Choosing a Health Insurance Policy

Hospital Cover

When choosing a health insurance policy, you need to think about your own health needs and those of your family. Here are the important issues to consider when you’re choosing hospital policies:

Waiting periods before payment of benefits

Most health funds will require you to complete a set period of membership, known as a waiting period, before you are covered for certain benefits.

The following are the standard waiting periods which apply when you start your cover:

• two month wait for psychiatric care, rehabilitation or palliative care (whether or not the condition is pre-existing)
• 12 month wait for benefits on any other pre-existing conditions
• 12 month wait for benefits for obstetric treatment (pregnancy)
• general two month wait for any other benefits.

If you upgrade your cover, most health funds will apply waiting periods for items you were not covered for on your previous policy.

Your health fund should tell you which waiting periods will apply when you join as a new member or change your existing cover. If you are a member of a health fund and cancel your policy, waiting periods will apply when you re-join.

Pre-existing Conditions

A pre-existing condition is defined by law as any ailment, illness or condition that you had signs or symptoms of during the six months prior to taking out hospital cover or upgrading to a higher level of cover.

This rule applies even if you and your doctor did not know you had this condition or if the condition was not diagnosed. A doctor appointed by the health fund decides whether your condition is pre-existing, not you or your doctor. He or she must consider your treating doctors’ opinions on the signs and symptoms of your condition, but is not bound to agree with them. If you anticipate any hospital admission within the first 12 months of joining or upgrading your health insurance, you should contact your insurer straight away to check if you will be covered.

For more information on waiting periods, you can refer to our brochure.

For more on pre-existing conditions, see our factsheet.

Excluded and Restricted Treatments

Some hospital insurance policies exclude certain treatments from benefits or permanently restrict the amount of benefits they will pay for certain treatments.

If a policy has ‘exclusions’, the health fund will not pay any benefits for the treatments listed as exclusions.

If a policy has ‘restrictions’, the health fund will only pay a limited benefit for the treatments listed as restricted and you are likely to have significant out-of-pocket expenses.

Make sure you know which treatments are excluded or restricted, and that you are prepared to take the risk of not being fully covered for those treatments.

Mental Health—waiting period exemption for higher benefits

If you are on a hospital policy which provides restricted benefits for psychiatric care, to access higher benefits you usually need to upgrade your cover and complete a two month waiting period. However, from 1 April 2018, you can upgrade without having to serve this waiting period to access higher benefits for psychiatric care in a private hospital.

This exemption applies only once per lifetime and can only be accessed if you have already completed an initial two months of membership on any level of hospital cover. For more information about accessing the exemption, please contact your health fund.

Excesses or co-payments for hospital admissions

Most health funds will offer you the option of nominating an ‘excess’ or ‘co-payment’ on your hospital policy in return for reduced membership premiums. If you nominate a high excess or co-payment, then you will have a lower premium than someone with no excess or co-payment.

An excess is a lump sum you pay towards your hospital admission before the health fund will pay its benefits.

A co-payment is an amount you agree to pay each time the health insurer pays hospital benefits for you. Normally a co-payment is payable for each day of hospitalisation up to a maximum annual amount or per admission amount.

You need to check the amount of any excess or co-payments, when they apply, and if there is a limit on how much you have to pay.

Please note: if you choose an excess higher than $500 per annum for single policies, or higher than $1,000 per annum for families/couples, there may be tax implications depending on your earnings. (See the Medicare Levy Surcharge section below.)

Agreements between health funds and hospitals

It is important to check that your health fund has agreements with private hospitals in your area or other private hospitals you might attend. Each health fund has a different network of agreement hospitals and some funds will specialise only in certain areas or certain states.

If you are admitted to an agreement hospital, you will have either no out-of-pocket expenses or you will be provided with details of the costs you will be required to pay.

If you are treated at a private hospital that your health fund does not have an agreement with, you may have to meet a considerable amount of the cost yourself. Ask the hospital and your fund for a quote.

Our website privatehealth.gov.au has a list of Agreement Hospitals for all insurers or you can phone your health fund to check which hospitals are covered.

“Gap” payments and coverage for doctors’ fees in hospital

The government sets a Medicare Benefits Schedule (MBS) fee for most medical services. The MBS fee is used to work out how much Medicare and your health fund will pay for an in-hospital service. However, doctors can charge more than the MBS fee if they wish, and many do.

If your doctor charges above the MBS fee, you may have to pay the difference between the MBS fee and the doctor’s charge. This extra amount is known as the ‘gap’.

You are entitled to ask your doctor how much this gap will be before you have treatment. Agreeing to known treatment costs upfront is called ’informed financial consent’.

Your health fund can provide extra benefits to help cover this gap if they have an agreement with the doctor, or if the doctor decides to participate in the insurer’s ’gap cover’ scheme. Ask your doctor(s) whether they will bill you under your insurer’s ‘gap cover’ scheme.

Ask your health fund how much of the doctor’s bill their gap scheme will cover.

For more information on Doctors’ Bills, you can refer to our brochure.

General treatment cover

General treatment policies, also known as ancillary or extras cover, provide benefits for out-of-hospital ancillary services such as physiotherapy, dental and optical treatment which are not covered by Medicare.

Here are some key steps in selecting a general treatment health insurance product:

• Make a list of the services you are likely to want to use (for example: dental, orthodontics, optical, natural therapies, etc.)
• Check that the policy you are considering pays benefits for those services.
• Ask what waiting periods apply for each of the types of service you might use.
• Ask how much benefit the fund will paid towards the cost of each service.
• Find out what annual limits apply and check when the annual limits are reset.
• Find out if the limits will increase over time if you stay with the health fund.

If you are changing your general treatment policy to another health fund, your new fund can make you serve waiting periods—but many don’t. It is worth asking if the new fund will waive or reduce any waiting periods.

All health funds operate their general treatment policies quite differently so you should always re-check the benefits as well as any annual limits and how they work. It is worth asking if the new fund will match any extra limits you might have built up with your old fund. However, loyalty bonuses—for example, higher benefits after five years of membership—are generally not transferable between health funds.

Exemptions from the Medicare Levy Surcharge

Most Australian taxpayers pay a Medicare Levy of 2% of their taxable income.

However, if your taxable income is above a certain threshold, you will have to pay an extra Medicare Levy Surcharge unless you have an approved hospital cover with a registered health fund. If you are in this situation, you need to make sure that the policy you are considering will exempt you from the Surcharge.

To avoid the Medicare Levy Surcharge, you must have a hospital policy which covers you and your dependants, and which has an excess that is:

• Equal to or less than $500 per annum for single policies, or
• Equal to or less than $1,000 per annum for families/couples.

The Surcharge threshold is periodically indexed. For current information, check Medicare Levy Surcharge or contact the Australian Taxation Office.

Lifetime Health Cover

Lifetime Health Cover (LHC) is a set of rules which determines how much you pay for private hospital insurance. LHC is designed to encourage people to take out hospital cover early in their life and keep it. Health funds are therefore required to charge extra to people who join a hospital policy after the age of 31. (There are some special rules for new residents and people who were overseas when they turned 31.)

The extra charge or ‘loading’ is 2% on top of the normal premium for each year you are over 30 years of age. For example:

• If you don’t take out hospital insurance until you are 40 you’ll pay an extra 20%.
• If you wait until you are 50 it’s an extra 40%.

The LHC loading no longer applies once you have paid it for a period of 10 continuous years.

For more information, see Lifetime Health Cover or ask your health fund.

Making the most of your health insurance (and avoid problems)

• Consider choosing the highest level of hospital cover you can afford. Choose a higher excess rather than a restriction, to save money on premiums.
• Keep your membership payments up-to-date. It is your responsibility to make sure you keep your premium payments up-to-date. If you get too far behind in your payments—usually two months or more—the fund can cancel your policy and refuse to pay you any benefits. If your policy is cancelled, waiting periods will apply to you when you re-join.
• Contact your health fund if you’re going to hospital. If you are going to hospital as a private patient, contact your health fund to check that you’ll be covered for the hospital bill and doctor’s bills, and how much you’ll have to pay yourself. Ask your doctor to give you a quote and the Medicare item numbers they will be using before you contact your health fund.
• Read the information your health fund sends you carefully: important information about your policy will be sent in a personalised letter and should not be ignored.
• Check your policy every year and make sure you are covered for the services and treatments you may need.
• Tell your health fund if you change address, add a partner or add a child.

More information

For general information about private health insurance and to compare health insurance policies, contact the Ombudsman at privatehealth.gov.au or 1300 737 299.

If you have a complaint about your health fund, you contact the Ombudsman on 1300 362 072 or ombudsman.gov.au