Choosing the right private health insurance policy for you and your family can be difficult. We provide some tips to help you make an informed choice.
Private health insurers cover the cost of treatment for private patients in private or public hospitals and can cover some additional services that Medicare generally does not, such as dental, optical, physiotherapy and chiropractic care.
Private health insurance also gives you more choices in your healthcare, for instance the ability to choose your surgeon/obstetrician/specialist and the hospital you prefer from the private health insurer’s agreed providers. If you go to a private hospital, you will also often be able to gain treatment faster than you might do on a public waiting list. Another reason consumers buy private health insurance is to respond to government incentives and taxation policies.
- Know your options – Having private health insurance is not compulsory, however your decision may have financial implications and can affect your tax status.
- Know your needs – Assess your healthcare needs to tailor your level of cover now and into the future. It may help to speak to your doctors about this. Make sure you’ve got the right policy and are with the right health insurer for your needs.
- Shop around –There are thousands of products available in the market. Compare them in detail and think carefully before shopping for price alone – some cheaper products may not be value for money in the long run and may contain a number of important exclusions.
- Don’t set and forget – Pay attention to any changes to your policy and reassess your health and insurance needs regularly. Consider switching insurers to get a better deal - it won’t cost you anything to switch, and as a general rule it is not necessary to ‘re-serve’ a waiting period for similar cover.
- Understand the terms and conditions – Don’t gloss over the details of insurance policies. Check that your policy covers the professionals, facilities and services you may want or need to use. Get a cost estimate before having a procedure so you can check any out-of-pocket costs with your insurer.
- Know your rights – You have many rights when purchasing and using private health insurance.
Purchasing private health insurance is not compulsory. The decision whether or not to purchase private health insurance may affect your tax obligations and your ability to access the medical treatment of your choice. Ask yourself whether you can afford to have private health insurance and whether you can afford not to have it.
Particularly around 30 June (end of financial year), advertising emphasises that buying private health insurance can help you with your tax status, but this may not always be the case. The Medicare Levy Surcharge requires high income earners who do not have private health insurance ‘hospital cover’ to pay a levy on taxable income. The Lifetime Health Cover loading means you pay higher premiums if you take out private health insurance after turning 31.
Example: if you are single with no dependents and you are not 31 years of age (or older) in the tax year, as a general rule, you will not need to pay the Medicare Levy Surcharge and the Lifetime Health Cover Loading if you earn less than the threshold income ($90,000 for 2015-16).
There are two types of private health insurance cover:
- hospital cover (for in-hospital treatment), and
- ancillary or ‘extras’ cover (for ambulance, optometry, dental, physiotherapy and other ancillary services).
Consider your health needs when purchasing or renewing private health insurance. Consulting your doctor/s may help in this process.
As your medical needs change over the course of your life, so will your insurance needs. Don’t ‘set and forget’. Consider whether a policy covers the conditions that are most relevant to you or your family in the short to medium term. For instance, what is the chance you will incur a sports related injury? Have a baby? Need a hip replacement? Also bear in mind that there are conditions that you can’t predict, including the need for psychiatric care, cardiac conditions and plastic and reconstructive surgery following surgery to remove cancer. These are all treatments that can be restricted or excluded under lower level policies.
In Australia, there are over 30 insurers offering over 20,000 health insurance products. These can be hard to compare as each policy is different. That said there are some handy tools and experts out there that can help.
In particular, look at the government website privatehealth.gov.au. The website is set up under legislation and every insurer is required to provide up-to-date information about what is covered by each policy and its prices. It also has a comparison feature which allows you to compare health insurance policies from every private health insurer in Australia.
Commercial comparison sites can also help you assess your needs and choose the right policy. However, you should always be alert to the fact that these sites may provide only some of the relevant information about a very diverse marketplace. They don’t necessarily cover every insurer or every type of policy available and they may have commercial relationships with, or receive financial inducements from, listed businesses.
See: Comparator websites
Think carefully before shopping for price alone – some cheaper products have lower levels of cover, higher out of pocket expenses and smaller rebates. Cheaper policies may not be value for money in the long run.
Insurance premiums tend to rise each year and insurers typically include terms and conditions in health insurance policies stating that they may change your cover at any time during your policy, although you need to be notified of those changes. Read any documents that a health insurer sends to you as these may contain important information about changes to the services and level of benefits available under your existing policy. Check with your insurer before having a procedure so you are aware of any potential out-of-pocket expenses that may be incurred.
It is important you understand any changes to your policy and how they may affect you, especially where the change involves a reduction in your level of cover. If you don’t like the changes to your policy, you can act to keep your existing cover. Have a look at other policies or insurers – you have the right to switch policies to avoid the effects of the detrimental change. And as noted above, your medical needs will change over time. You should also review your cover at least every couple of years to ensure it continues to meet your needs and remains value for money.
By law, consumers can switch policies or insurers without incurring financial loss or having to re-serve waiting periods, although waiting periods will apply for some services where you take out a higher level cover. You should check if this applies to you before switching insurers.
Not all medical services or procedures will be covered or be covered in full by your chosen policy. You may also need to serve a ‘waiting period’ before being able to make a claim. Consequently you need to understand the terms and conditions of your chosen insurance policy before purchasing insurance or switching insurers.
Don’t just rely on the insurer’s website information or information provided over the phone. Read your chosen policy’s Product Disclosure Statement (PDS) carefully and pay attention to the fine print.
Exclusions and restrictions
Be familiar with the exclusions and restrictions which may apply to you and be sure the policy meets your needs. If you are treated as a private patient for an item which is excluded or restricted on your policy, you will be responsible for most or all of the cost of the treatment yourself.
Gap and other costs when accessing benefits
If you know you want to be treated by a certain provider or at a certain hospital, you should check before purchasing or using your private health insurance what arrangements the private health insurer has with that provider or hospital, as that will affect any out-of-pocket expenses.
When you receive treatment and your insurer does not cover the full cost of that treatment, you will need to pay ‘the gap’. This reflects what your doctor chooses to charge for their services and your degree of coverage. When it comes to hospitals, your fund may provide more or less of a rebate depending upon which hospital you use. Similarly, your fund may have ‘no gap’ or ‘known gap’ arrangements with some health care providers.
Be aware that some insurers will recognise (and offer rebates for) services provided by a category of allied health provider but not recognise the same or similar treatment when it’s given by another category of provider (e.g. some insurers recognise nutritionists but not dieticians to provide nutrition services while others recognise nutritionists and not dieticians etc).
You may also need to pay an ‘excess’ each time you visit a hospital under your hospital cover. Often a higher excess will mean a lower premium.
To avoid bill shock, it is strongly recommended you ask your doctor/medical practitioner for an estimate regarding your treatment which includes the Medicare item numbers. That way you can contact your insurer with the necessary details before undertaking any treatment to find out how much of the cost will be covered, and what you will have to pay out-of-pocket.
‘Extras cover’ will often have a maximum claim amount for each type of visit. For example you may only be entitled to claim a maximum of $30 per physiotherapy visit. ‘Extras’ cover may also often limit the amount you may claim in any year for a certain type of service. Once you have reached your benefit limit for that service, you will need to pay the full cost of those services.
A waiting period refers to the period of time a person must wait to make a claim after they start a new policy or increases their level of cover. For example, if a 12-month waiting period applies to birth and obstetric services you will not be covered for the cost of delivering a baby in a private hospital for the first year after purchasing your insurance. A 12-month waiting period also applies to pre-existing conditions on joining or after upgrading your policy; the only exception is treatment for psychiatric, rehabilitation and palliative care, which can only incur a 2-month waiting period, even if the condition is pre-existing. As noted above, waiting periods typically won’t apply if you are switching policies or insurers to avoid the loss of cover caused by an insurer changing your policy. Check what waiting periods will apply to you.
A number of government agencies are involved in the administration and regulation of the private health insurance industry:
- The Department of Health administers the Private Health Insurance Act 2007 and private health insurance provider rule and is responsible for developing policy in relation to private health insurance
- The Commonwealth Ombudsman manages consumer complaints relating to private health insurance. They may be able to assist consumers in disputes with their insurers
- We enforce the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL). The ACL, among other things, prohibits insurers advertising in ways that are misleading or deceptive.