How do I cancel my private health insurance?

Private health insurance is like having a partner who’s always there for you. It’ll pick you back up (financially) if you ever find yourself in a tough spot with your health. But the truth is that sometimes, you just have to consider the breakup.

With the cost of living only going up, the amount you pay for your health insurance premiums might have you seriously considering whether you should hit the ‘cancel’ button on your policy. It's a big decision – and one that could potentially come back to bite you. So let's unravel the nitty-gritty of cancelling, weigh the pros and cons of swapping to a different policy or provider, and also give you the lowdown on how to cancel private health insurance as painlessly as possible.

The good news is you hold all the power here. You can cancel your private health insurance policy whenever you decide it’s the right time. There’s no need to wait for a special day or navigate a labyrinth of regulations. Having this flexibility means you can make decisions based on your unique circumstances, which is a win for all Aussies right now.

The specifics of how you bid farewell to your insurance policy will depend on your provider. They typically offer a few different methods: phone call, email, online form or logging into their dedicated portal. Simply choose the one that feels right for you.

But here's the catch: when you cancel, it’s not a matter of just hitting the ‘undo’ button. Once you've cancelled your health insurance, you can’t get it back without jumping through several hoops. So it’s a decision that shouldn’t be made lightly.

Cancelling your health insurance policy can save you money on premiums – yes. But, as with most things in life, the grass isn’t necessarily greener on the other side. If you decide to cancel and then change your mind, be ready to face fresh waiting periods when you re-join the private health system. In other words, the clock will reset – and you'll have to wait before you can access the benefits you need.

For example, if you cancel and later want to switch to another health insurance provider, your old insurer should provide you with a clearance certificate within 14 days. This certificate will help you skip the waiting times on your new equivalent policy, but only if you’re switching, not cancelling outright.

Moreover, cancelling your private health insurance might have tax implications. If you earn more than $93,000 (or $186,000 as a couple), you may find yourself liable for the Medicare levy surcharge. It’s an additional tax that was created to encourage Australians to take out private hospital cover. If you fall into this bracket, the surcharge could cost you between 1% to 1.5% of your income.

And then there’s the pesky lifetime health cover (LHC) loading as well. This is like that extra baggage from a previous relationship – it might come back to haunt you. If you cancel your health insurance and remain uninsured, the loading could add 2% to the cost of your future cover for every year you’re aged over 30.

If you decide to part ways with your insurer, they are obliged to refund any premiums you've paid in advance. But there are a few more things to keep in mind.

First, some providers might charge you an administration fee when you cancel. It's essentially a parting gift you didn’t ask for, but it’s not uncommon. These fees can eat into your refund, so check your policy’s terms and conditions for any potential charges.

If you’ve only just started a new policy, you may still be within the cooling-off window. During this period, if you change your mind and cancel the policy, you’re usually eligible for a full refund. Be sure to check your policy documents for details on the cooling-off period and its duration.

So, you’re really thinking about calling it quits with your private health insurance? Before you take the final plunge, make sure you understand the full implications of this move. When you cancel your policy, several factors come into play which will affect your coverage, finances and future healthcare arrangements.

One of the first things you'll encounter when cancelling your private health insurance is waiting periods. These are the initial timeframes during which your insurer won’t cover specific services. The good news is that if you decide to switch to another provider offering equal or lower coverage, you typically won’t have to re-serve waiting periods you’ve already completed.

However, if you go for a new policy with services or benefits not covered by your previous one – or if you go back to private health cover after spending a period of time without any – then you will need to re-serve waiting periods for those particular services. Make sure you check your new policy’s PDS for waiting periods and benefits, so you know exactly what to expect.

Here’s another factor to consider: the Medicare levy surcharge. If you cancel your private health insurance and your income exceeds certain thresholds, you may become subject to the MLS. This additional tax is only imposed on high-earning Australians who don’t hold private hospital cover.

The MLS can range from 1% to 1.5% of your income, which is nothing to scoff at. If you cancel your health insurance mid-year and your income surpasses the threshold, you might have to pay a portion of the MLS for the number of days you were uninsured during that financial year.

The LHC loading is another important consideration when cancelling your private health insurance. If you’re 31 or older and remain without private hospital cover, a 2% loading is added to your premiums for every year you’re uncovered, up to a maximum of 70%. This loading can be an eye-watering increase to the cost of your insurance.

Thankfully, the loading is removed once you’ve held continuous hospital cover for 10 years. But, if you cancel your health insurance and decide to return to it later in life, you could face these additional costs again.

Cancelling your private health insurance might also mean delayed medical treatment. One advantage of holding private cover is getting faster access to medical procedures. By reverting to the public health system, you will usually face longer waiting times for non-urgent treatments, particularly elective surgeries.

You may also incur extra costs, such as high dental expenses, ambulance call-out charges (varies by state) and potential tax obligations like the MLS and LHC loading.

It’s finally time. You've decided to pull the plug and part ways with your private health insurance. Here’s how to do it with as few hassles as possible:

• Contact your insurer: Start by reaching out to your health insurance provider through your preferred method, whether that’s phone, email, online or their portal.
• Request a clearance certificate: If you plan to switch to another provider, ask your current insurer to provide a clearance certificate, also known as a transfer certificate. This document breaks down your previous health coverage, which can help you skip waiting times with your new insurer.
• Note your policy dates: Keep track of the dates when you opened and closed your health insurance policy. You might need this information come tax time.
• Cancel direct debits: This one is easy to forget! Make sure you cancel any direct debits to your previous health insurer. You should receive a refund for any prepaid premiums, minus any administration fees.

Deciding to cancel your private health insurance in Australia isn't a choice to take lightly. While it might offer short-term financial relief, you should also factor in the potential long-term consequences. Re-serving waiting periods, dealing with the Medicare levy surcharge and losing out on essential benefits are all big considerations.

Fortunately, you have alternatives like switching providers, suspending your cover or moving to a cheaper policy to make health insurance more manageable. Remember, it’s always wise to explore your options before making your final decision.