The pandemic saw an upswing in private health insurance memberships, but rising premiums have many people looking to switch or ditch their cover.

Nearly one-third of Australians with private health cover are looking for a better deal or planning to drop their insurance altogether, with rising premiums adding to widespread cost-of-living pressures, according to Finder data.

“Aussies have been hit with everything from skyrocketing energy bills to rising petrol prices and food bills, and in many cases insurance is the first non-essential to be cut,” Finder health insurance expert Tim Bennett said.

“We may start to see higher rates of underinsurance over the coming months as many simply won’t be able to afford the policies they need.”

However, the most recent data covering private health insurance membership numbers shows many Australians have not yet changed their cover.

Hospital treatment membership increased by 2.2 per cent, or 257,797 people, in the year to March, according to the Australian Prudential Regulation Authority.

This means 45.1 per cent of the Australian population has hospital coverage.

But these Australians are looking to get bang for their buck; claims increased by 4.9 per cent in the year, reflecting higher use of services.

Pay for health cover you’ll use

When it comes to deciding whether to get, swap or ditch private health cover, Choice health insurance expert Uta Mihm said it’s important to consider what services you’re likely to use.

This is particularly relevant to extras cover, which could see private health members putting in more than they’re getting out.

“A lot of Australians actually lose money on extras cover, because they pay more on their premiums than they get back in … refunds,” Ms Mihm said.

Although you might want to be covered for anything that could happen, certain levels of cover may be less relevant to your life and circumstances than others.

For example, Ms Mihm said, many ‘gold’ tier policies cover things like pregnancies and hip or knee replacements.

If you’re done having kids, or you’ve already gotten a new hip that has healed nicely, it might be worth considering dropping your cover to the silver tier or lower.

If you and a partner are both covered under a couples plan, you should evaluate your individual needs; if all you’re after is dental and eye check-ups, while your partner has a chronic condition that needs more constant medical management, it could be cheaper to swap to single plans.

Opportunity to save

Private health cover might be a big expense, but if you’re in a higher tax bracket, it could save you money come tax time.

If your income is above a certain threshold and you don’t have private health insurance, you will be required to pay an additional tax called the Medicare levy surcharge.

The income thresholds for 2023-24 are $93,000 for a single person, and $186,000 for a family.

“Even if you don’t want to have private health insurance at all … you could still take out the cheapest policy, which would be – in most cases – less than paying that tax,” Ms Mihm said.

Another factor to take into consideration is lifetime health cover (LHC) loading.

LHC is a government initiative that encourages the uptake of private patient hospital cover earlier in life by requiring you to pay 2 per cent loading on top of your premium for every year you are aged over 30.

But if you’re struggling to pay for private health cover continuously, Ms Mihm said it might still be cheaper to get cover when you know you’ll need it, despite the additional loading.

“In many cases, if you … only take [cover] out for the periods of time where you actually … need it and then drop it again, it’s actually cheaper [to pay] that surcharge than paying the cheapest policy over that period of time,” she said.

“Obviously, if you have a chronic illness and are frequently going to hospital, that would not be the case. But if you just need it when you have a baby, and then later on when you have a hip replacement, that quite often could be the case.

“You just need to look at your personal risk profile.”

If you’re young and healthy, but still would like the peace of mind and security that private health cover can provide, Ms Mihm suggests the ‘bronze’ tier cover may be the way to go.

“If you don’t need health insurance at the moment – so you’re young and healthy and … you just want to have it just in case – then bronze policies might be something to look at, because they cover things like broken bones and flu, and even breast cancer surgery and prostate cancer surgery,” she said.