Private Health Insurance Reforms & Higher Excess Levels

More than 13 million Australians have private health insurance¹ , so there’s plenty of us who are interested in keeping it as affordable as possible. In 2017, the Australian Government announced wide-ranging reforms to ensure private health insurance remains as affordable as possible².

One aspect of the reforms is changes to the excess system. As a private health insurance customer, you will soon be able to choose higher excess levels in return for lower premiums³.

How does the private health insurance excess system work?

When you choose to include an excess with your policy, you pay a lump sum (the excess) when you make a Hospital claim. The excess is an amount you agree to pay towards the cost of your hospital treatment. In return, you pay lower premiums⁴.

For example, you could agree to pay an excess of $500 on your hospital cover in return for lower premiums. If you go to hospital, you’re required to pay the $500 excess. You don’t pay excess on extras cover, it’s only payable if you’re admitted to hospital.

Do I have to pay an excess for every hospital stay I make (or my family makes)?

Excess levels vary between health insurers. According to the Australian government, some customers pay every time they go to hospital, while others pay for only the first time they visit in a calendar, financial or rolling membership year.

You can check your policy or contact your insurer to see how this the excess works with your particular policy.

What are the changes to excess levels?

Previously, the maximum permitted excess for private hospital insurance was $500 for singles, and $1,000 for couples and families.

With the changes, effective from April 1st 2019, maximum excesses for private hospital insurance will increase from $500 to $750 for singles, and from $1,000 to $1,500 for couples/families³.

Insurers generally don’t offer higher excesses because if the excess is higher than $750 for singles or $1,500 for couples the policy will not qualify for an exemption from the Medicare Levy Surcharge. The Medicare Levy Surcharge is a tax calculated at a rate of 1% to 1.5% if you’re single and have an annual taxable income over $90,000 or if you’re a couple or a family and earn over $180,000. Having private hospital cover with up to the maximum permitted excess exempts you from paying MLS. Find out more about the MLS here.

What kind of savings will the changes to the excesses mean?

The Australian Department of Health indicates that the changes in excess options could mean savings of up to $200 for singles, and $350 for families⁴.

Do I need to move to a higher excess product?

No, you can stay with your current level of health insurance premiums and excess if you wish. However, if you’re interested in seeing if you can reduce your premiums, feel free to contact us after the reforms have come into effect in April 2019, to see if we can help you find a policy which better meets your needs and budget.

How many people in Australia have an excess on their hospital cover?

According to the Australian Department of Health, 80% of Australians choose to opt for an excess with their hospital cover⁴.

With 13 million Australians holding private health insurance, that’s about 10.4 million Australians who can soon choose a higher excess option, and potentially enjoy considerable savings on private health insurance.

Do private health insurers have to offer increased excess options?

No, the excess options are not mandatory and private health insurance providers do not have to offer higher excesses. However, the government is hoping that by offering higher excesses and lower premiums, more customers will be able to afford private health insurance, and this may enable insurers to offer more competitive, cheaper premiums⁴.

What are the benefits of more affordable private health insurance?

If you’re one of the 13 million Australians with private health cover, you may be happy to know that health insurance is becoming more affordable. You may choose to pay a higher excess in return for lower premiums. This also benefits the private health insurance industry by helping it attract more customers with more affordable options.

What other private health insurance reforms are being introduced?

The change to excess maximums is just one of the reforms being introduced by the Australian Government. Some of the other changes include²:

• Allowing insurers to offer age based discounts to 18 to 29 year olds
• Introducing Gold/Silver/Bronze/Basic product categories and standardised clinical categories
• Boosting the powers and resources of the Private Health Insurance Ombudsman
• Reducing costs for consumers through a $1.1 billion reduction in prostheses benefits under an agreement with the Medical Technology Association of Australia
• Allowing customers upgrade their cover to access mental health services without a waiting period on a once-off basis
• Allowing insurers to expand hospital insurance to offer travel and accommodation benefits for people in regional and rural areas
• Removing coverage for a range of natural therapies as benefits under general treatment

Looking for the right health insurance policy?

At iSelect we’re here to help you find the right policy for your needs and budget. You can compare policies side by side online, or call us today on 13 19 20 to speak with one of our expert health advisors.

iSelect does not compare all providers or policies in the market. Not all policies are available at all times.

Sources:
1. http://www.health.gov.au/internet/ministers/publishing.nsf/Content/health-mediarel-yr2017-hunt106.htm
2. http://www.health.gov.au/internet/main/publishing.nsf/Content/private-health-insurance-reforms-fact-sheet-summary
3. http://www.health.gov.au/internet/main/publishing.nsf/Content/private-health-insurance-reforms-fact-sheet-increasing-maximum-excess-levels
4. https://privatehealth.gov.au/faq/glossary.htm#Excess