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Private health insurance: What is community rating?

In Australia, everyone has the right to buy health insurance

A man relaxing on his bed with his laptop on his lap and a guitar sitting next to him
A man relaxing on his bed with his laptop on his lap and a guitar sitting next to him

Did you know that regardless of how healthy you are, how old you are or what your gender is, you’ll be charged the same premium as every other nib member in your state? It’s all because of community rating.

If you’ve racked up a few speeding fines or have been caught running a red light or two, you can expect to pay more for your car insurance premium than someone with a perfect driving record. That’s how risk-rated insurance works.

When it comes to private health insurance in Australia, the same rules don’t apply. Providing they’re with the same health fund, a healthy, marathon-running, non-smoking 35-year-old woman will pay the same for a basic level of cover as an overweight 90-year-old man with heart disease1.

They’re both entitled to pay the same premium for the same product, and that won’t change regardless of how many times they make a claim on their policy. Why? Because private health insurance in Australia is based on a system of community rating.

What is community rating?

Developed by the Australian Government, community rating was designed to prevent health funds from charging different premiums within a geographic area on the basis of:

  • Gender

  • Race

  • Religious beliefs

  • Sexual orientation

  • State of health2

  • Size of family

  • Age (except where Lifetime Health Cover loading or age-based discount applies)

  • Perceived risk of requiring future treatment

  • Any other reason

Now, it’s important to remember that premiums may differ between states. There’s a number of reasons for this including the fact that some states have more hospitals available and lower healthcare costs. To find out more, check out our article, I’ve moved addresses, will my health insurance premium change?

Premiums may also differ depending on what excess option you choose. nib members can choose an excess limit of $250, $500 or $750 for singles, and $1,000 or $1,500 for couples or families. So, if you’re with nib, you can opt for a higher level of excess in return for a lower premium. To find out more about excess, read our article Excess changes: How to reduce the cost of your premium.

A young boy laughing with a senior man

What is the difference between risk-rated and community-rated insurance?

Car, income protection, life, trauma and total and permanent disability insurance are all risk-rated. This means a premium is calculated on the level of risk associated with that person making a claim on their policy. Companies offering risk-rated insurance can also refuse to cover a person and increase the cost of their premium or lower their benefit limit if they make a claim.

This is very different from a community-rated system, where everyone has the right to buy health insurance. Health funds can’t refuse to provide you with the level of cover you desire; you’re guaranteed the right to renew your policy and the cost of your premium will not increase based on your health, personal circumstances or how many times you make a claim.

When it comes to community rating, are there any exceptions?

There are no exceptions when it comes to your health history, but there are some exceptions when it comes to your age and income.

1. The Lifetime Health Cover (LHC) loading

The LHC is an initiative that was put in place by the Federal Government to encourage people to take out private hospital cover earlier in life.

For every year you put off getting private hospital insurance following 1 July after your 31st birthday, you’ll be charged a 2% loading on top of your premium when you take out a policy.

This loading is applied to your health cover when you join, and you’ll need to pay this loading for 10 consecutive years before it ceases to apply.

If you want more information about the Lifetime Health Cover loading, you can visit our FAQs page, or call us on 13 16 42.

2. The age-based discount

nib members aged 18-29 can receive discounts of up to 10% on their private hospital insurance premiums.

Eligible members3 receive a 2% discount for every year that they’re aged less than 30, up to a maximum of 10% for those aged 18-25. And, the best part is if they remain on an age-based discount policy they’ll retain that discounted rate until they turn 41, where it will then be gradually phased out at a rate of 2% per year.

If you have questions about your existing nib policy visit member account or call us on 13 14 26.

If you’re thinking about getting private health insurance with nib, you can get a quote online, or call us on 13 14 26 to discuss your options.

3. The Australian Government Rebate

To make private health insurance more affordable, the Federal Government provides many Australians with a rebate, known as the Australian Government Rebate (AGR). If you earn an income of $140,000 or less as a single, or $280,000 or less as a family, you are eligible for the rebate. However, the rebate amount can depend on which of the three age brackets you fall under – under 65, 65-69 and over 70. Find out which rebate tier you fall into and what percentage of your premium the Australian Government will cover.

At nib, we’re passionate about making health insurance affordable, which is why we’ve put together an article with tips on how you can reduce the cost of your nib policy. Check out our article A guide to saving money on your health insurance cover for more.

1Other factors may affect your price depending on your age, such as Lifetime Health Cover Loading, the Australian Government Rebate, and the Age-Based Discount

2Waiting periods apply for Pre-Existing Conditions under Hospital cover.

3To be an eligible member you must be aged between 18 and 29 (inclusive) and not a dependent child under the age-based discount policy