Health Insurance Frequently Asked Questions
Private health insurance can be a confusing topic! Take a look through our frequently asked questions below to gain a more in-depth understanding about how it works and make sense of some of the common terms we use when we talk about private health insurance.
Q: Why Private Health Insurance?
In Australia, all permanent residents have access to Medicare, the public health system, ‘for free’, yet almost 11 million people choose to supplement this service by purchasing private health insurance.
There are a number of reasons why people choose to take out private health insurance. It makes sense to avoid having to pay the Medicare Levy Surcharge at the end of the financial year, or they want to get in early so they can avoid paying a Lifetime Health Cover loading when they are older.
Others enjoy the extra peace of mind of knowing that they can get faster access to medical services or subsidised treatment for services that aren’t covered by the public health system.
Q: What are the main differences between the private and public systems?
While the Australian public health service is one of the best in the world, it does still have some limitations. The main ones are that it can take longer to access than private health services, and you get less choice about who’ll treat you when you receive treatment and where you can be treated when you go through the public system.
Private health insurance can circumvent these shortcomings and depending on your cover, should enable you to have surgery performed with far greater choice in relation to where, when and by whom the surgery is performed.
Q: How much have private health insurance premiums increased since 2014?
Generally speaking, private health insurance funds raise their premiums on April 1 of each year.
The private health insurance premium increase is designed to support the increasing cost of health services. While not all of the costs are passed on to members, some are.
Q: What are waiting periods and how do they work?
A waiting period is the period between when you take out a health insurance policy and when the benefits of that policy become available to you and anyone else covered under the policy.
Waiting periods are put in place to prevent people joining a health fund, making a claim straight away and then cancelling their membership. This would drive up the premium costs for everyone.
Q: What is Hospital Cover?
Hospital Cover pays benefits towards the cost of hospitalisation. This generally includes treatment by your doctor when in hospital as well as accommodation costs, theatre fees, intensive/coronary care etc.
Hospital admission costs can range from a few thousand dollars to a several hundred thousand and, providing you have sufficient cover for the procedure you need, your insurer will pay the hospital directly.
Hospital Cover comes in different levels, from basic cover; which will meet your obligations when it comes to minimising the Medicare Levy Surcharge and Lifetime Health Cover loading, to top tier cover to give you complete peace of mind. The more basic your level of cover, the more exclusions it might include and the less choice you might have.
Q: What is Extras Cover?
Extras Cover provides protection for non-hospital health care services that are generally not covered by Medicare. These include: Dental, Optical, Physiotherapy, Chiropractic, Psychology, Speech Therapy, Occupational Therapy and may include a number of other therapies. If you don’t use any of these services, nor expect to use them in the future, then you may want to opt for Hospital Cover only.
In our experience, most people find that Extras Cover is a worthwhile investment but it’s important that your level of Extras Cover is tailored to your specific needs. There is a huge variation between funds when it comes to waiting periods, what you can claim for and how much you will be able to claim back on your Extras policy so comparing is crucial.
Q: Will I have to pay Lifetime Health Cover loading?
Lifetime Health Cover is a government initiative to encourage people to take out Hospital Cover at a younger age, and to maintain that cover over their lifetime. It penalises taxpayers for taking out cover after the 1st of July following their 31st birthday (or 12 months after migrating to Australia) with a 2% loading for each year that you are over 31 if you decide to take out health insurance in the future.
Joining a health fund and getting Hospital cover before 1 July following your 31st birthday ensures that you receive the lowest rate for as long as you continue to hold Hospital cover.
Q: What is the Medicare Levy Surcharge?
To encourage people on higher incomes to take out health insurance and reduce pressure on the public health system, the government introduced a tax surcharge known as the Medicare Levy Surcharge.
If your family income is over $180,000 in the financial year 2014/15 or for an individual you are earning over $90,000 per year and you do not have Hospital Cover, you will be required to pay a Medicare Levy Surcharge, on top of the normal 1.5% Medicare Levy that most people pay as part of their taxes.
The Medicare Levy Surcharge works out to be a minimum of $1800 for families and $900 for singles. This can be avoided by taking out Hospital Cover, which in some cases works out to be cheaper than paying the additional tax.
Q: What is the Australian Government Rebate?
If you are eligible for Medicare you may also be eligible to receive a rebate on your health insurance premium paid for by the Government.
The level of rebate is determined by the age of the oldest member covered by your health insurance policy as well as household income. People aged over 65 are eligible for a higher rebate.
The vast majority of people access their rebate by registering for the rebate at the time they take out the insurance and requesting that it is deducted from their premiums upfront. We quote prices assuming that this is your choice.
Alternatively, you can choose to claim the rebate if you are eligible when you complete your tax return each year.
Q: What happens if I have a pre-existing condition?
If you have a pre-existing medical condition when you first join a Hospital Cover, you will usually be required to wait 12 months before you can make a claim for treatment for the pre-existing condition. If you have already had Hospital Cover for 12 months you can switch to another fund on an equivalent or lesser cover without serving new waiting periods.
A pre-existing condition is one that occurred before you first joined a health fund or upgraded your level of cover. For a condition to be defined as pre-existing you had to have had symptoms in the 6 months prior to first joining cover or upgrading your policy.
The usual waiting period for claiming for pre-existing conditions is 12 months.
Q: What does Optical Health Insurance cover?
Optical health insurance to cover glasses, contact lenses and laser eye surgery is typically included in Extras cover and not in Hospital cover. This is because not everyone will use these products in their lifetime, while some will use them frequently.