Private health insurance can help you pay hospital and medical costs not covered by Medicare. In some cases, you can receive treatment sooner by electing to be treated as a private patient.
Types of health insurance
There are three main types of private health insurance. Knowing the difference between each can help you choose the right cover to suit your needs.
Ambulance cover
This is the most basic type of cover. It covers the cost of transport in an ambulance in an emergency.
Some state and territory governments cover the cost of ambulance services for residents without private health insurance. Visit PrivateHealth.gov.au to check if you’re covered.
Hospital cover
Hospital cover can help with some of the costs of staying in hospital. The costs covered will depend on the level of cover you have. The levels of cover range from basic to top level. Check what the inclusions are before signing up.
Extras cover
Extras cover is for out-of-hospital medical treatments. This can include services such as physiotherapy, optical and dental. Generally the more services the policy covers, the more expensive it is.
Combined health insurance covers you for both hospital and extras under the one policy.
Choosing a health insurance policy
Once you’ve decided what level of cover you need, compare different providers and their policies.
You can compare all private health insurers (health funds) on the Australian Government’s PrivateHealth.gov.au website. Read through each policy’s product disclosure statement (PDS) to understand the inclusions and exclusions.
Before you sign up, think about:
- Who the cover is for — You can take out policies for singles, couples and families.
- How much you can afford — Create a budget to work out how much money you can spend on health insurance.
- What extras you need — You may need to prioritise certain extras. For example, if everyone in your family has glasses, you may need a policy that covers optometry.
- How long the waiting period is — Most health funds have a waiting period before you can claim on any services. The length of the waiting period often depends on the type of medical treatment you receive.
Be honest about your health history when you sign up to a policy. If your insurer believes you have misled them, they may not pay your claim.
Keep in mind, comparison websites might only include some health insurers, not the whole market.
Health insurance surcharges and incentives
Medicare levy and surcharge
Most Australians pay the Medicare levy of 2% of their taxable income as part of their tax. If you don’t have private health insurance and earn more than the threshold, you may pay an extra surcharge. This can be up to 1.5% of your taxable income.
If you’re on a high income, it may be cheaper to buy the insurance than pay the surcharge. See the Australian Taxation Office (ATO) website for more information on the Medicare levy surcharge.
Lifetime Health Cover (LHC) loading
The LHC loading is a government initiative to encourage Australians to get health insurance before they turn 30. For every year after you turn 30 that you haven’t been insured you’ll pay a 2% loading on top of your premium.
You only need basic hospital cover to avoid LHC loading. For more detail on how the LHC works, see PrivateHealth.gov.au.
Age-based discount
Some insurers offer a discount for new and existing customers aged 18—25. The discount can be up to 10% off your premiums until you turn 41. For more information visit PrivateHealth.gov.au.
Making a claim
If you receive treatment that’s covered by your insurance, you can make a claim. Some healthcare providers process claims on the spot. If your provider doesn’t, lodge the claim with your insurer online or over the phone.
Out of pocket expenses
Sometimes your insurance won’t cover the full cost of a treatment. The amount you pay out of your own pocket is known as a ‘gap’. Some insurers offer gap cover to help you with these payments.
Waiting periods
Remember to check the waiting periods in your insurance policy. If you receive treatment and try to make a claim within the waiting period, your insurer will not cover the cost.
Problems with your health insurance
If you’re unhappy with your health insurance policy or provider, there are steps you can take.
Talk to your insurer
The first step is to talk to your insurer. Explain the problem and how you’d like it fixed.
Make a complaint
If the problem isn’t fixed, make a formal complaint in writing to your insurer.
If the problem is still not resolved, contact the Commonwealth Ombudsman to make a complaint and get free, independent dispute resolution.
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Source: ASIC MoneySmart
