers could make considerable savings due to a reduction in claims paid to, or on behalf of, consumers during the pandemic.

This is because services, such as elective surgery, and general treatments, such as dental services, are not available or are limited. And it recommends some of these savings should be passed on to policy holders.

Private health insurance companies have assured consumers that any increase in premiums will be delayed by at least six months.

They have also said that some funds resulting from the cancellation of elective surgery or allied health services will be returned to customers. It isn’t clear, though, how this will be done and over what period.

What options do I have?

It’s not surprising if you’re confused about whether to keep, drop or downgrade your private health insurance.

Our research consistently shows consumers find changing private health cover confusing. Increasing costs of premiums, value for money and difficulties understanding policies are common concerns. People aren’t certain what they need cover for, what is a reasonable price to pay, and how much difference there is between the public and private systems.

Read more: Confused about your private health insurance coverage? You're not alone

If you are thinking about downgrading your hospital cover or stopping extras cover, think about what services you may need in the future.

Remember that if you downgrade your hospital cover to a lower level of cover some services may be excluded (for instance, pregnancy). If you decide to increase your level of hospital cover in the future you may also need to re-serve waiting periods for those services excluded at the lower level of cover.

If you drop your hospital cover and take it up again in the future, you may pay more due to the Lifetime health cover loading (if you do not take private health insurance up again within 1,094 days of dropping your cover).

Choice is also recommending people drop their extras cover. But your decision about this will depend on the types of services you typically use.

If you decide to drop your extras cover, you may also be required to re-serve waiting periods if you take up extras again in the future.

This means you may need to wait two months for general dental services or physiotherapy, but 12 months for major dental procedures. However these waiting periods vary according to procedure and insurer. So to find out what waiting periods apply, ask your health fund.

If you are experiencing financial hardship you may be able to ask your fund to temporarily waive your premiums or suspend your policy. However, you won’t be covered while your health insurance is suspended.

What happens after the coronavirus?

The pandemic highlights issues with Australia’s health-care system, and how private health insurance operates and is funded.

There has been much critique of government policy encouraging Australians to take out private health insurance, and in particular the subsidising of premiums through the private health insurance rebate.

Read more: Elective surgery's due to restart next week so now's the time to fix waiting lists once and for all

At a time when more consumers are experiencing financial hardship they will question the value of their private health insurance even more than before.

There may be other ways of providing health-care, including fixing waiting lists, that meet the needs of all Australians, while retaining the best aspects of both public and private care.

As decisions about whether to change your private health insurance depend on your personal circumstances, please discuss your options and their implications with your health fund or read the fine print on policy documents.

For independent advice and consumer resources, see the government’s private health insurance website, health department website or consumer organisation websites such as Consumers Health Forum of Australia or Choice.