There are different reasons why people take out health insurance
Private health insurers cover some of the costs of treatment for private patients. Treatment can be in private or public hospitals.
Health insurance can cover some services not usually covered by Medicare, such as:
- dental and orthodontics
- glasses and contact lenses
- chiropractic care
- home nursing
- speech therapy.
Other reasons why people might choose to take out health insurance include:
- the ability to choose the doctor or specialist and the preferred hospital from the health insurer’s agreed providers
- often being able to get treatment faster in a private hospital than might be possible on a public waiting list
- to respond to government incentives and taxation policies.
There are some things consumers can do to make sure health insurance meets their needs.
Consider the costs and benefits
Buying private health insurance is not compulsory.
In deciding whether to buy private health insurance, consumers should:
- think about how important the benefits of insurance are to them, such as greater choice about treatment
- weigh up the costs and benefits to decide whether insurance will make healthcare more affordable for them.
Buying health insurance will only reduce a person's tax bill if their income is above a certain threshold. The Medicare levy surcharge applies to individuals with a taxable income above $90,000 (or above $180,000 for families) who don’t have health insurance hospital cover. This is separate to the Medicare Levy, which is something most taxpayers pay regardless of whether they have health insurance. The Australian Taxation Office has more information.
Lifetime Health Cover is a government program designed to encourage people to take out health insurance earlier in life and to keep their cover. Lifetime Health Cover can affect health insurance premiums, but it doesn’t affect a person's tax bill. The government’s private health website has more information.
The decision whether to get health insurance may affect a consumer's tax obligations and their ability to access the medical treatment of choice.
Know health needs when choosing a policy
There are 2 types of private health insurance cover:
- hospital cover, for in-hospital treatment
- ancillary or ‘extras’ cover, for ambulance, optometry, dental, physiotherapy and other health services.
Many consumers hold a combined policy that includes both hospital and extras.
Consider health needs when buying or renewing health insurance. Talking to a doctor may help.
As medical needs change over the course of a person's life, so will their insurance needs. Before renewing a policy, check whether it still meets needs.
Consider whether the policy covers the conditions that are most relevant in the short to medium term. Think about the chance of needing insurance soon due to something happening, such as:
- a sports or fitness-related injury
- having a baby
- needing a hip replacement or other procedure.
There are some conditions that consumers can’t predict, including psychiatric care, cardiac conditions and plastic and reconstructive surgery. These are all treatments that can be restricted or excluded under lower-level policies. Make sure to check the exclusions before buying private health insurance.
If buying new health insurance, or upgrading an existing insurance to include additional cover, there may be a waiting period that needs to be served. Consider getting covered or changing cover before needs change.
Shop around and compare policies
In Australia, there are more than 30 insurers offering a wide variety of distinct health insurance products.
While the number of policies available will vary depending on where the consumer lives and their individual circumstances, there may still be more than 100 different policies to choose from. Comparing offers can help in making a decision and finding an offer that suits needs.
Health insurance policies can be compared on the government’s private health website. Every insurer is required by law to provide up-to-date information about each policy and their prices.
Commercial comparison sites can be useful, but consumers should know how they work before relying on them to help make a decision. Commercial comparison sites may:
- not cover every insurer or every type of policy available
- have commercial relationships with, or receive payment from, the businesses they list.
Choosing the cheapest policy is not always the best option
It might not always be best to choose the cheapest policy. Some cheaper products have lower levels of cover, higher out of pocket expenses and smaller rebates, so they may not be value for money in the long run.
Don’t set and forget – review the policy regularly
Review cover at least every couple of years to ensure it continues to meet needs and provide value for money.
The right to switch cover or insurer
By law, consumers can switch their hospital cover or insurer without financial loss or having to re-serve waiting periods.
Waiting periods will, however, apply for any added benefits or better conditions on the new policy. Check if this applies before switching insurers. In some cases, the new insurer may offer to waive waiting periods for higher levels of cover. Ask if this is available when thinking about switching.
When a health insurer changes the policy
Health insurers must notify customers of changes to their policy, including increases in health insurance premiums or changes to cover.
Often insurers’ terms and conditions allow them to change their cover at any time, but they should give customers notice. Read any documents that a health insurer sends as these may contain important information about changes to services and level of benefits.
Changes to a policy may reduce the level of cover. Customers that don’t like the changes should look at other policies or insurers.
Consumers have the right to switch policies.
Understand the terms and conditions
Inclusions and conditions
Not all medical services or procedures are fully covered by every health insurance policy. Some services and procedures may not be covered at all. There may be a waiting period to serve before being able to make a claim.
Before having a procedure, check what the out-of-pocket costs could be with the insurer.
Consumers should make sure they understand the terms and conditions of their health insurance policy before getting insurance or switching insurers. When reviewing the terms and conditions:
- don’t rely on the insurer’s website - read the policy’s Product Disclosure Statement
- ask the insurer questions to clarify 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 and be sure the policy meets needs.
A consumer that is being treated as a private patient for an excluded or restricted item will be responsible for most or all of the cost of the treatment.
Gap and other costs when accessing benefits
The ‘gap’ is another word for the out-of-pocket expenses to pay for the treatment. This happens when the fees charged by the hospital or doctor are higher than the amount covered by Medicare and the private health insurer.
Consumers who know they want to be treated by a certain provider or at a certain hospital should check what arrangements their health insurer has with that provider or hospital. These arrangements can affect any out-of-pocket expenses.
When it comes to hospitals, the insurer may:
- provide a higher or lower rebate depending upon which hospital is used
- have ‘no gap’ or ‘known gap’ arrangements with some healthcare providers.
Some insurers will recognise and offer rebates for services provided by one type of healthcare provider, but won’t recognise the same or similar treatment when it’s given by another type of provider. Consumers should contact the insurer to find out whether the kind of provider they want to use is covered.
Consumers may also need to pay an ‘excess’ each time they visit a hospital under their hospital cover. An excess is an amount the consumer pays towards their hospital admission before the health insurer will pay out benefits. Often a higher excess will mean a lower premium. A higher excess can affect a consumer's tax liability because it's relevant to the Medicare levy surcharge—the Australian Taxation Office has more information.
Example of a premium with and without an excess
Jane is choosing a health insurance policy with hospital cover. She has settled on a provider, and now needs to decide whether to include an excess.
She will pay $250 a month for hospital cover with this provider if she chooses a $500 excess.
Her premium will increase to $350 a month if she chooses to have no excess.
Before a hospital procedure, ask the doctor for an estimate of the treatment cost including the Medicare item numbers. Then contact the insurer to find out how much of the cost will be covered, and what the out-of-pocket expenses are. The government’s Medical Costs Finder tool can help consumers understand what is typically paid and whether their likely out-of-pocket costs are high or low.
‘Extras' cover will often have a maximum claim amount for each type of visit. For example, there may be a maximum claim of $30 per physiotherapy visit. 'Extras' cover often limits the amount that may be claimed in any year for a certain type of service. Once the benefit limit is reached for that service, the health insurer will not pay for the service and the person must pay the full cost of those services.
Check what waiting periods apply
A waiting period refers to the time a person must wait to make a claim after they start a new policy or increase their level of cover. For example, a 12-month waiting period applies across all health funds to birth and obstetric services. This means, there is no cover for the cost of having a baby in a private hospital for the first year after starting the insurance or increasing the insurance to include this service.
A 12-month waiting period usually applies to pre-existing conditions. The only exception is treatment for psychiatric, rehabilitation and palliative care, which only has a 2-month waiting period, even if the condition is pre-existing.
Waiting periods usually won’t apply when switching policies or insurers to a similar level of cover. This includes switching to avoid losing cover because an insurer is changing their policy.