Canstar’s Justine Davies expects a crackdown on junk health insurance policies Picture: Jack Tran

A new analysis of more than 70,000 people has found that tough talk from both sides of politics has helped stop the spread of junk policies.

Fewer than 1 per cent of people seeking health cover are specifically trying to avoid the government penalties for not being insured, down from more than 8 per cent a year ago, Canstar research has found.

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Australians get slugged with tax and other penalties if they are on higher incomes and don’t have private hospital insurance, or if they don’t take out cover after age 30. Some cheap policies only cover treatment in public hospitals, where waiting lists still apply.

Canstar spokeswoman Justine Davies said it was likely that a government publicity campaign against these so-called junk policies was having effect.

“Labor also announced its intention to remove the health insurance rebate from policies that only cover public hospital treatment,” she said.

Ms Davies said she expected there would soon be changes to the minimum level of hospital insurance required to avoid the Medicare Levy Surcharge of between 1 per cent and 1.5 per cent.

Laura Crowden from iSelect says fewer Australians are opting for cheaper policies.Source:Supplied

Health fund broker iSelect’s spokeswoman, Laura Crowden, said iSelect also had seen a decrease in the number of people taking out the cheapest policies, which often cost about the same as the minimum Medicare Levy Surcharge of $900.

Ms Crowden said a few hundred dollars more could pay for a higher level of insurance that also covered people for 20,000 procedures. “The whole point of insurance is peace of mind,” she said.

Experts say there are other ways to save money on health insurance rather than choosing the cheapest policy.

Research by iSelect found that 40 per cent of Australians have the top level of cover while 75 per cent are seeking extras cover with their hospital insurance.

Extras typically costs $50 to $100 a month and its effectiveness has fallen in recent years as many funds cut the amount of money they pay back on claims. The most popular claims for extras are dental, physiotherapy, optical and chiropractic.

Ms Crowden there were some “very good” mid-range hospital insurance policies that perhaps did not cover people for specific benefits such as pregnancy or cataract surgery.

She said while extras cover could be great for some people, particularly those claiming for optical, it was a good idea to “get clever with your extras” to make sure it was worth the cost.

“Ask your fund to send you a statement of what you claimed over the past 12 months, so you can see whether or not you are using it,” she said.