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Health Insurance in Australia: An Overview

Jonathan August 18th, 2010 0 comments

Although universal health care is a fundamental human right, the reality is that it can also be a costly expense. A greater reluctance to pay out of pocket for health care expenses has seen a greater awareness of the benefits of health insurance. As with many other facilities, there are both private and public options.

Medicare – The Public Option

Established in 1984, Medicare ensures that all Australians have access to free treatment at public hospitals. Medicare benefits also include treatment from specialists, general practitioners, dentists and optometrists who participate in the scheme for free or subsidised fees.

Participating dentists and optometrists can render particular services only, as described by the Medical Benefits Schedule (MBS), while the cost of other general, or ancillary treatments has to be borne by the patient. Prescription medication is also greatly subsidised by the Pharmaceutical Benefits Scheme that comes under the Medicare umbrella. In short, Medicare means:

– free admission to a public hospital and care, treatment and after-care from nominated health care providers

– the possibility of being liable (paying out of pocket) for hospital accommodation, fees for operation theater use and medication.

Medicare provides such services based on tax contributions from all Australians, as well as an extra levy imposed on those earning a high income. For single people, this threshold is $73,000 for the year 2009-10, while couples with a combined income of $143,000 and above are subject to the Medicare- levy. Low-income earners are not required to contribute to Medicare.

Eligibility For Medicare

Australian residents are eligible for this public health insurance scheme as long as they are Australian or New Zealand citizens, hold permanent (Australian) visas or have applied for one, although terms and conditions may apply.

Individuals whose citizenship status is less clear cut may also have to submit documents supporting their Australian residency.

Private health insurance

Another option for Australians is private health insurance, obtained courtesy of private health insurance providers, or funds. The largest and most well known of these is Medibank Private, a government- owned fund that follows the same regulations as other private health funds.

In contrast to the norms in America, Australian health insurance premiums aren’t determined by age, health, address or even medical history. Private health funds in Australia fall in to the following categories:

– for-profit: such as MBF Health Fund, or the Health Insurance Fund of Australia

– non-profit: such as HCF Health Insurance or GMHBA

– regional: such as HBF, which provides for residents of Western Australia, or the Territory Insurance Office, which caters to the Northern Territory

A person can determine which private health fund to opt for by comparing policies online. Those who subscribe to private funds have a wider range of health care options compared to those on Medicare. Based on the premiums paid, an individual can opt to have the fund take care of out of pocket expenses that aren’t already covered by Medicare.

The Importance of Being Community-Rated

All private funds may not refuse a person a policy or subscription based on the following factors:

– race

– religion

– gender

– job

– sexual orientation

– hobbies

A community-rated fund ensures that all potential subscribers may purchase policies at the same rates or premiums and enjoy the same benefits as others who subscribe to the same plan. Inter-state premiums may exist for a particular product, but intra-state differences are forbidden.

The Waiting Game

While private funds may extend more comprehensive health coverage to subscribers, private health insurers may also impose a waiting period of up to one year at their discretion, especially where preexisting ailments (PEA) are concerned.

The period is imposed in order to minimise the risk that a fund may attract profit-seeking subscribers, whose presence may impact on other subscribers in the form of higher premiums and/or fewer benefits. It can also apply to new memberships or existing subscribers who want to upgrade their cover.

A waiting period prolongs the duration an individual has to wait to receive benefits for a claim. For individuals with PEA or an obstetric condition, it means that the fund will not pay out claims for the first 12 months of the policy. Medical practitioners define PEA as an illness or ailment that existed 6 months before subscription or upgrading.

The Push for Private Insurance Policies

The following schemes are designed to encourage Australians to purchase private health insurance instead of relying solely on Medicare or paying out of pocket, and much earlier:

Lifetime health cover – an individual is liable for an annual “loading” fee of 2% if he or she takes out private hospital, not ancillary, coverage on the first July after they are 30 years of age. This means that a span of 5 years will see an individual paying a total of 10% more for health insurance premiums, but only for the first ten years following the initial subscription.

Private health insurance rebate – subscribers to private health insurance policies, both ancillary and hospital, stand to enjoy government subsidies on premiums paid on a sliding scale.

Medicare levy surcharge – single individuals whose taxable income exceeds $73,000 or couples whose combined income exceeds $140,000 who don’t have private health insurance face a surcharge of 1% in addition to the 1.5% Medicare tax when it comes to health care fees. In this aspect, a private hospital policy is a more affordable and beneficial alternative.

Going to the doctor is never an enjoyable experience, and it’s fortunate a person has to option of turning to health insurance to meet the expense. In addition to being proportionate to the income earned, a person’s health insurance policy should cover his or her needs comprehensively.

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