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Private health insurance: What is community rating?

4 minute read
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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 disease.

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 health
  • Size of family
  • Age (except where Lifetime Health Cover loading or age-based discount applies)
  • Perceived risk of requiring future treatment
  • Any other reason
A grandfather holding his grandsons hand and laughing

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 two exceptions when it comes to your age.

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 after you’ve turned 31, 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

Thanks to the upcoming private health insurance reforms, nib members aged 18-29 from 1 April 2019 will receive discounts of up to 10% on their private hospital insurance premiums.

This reform is called age-based discount and it’s an optional reform, which means other health funds might not be implementing it, or could be applying it to some (but not all) products.

Our eligible members1 will 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.

Between now and 1 April 2019, we’ll be in touch to let you know exactly how the upcoming reforms will affect you and your health cover. For more information, check out our dedicated private health insurance reforms page.

If you have questions about your existing nib policy visit Online Services 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.

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

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