Private health insurance provides financial cover for all or part of the cost of various health related treatments and services. Depending on the policy, it can provide cover for treatment as a private patient in a public or private hospital, allowing you to choose both your doctor and hospital, at a time which suits you. Additionally, it can provide cover for health services not covered by Medicare (such as physiotherapy, optical, and dental). It functions similarly to other types of insurance, such as home and contents or car insurance, although rather than being risk based, it’s community based. This means that everyone is eligible to receive the same base price for the same policy from any single provider, rather than being rated on their individual health concerns. There are two main types of policies you can take out: Hospital Cover and Extras Cover. These can be purchased separately, or combined into a single policy with your health provider. One of the biggest benefits of health insurance is choice and flexibility. For example, as a private patient you’re given the choice of doctor, the choice of agreement hospital or clinic, and you have flexibility over the time of your appointments. In comparison, when you’re treated as a patient in the public system, the appointment times, doctors, and hospitals are typically inflexible, determined by your location and your health concern. Health insurance can also help you avoid long waiting lists for treatments (provided you’ve served the necessary waiting periods) which exist in the public system.

Private health insurance cover is divided into two categories: hospital cover and general treatment cover, also known as ‘extras’ cover. These covers can be purchased separately or as combined policies by most health funds, depending on your individual requirements. In some states, a third category known as ambulance cover is also available, although this is sometimes included in hospital cover or extras depending on your policy. As private health insurance is not risk rated, providers can’t refuse to insure any eligible person. They must also charge everyone the same base premium for the same level of cover. Therefore, to help mitigate some of the risk for health fund providers, some treatments may incur a waiting period. This is typically served when you first purchase private health insurance, or when you upgrade your policy to include services and treatments not previously covered. The government sets the maximum waiting periods that health funds can impose for hospital treatment, which are:

• 12 months for pre-existing conditions
• 12 months for obstetrics and IVF
• 2 months for psychiatric care, rehabilitation or palliative care, even for a pre-existing condition
• 2 months in all other circumstances

For extras insurance, waiting periods are determined by your individual health fund provider, and the length can vary depending on the treatment and your level of cover. If you’ve already served a waiting period for a specific service and switch providers without cancelling your cover in between, you generally don’t have to serve a new period unless you are increasing your benefits, although it’s best to verify this with your new provider. To receive benefits, you must have a policy that covers the treatment you’re receiving and have served your waiting period. Some clinics and hospitals will be able to automatically apply your benefit by scanning your health fund membership card during the payment transaction. In some cases, you may need to make the benefit claim after paying up front, which you can do by contacting your health fund provider directly. How much you pay, ultimately depends upon your policy and level of cover.

Private health insurance can cover a range of health treatments depending on your individual policy and provider. It can also depend upon whether you’re claiming a benefit for hospital or extras cover. On 1st April 2019, the Australian Government made changes to how hospital insurance was classified to help policy holders better understand their cover. These classifications are:

• Basic: A basic hospital policy will allow you to be treated as a private patient in a public hospital for the following treatments:
  • Rehabilitation
  • Hospital psychiatric services
  • Palliative care
• Bronze: A bronze hospital insurance policy will allow access to the above, as well as:
  • Brain and nervous system
  • Eye (excluding cataracts)
  • Ear, nose, and throat treatments
  • Tonsils, adenoids, and grommets
  • Bone, joint, and muscle treatments
  • Joint reconstructions
  • Kidney and bladder
  • Male reproductive system
  • Digestive system
  • Hernia and appendix
  • Gastrointestinal endoscopy
  • Gynaecology
  • Miscarriage and termination of pregnancy
  • Chemotherapy, radiotherapy, and immunotherapy for cancer
  • Pain management
  • Skin
  • Breast surgery (medically necessary only)
  • Diabetes management (excluding insulin pumps)
• Silver: A silver policy will cover you for all of the above, in addition to:
  • Heart and vascular system
  • Lung and chest
  • Blood
  • Back, neck, and spine
  • Plastic and reconstructive surgery (medically necessary only)
  • Dental surgery
  • Podiatric surgery (provided by a registered podiatric surgeon)
  • Implantation of hearing devices
• Gold: A gold policy will offer unrestricted cover for all treatments above, as well as for:
  • Cataracts
  • Joint replacement
  • Dialysis for chronic kidney failure
  • Pregnancy and birth
  • Assisted reproductive services
  • Weight loss surgery
  • Insulin pumps
  • Pain management with device
  • Sleep studies

There are also two secondary categories to consider. ‘Unrestricted’, where you’re considered a private patient in a private hospital, or ‘restricted’, where you’re a private patient in a public hospital. For restricted patients, you can choose your doctor, but not necessarily your hospital, and you may still be subject to waiting lists. In regards to extras insurance, what you’re covered for, and how much benefit you receive, can vary significantly depending on your provider and the policy you’ve selected. It will generally include services such as:

• Dental treatment
• Optical, including glasses and contact lenses
• Physiotherapy and osteopathy
• Chiropractic treatment
• Occupational, speech, and eye therapy
• Hearing aids and audiology
• Diet and nutrition
• Psychology

Excess charges in health insurance work similar to other forms of insurance. For example, some types of car insurance policies give you the option to increase the cost of your excess in order to reduce the overall cost of your premium. The same can be said for health insurance hospital cover. To further clarify, when you attend hospital, Medicare will cover 75% of the Medicare Benefits Schedule (MBS) fee for the treatment you’re receiving. Provided you have the appropriate private health insurance policy, your health fund will cover the remaining 25%. While the Australian Government determines the fees for the MBS, they do not set the costs doctors choose to charge for their services, which can lead to additional expenses. Depending on the extent of your hospital stay, further charges may also apply to cover the costs of drugs and pharmaceuticals, dressings and diagnostic tests. To avoid a large bill for private health patients, some health fund providers offer what is known as ‘gap cover’. This option means the additional expenses may also be included in your benefit from your health fund if the treating doctor wishes to participate. In order to avoid a high premium, you can opt to select an excess to help keep your costs down. Depending on your policy, you may be required to pay an excess every time you go to hospital, or just once per year.

The private health insurance rebate is provided by the Australian Government to help cover the cost of your premiums for hospital, extras, and ambulance cover policies. It’s offered in order to encourage Australians to sign up for private health insurance and subsequently lessen the load on the public healthcare system. For this reason, it’s not applicable to overseas visitors cover. How much you receive as a rebate depends upon your income. If you have a higher income, your rebate entitlement may be reduced, or you may not be entitled to any rebate at all. Couples (including de facto) are subject to a family-based income. The rebate percentage is adjusted on 1 April each year, although the income thresholds are currently indexed and will remain the same to 30 June 2021. If you’re eligible to receive the rebate, there are two ways you can claim. The first is as a premium reduction through your health fund provider, which means you pay less upfront. If you choose this method, it’s your responsibility to nominate the appropriate rebate tier with your provider to avoid a tax liability. Alternatively, you can pay more upfront on your premium and receive the rebate as a tax offset when lodging your annual tax return.

When retirement age rolls around, most Australians start to consider lowering their expenses. This could include downsizing their homes, reducing the amount of cars they own – and reducing or cancelling their private health insurance. This is especially true for pensioners who have lived a healthy lifestyle and seldom needed to take advantage of their insurance. That said, reaching your senior years may be the time you need your private health insurance the most. Getting older leaves you more susceptible to a range of health issues, and while a healthy diet and exercise will certainly help reduce your risk, there’s no guarantees. Health insurance could provide you invaluable peace of mind. Whether for an injury, an illness or another health ailment, typically the older you are, the more likely you’ll need medical treatment. While you’ll have access to the public healthcare system, this could lead to potentially substantial waiting times for treatment depending on the severity of your health concern and where you are located. If you chose to attend a private hospital without Private Health Insurance, Medicare will still cover 75% of the Medicare Benefits Schedule (MBS) fee for the treatment you’re receiving. However, you’d need to foot the other 25%, along with a myriad of other potential charges depending on the length of your stay and the type of treatment you’re receiving. There are other benefits to maintaining your health insurance as a pensioner as well. If you do require medical treatment, you can skip the waiting lists of the public healthcare system and choose which doctor you want to see. Depending on your level of cover, you’ll also have access to a variety of preventative treatment options. Best of all, Australians over the age of 65 receive a higher rebate percentage from the government than their younger counterparts, and it increases again once you turn 70.

Ambulance services are not covered by Medicare. Instead, cover varies from state to state.

• ACT: If you live in the ACT and you hold a Health Care Concession Card or Pensioner Concession Card, you’re entitled to free emergency ambulance services. If you’re not eligible for concession, you can purchase insurance from a private health fund provider
• NSW: If you live in NSW and you hold a Health Care Concession Card or Pensioner Concession Card, you’re entitled to free ambulance transport services. Alternatively, if you hold any level of private hospital cover you will automatically receive emergency ambulance cover in NSW only. If you’re ineligible, you can purchase ambulance cover from a private health fund
• NT: If you hold a Pensioner Concession Card or Commonwealth Seniors Health Card, you’re entitled to free ambulance transport services. Otherwise, you can purchase ambulance cover from a private health fund or through the state ambulance service
• QLD: If you’re a Queensland resident, ambulance costs are covered by the state government
• SA: If you’re an SA resident, you can purchase ambulance cover from a private health fund or through the state ambulance service
• TAS: Ambulance costs for Tasmanian residents are covered by the state government
• VIC: If you’re a VIC resident and you hold a Pensioner Concession Card or a Health Care Card, you’re entitled to free ambulance transport services. Otherwise, you can purchase insurance from a private health fund or through the state ambulance service
• WA: If you’re a WA resident and you hold an Aged Pensioner Concession Card, you’re entitled to free ambulance transport services. If you’re ineligible, you can purchase insurance from a private health fund or through the state ambulance service

It’s important to note that if you’re travelling interstate, your cover may vary. For example, Queensland and Tasmanian residents who have free ambulance cover in their state may not be covered when in Victoria or another state. It’s recommended you check with your state ambulance service, concession card provider or health fund prior to travelling.

When you have medical treatment that’s listed on the Medicare Benefits Schedule (MBS), Medicare will cover 75% of the fee. If you have the appropriate private health insurance policy, your health fund will cover the remaining 25% of the fee. While the Australian Government sets the MBS fees, they don’t control how much a doctor chooses to charge for their services. In some cases, your doctor may charge above the MBS fee for their services. When this happens, you generally need to pay the difference, which is known as the ‘gap’. Some health funds offer “Gap Cover” as part of their policies. Gap cover is available when a health fund has an agreement in place with a specific doctor, specialist or hospital. In this case, all of their charges above the Medicare rebate will be covered by your health fund, leaving you with no gap to pay if the treating doctor wishes to participate in the program. Before you receive medical treatment, it’s recommended you contact your health fund provider to determine whether your doctor is participating in their gap cover arrangements. You should also ask your doctor for an estimate of their costs, as well as whether any other doctors will be involved in your treatment (such as an anaesthetist) and what their charges will be. It’s up to each individual doctor to decide whether they will participate with your fund’s gap cover arrangement.

Extras cover, also known as general treatment cover or ancillary cover, provides insurance that covers some or all of the costs of treatment by ancillary health service providers, such as dental and optical services. You can combine extras cover with your hospital insurance or choose a separate policy, with the same insurance provider or another, depending on your individual requirements. There are three levels of extras cover, which provide varying levels of benefits for different ancillary services. These levels are:

• Comprehensive: The highest option for extras insurance, to be considered comprehensive it must include cover for the following:
  • General dental
  • Major dental (with a benefit limit average or above industry average)
  • Endodontic
  • Orthodontic (benefit limit must be average or above industry average)
  • Optical
  • Non-PBS pharmaceuticals
  • Physiotherapy
  • Podiatry
  • Psychology
• Medium: To be considered medium cover, it must include general dental, major dental, endodontic services, as well as any five of the following:
  • Orthodontic
  • Optical
  • Non-PBS pharmaceuticals
  • Physiotherapy
  • Chiropractic
  • Podiatry
  • Psychology

• Basic: All other policies are considered ‘basic’ extras cover, with no requirements needing to be met.

While these guidelines are in place, it’s still important to shop around for extras cover that suits you, as what you’re covered for and how much benefit you receive can vary significantly depending on your provider, and the policy you’ve selected.

The differences between what Medicare covers and private health insurance covers varies depending on whether you’re reviewing your hospital insurance or extras insurance.

• Hospital insurance: Medicare covers 75% of the Medicare Benefits Schedule (MBS) for associated medical costs. The remaining medical costs may be covered by your health insurance provider depending on your level of cover. This can include:
  • The remaining 25% of the MBS fee
  • Hospital accommodation
  • Theatre fees
  • Intensive care
  • Drugs, dressings, and other consumables
  • Protheses (surgically implanted)
  • Diagnostic tests
  • Pharmaceuticals
  • Any additional doctors fees above the MBS fee (if doctor has agreed to Gap Cover)

• Extras insurance: When visiting a GP, Medicare will cover 100% of the MBS fee. If you’re seeing a specialist, only 85% of the MBS fee will be covered. Medicare also provides benefits towards services such as x-rays, pathology tests, eye tests performed by optometrists, and some surgical procedures. This applies whether or not you have private health insurance.

When it comes to services outside of your GP’s scope, Medicare benefits are extremely limited. For example, Medicare doesn’t provide benefits for the following:

• Most dental examinations and treatment
• Physiotherapy services without a GP referral
• Occupational therapy, speech therapy, eye therapy
• Chiropractic services
• Most podiatry services
• Psychology services without a mental health plan
• Acupuncture not a part of a doctor’s consultation
• Glasses and contact lenses
• Hearing aids and other appliances
• Home nursing

When it comes to pharmaceuticals, if your prescription medication is not listed on the Pharmaceutical Benefit Scheme (PBS), Medicare does not contribute to any of the cost. In this case, you may be able to arrange for your private health insurance to cover part of the cost, depending on your level cover and the medication required. Ambulance cover is another service not covered by Medicare, which can be purchased as part of your private health insurance fund depending on your location.