Article was originally published by TJ Ryan on February 3, 2017.
Whether it’s for budgeting reasons, taking an extended trip overseas, or switching health funds, it can be useful to be able to suspend your health insurance policy until you’re ready to take it up again.
Can I suspend my health insurance policy?
Yes. You can suspend or ‘freeze’ your health insurance policy for quite a while in certain situations. You can’t just stop paying your premiums though; you have to apply to your insurer and meet certain conditions such as being fully up to date on paying your premiums.
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If you fit into one of these three situations, you may not have to pay any extra Lifetime Health Cover (LHC) loading because you took a break from having private health insurance:
No insurance – Days of Absence gap in cover
You can go without any hospital cover health insurance for periods adding up to 1,094 Days of Absence in total (i.e. 3 years less one day). This is useful for small gaps when you are not covered by any private health insurance, such as when you switch from one fund to another. Once you have used up your total Days of Absence allowed (1,094 days), you will pay LHC loading of 2% on top of any previous loading you were already paying. The amount of LHC loading you pay will increase by 2% for every year you spend without cover after the 1,094 Days of Absence are used up.
The table below features a snapshot of hospital & extras policies on Canstar’s database with links to providers’ websites, sorted by Star Rating (highest-lowest) then by provider name (alphabetically). Please note the results are based on a couple aged under 35 in NSW with no pregnancy cover.
Insurance suspended – when health fund agrees
If you want to take a break from your insurance premiums, maybe because you’re experiencing financial hardship or taking an overseas holiday, apply to your health fund to suspend your hospital cover for a short period of time. If your health fund approves your application, this period of suspension doesn’t count towards your allowed 1,094 Days of Absence. Terms and conditions for suspending your health insurance policy vary from fund to fund – for example most health funds only allow you to suspend your policy once per calendar year or twice per year. Some health funds only allow financial hardship suspensions of up to 3 months, and suspension in other circumstances for up to 2 years. Check with your insurer what they allow.
Insurance suspended – 1 year or more overseas
If you cancel your hospital cover so you can go overseas for at least one continuous year (e.g. for a gap year, working holiday, or sabbatical), the days you spend outside of Australia after your LHC base day don’t count towards your allowed 1,094 Days of Absence. You can have short trips of up to 90 consecutive days (i.e. roughly 3 months in a row) back home to Australia, but if you stay in Australia longer than 90 days without getting hospital cover again, these days will count towards your allowed 1,094 Days of Absence.
If your insurer doesn’t have a good policy when it comes to allowing you to suspend your health insurance, it could be worth shopping around for a more lenient insurer. Keep in mind that you must stick with an insurer for at least 12 months in order to be eligible to suspend your policy.
How do I suspend my health insurance policy?
It is easy to suspend your health insurance policy. In the case of financial hardship, contact your insurer by phone, email, letter, or by completing an online application to suspend your membership through your insurer’s online membership portal. You must start paying your premiums again within 30 days of the suspension ending in order to keep your cover.
In the case of suspending your cover while taking an extended trip overseas, confirm your travel dates and contact your insurer by phone, email, letter, or by completing an online application to suspend your membership through your insurer’s online membership portal. It’s vital that you get this sorted before you hop on a plane to your overseas destination, because you cannot apply to suspend your policy after you have already left the country.
When you return to Australia, you will need to notify your insurer within 30 days of your arrival, and make payment to your membership immediately. This will reinstate your cover and you will be able to make claims again for medical services you receive within Australia.
Can I claim benefits while my policy is suspended?
No. While your health insurance policy is suspended, you are not covered to make claims for any rebates or benefits from your insurer.
Do my waiting periods keep going while my policy is suspended?
No. While your policy is suspended, your waiting periods are ‘on hold’. You will be able to continue serving the rest of your waiting periods when your policy resumes.
Do I pay Medicare Levy Surcharge during suspension?
Yes. When your insurance policy is suspended, if you earn above the income threshold you will have to pay the Medicare Levy Surcharge for that tax year. This can cost you an extra 1% to 1.5% in tax, depending on your income.