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:
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.