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 some of 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 if you earn above a specified income threshold.
- 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. You should regularly review your level of cover from time to time, as your needs change.
- Shop around –There are many 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 hospital cover. It may also be the case that your potential new insurer may waive waiting periods for extras cover, so you should ask when considering switching.
- 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.
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 it will incur any costs if you do not have it.
The Medicare Levy Surcharge, as distinct from the Medicare Levy, is an additional tax imposed on high-income earners who do not have a prescribed level of private health insurance. Only taxpayers with a taxable income above a certain threshold ($90,000 for individuals or $180,000 for families as at 2016/2017) will save on the Medicare Levy Surcharge by purchasing appropriate private health insurance. The majority of Australian consumers do not incur the Medicare Levy Surcharge and are not able to save on tax by purchasing health insurance. Queries regarding the Medicare Levy Surcharge should be directed to the Australian Taxation Office (see link below).
Lifetime Health Cover is a government initiative designed to encourage people to take out health insurance earlier in life and to maintain their cover. Lifetime Health Cover can affect health insurance premiums, but it does not impact on a consumer’s tax liability. Queries regrading Lifetime Health Cover should be directed to the Department of Health or Private Health Insurance Ombudsman.
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.
If you upgrade your health insurance to include additional cover, you may need to serve a waiting period for the additional cover. As such, you should consider changing your cover before your needs change.
In Australia, there are over 30 insurers offering around 3,500 distinct health insurance products. While the number of policies available to you will vary depending on where you live and your individual circumstances, you may still have over 100 different policies to choose from. 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 each policy and its prices. It also has a comparison feature which allows you to make some comparisons between health insurance policies from every private health insurer in Australia. Commercial comparison sites may 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 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. 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 their hospital cover 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. In some cases, though not required to do so, the new insurer may offer to waive waiting periods for extra covers, so ask when you're thinking about switching.
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. It is also important to read your chosen policy’s Product Disclosure Statement carefully. Ask the insurer questions to clarify your understanding of what is included in the policy and make a record of the conversation.
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.
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 the 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.