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Written by
Francis Taylor
Edited by
Laura Crowden
Private Hospital Cover is pretty self-explanatory. It helps cover the costs when you get treated as a private patient in a hospital. This includes some (or all!) of the in-hospital costs for essentials like medicine, theatre fees and accommodation.
With Hospital Cover, you'll get more choice over the doctor who'll treat you and the hospital where you'll stay.1 Plus, you'll usually face shorter wait times for elective surgery.2 If you’re a higher income earner, then holding eligible Hospital Cover could also mean you’ll pay less tax.3
Medical gap payments:
In Australia, all in-hospital medical treatments have a standard fee attached to it, called the Medicare Benefits Schedule (MBS) fee. When you get treated as a private patient, the government (via Medicare) pays 75% of your MBS fees. 6 Your insurer then pays the remaining 25% — so long as your policy also covers these treatments.7 But beware: doctors aren't bound by the MBS and can charge more than 100% for your treatment cost. The amount doctors charge above the MBS is called the medical “gap”.8
Avoiding the gap:
A medical gap means that you'll need to pay for any charges above the MBS fee—even if you have Private Health Insurance. You can avoid or reduce your gap fee by selecting a doctor and hospital that has a gap agreement with your insurer.9
A gap agreement is when participating either charge zero or “no gap” or a "known gap" where there is a limit to how much they charge above the MBS fee.10 Always check whether your insurer has a gap agreement with your preferred doctor and hospital.
As mentioned, the tiers progress from Basic (which covers the smallest number of treatments) to Gold (which all of them). Each tier has to provide the following cover levels11 as a minimum:
Each tier also builds on the previous one. Bronze includes all the coverage that Basic provides, Silver covers all the clinical categories that Bronze does, and so on. We also provide a detailed breakdown of the different clinical categories each policy covers on our page about Hospital Cover tiers.
Some funds offer Basic Plus, Bronze Plus or Silver Plus policies. These policies feature all of the minimum standards of coverage outlined above. However, they can also include additional features from a higher clinical category.12
For example, some Silver “Plus” policies can include coverage for pregnancy, cataracts or joint replacements, which are typically only found in Gold policies.
The short answer is “’no’, but there’s a pretty strong incentive to take cover at this time in your life.
Whilst buying Hospital Cover isn’t mandatory, if you don't purchase it by July 1 following your 31st birthday, you’ll likely have to pay the Lifetime Health Cover (LHC) loading on top of the base premium of any Hospital Cover you later purchase.13
In short, the longer you go without Hospital Cover after your 31st birthday, the higher the loading you might have to pay on top of your monthly premiums if you take out cover later in life.
For every year past your 31st birthday that passes until you take out cover, you’ll pay 2% more on your health insurance premiums (based on your age on the 1 July prior to joining).14 For example, if you purchase health cover at the age of 40, you’ll pay 20% more on your premiums. The maximum LHC loading that can be applied is 70%. Once you have paid LHC loading for 10 years of continuous cover, you will no longer have to pay this loading.15
To help reduce your premiums, you can choose an excess or co-payment.16 Generally, the higher the excess, the greater the saving on your premium.
Most excesses are applied per person per year. But like most aspects of Hospital Cover, it pays to check how the excess is applied to your cover, because some policies don’t charge an excess for events like children’s admissions or treatment that is the result of an accident. The highest excess you can choose without becoming liable for the Medicare Levy Surcharge is $750 per year for singles and $1,500 per year for couples and families.17
A co-payment is similar to an excess but rather than paying a lump sum, you typically pay a daily amount for your hospital stay.18 Some co-payments have a yearly cap such as $500 or only apply for a private room. Some co-payments only start after you've been in hospital for a certain number of days (after five days, for example). Again, be sure to check how many times the co-payment applies per year.
All Hospital Cover policies have waiting periods. This means you'll usually need to hold the policy for a few months before you can claim on certain health insurance benefits. For most pre-existing conditions, pregnancy and obstetrics, a 12-month waiting period may apply.19 For all other conditions, the waiting period can only be a maximum of two months.20 Palliative care, rehabilitation and psychiatric care also can’t exceed two months—even if it’s for a pre-existing condition.21 And some fund even offer accident-only cover with only a one-day waiting period.22
It depends. From 1 July 2023, if you earn over $93,000 as a single or $186,000 for as a couple (or family!) and don’t have Hospital Cover, then you may have to pay the Medicare Levy Surcharge (MLS).23 To be exempt from the surcharge, you’re required to have Hospital Cover with a registered health insurer and it needs to cover at least some of the fees for any hospital stay.24
Most Australians with private health insurance currently receive a rebate from the Australian Government to help cover your premiums. The rebate is known as the Australian Government Private Health Insurance Rebate. Based on your age and your income, the rebate is available for people with Medicare eligibility. If you’re eligible for the rebate, you can choose to have it automatically deducted from your premiums or claim it back in your tax return.
If there’s one thing we all know, it’s that life changes all the time. That means your Hospital Cover needs are likely to change along with it. For this reason, the Private Health Insurance Ombudsman recommends that you review your policy at least once a year.25
As you’ve probably gathered from all of the questions above, there’s a lot to think about when choosing Hospital Cover. The good news is that iSelect is here to try make it easy. Start comparing health policies online*, or call us on 1800 784 772. Our friendly team is ready to help you explore Hospital Cover from a range of policies and providers.
Save time and effort by comparing a range of Australia's health funds with iSelect*
