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What are the benefit of health insurance?

Benefits of health insurance cover

Having private health insurance is an important and cost effective method of protecting against unexpected health issues and providing you with more control over your health care, choice of services and choice of doctor. Private health insurance puts you first.

Even if you have no family or personal history of serious illness you cannot be certain that that you won’t require certain services or specialist case in the future.

People who have private health insurance have the peace of mind that comes with knowing they are covered for the best available medical treatments when and if they become necessary.

Private health insurance provides members with the following benefits:

  • Choose the doctor who is right for you private healthcare provides quick access to Australia’s best doctors and specialists. More than half of all surgery performed in Australia is paid for by Private Healthcare Funds.
  • Shorter waiting times for elective surgery.
  • You have greater control over when and where you are treated.
  • Cover for services not provided by Medicare such as ambulance, chiropractic, dental, physiotherapy, optical, dietary advice and some alternative therapies.
  • Relieves the strain on the public hospital system and frees up government funds to upgrade hospitals.

A strong health insurance sector benefits members through access to care when they need it, and all Australians by easing pressure on public hospital waiting lists. Public hospital average elective wait times have more than doubled since the year 2000.

What does health insurance mean?

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Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly.

What is covered by private health insurance?

Private health insurance cover is generally divided into hospital cover, general treatment cover (also known as ancillary or extras cover) and ambulance cover. Ambulance cover may be available separately, combined with other policies, or in some cases is covered by your state government.

Private health insurance is not ‘risk-rated’ like most forms of insurance. Private health insurers cannot refuse to insure any person, and must charge everyone the same premium for the same level of cover, despite their risk profile and likelihood of using health services.

There are different types of cover that offer different benefits. Check with your health fund to be sure of exactly what you are covered for.

Hospital Cover

With hospital cover you have the right to choose your own doctor, and decide whether you will be treated at a public or a private hospital that your doctor attends. If you are a private patient at a private hospital, you may also have more choice as to when you are admitted to hospital. If you are a private patient in a public hospital, public hospital waiting lists still apply.

When you are admitted to hospital, you can choose to be treated under either the public Medicare system or in the private system.

Private health hospital cover insures you against some or all of the additional costs of being a private patient in either a public or private hospital. Medicare will cover 75% of the Medicare Benefits Schedule (MBS) fee for associated medical costs. Provided you have the appropriate private health insurance policy, your health fund will cover the remaining 25% of the MBS fee.

You will be charged any amount above the MBS fee the doctors have chosen to charge. Depending on the extent of your private cover, you may also be charged for some or all the costs of hospital accommodation, theatre fees, intensive care, drugs, dressings and other consumables, prostheses (surgically implanted), diagnostic tests, pharmaceuticals, and any additional doctor’s fees.

Some funds also offer ‘gap cover’ to cover some or all of the difference between the doctor’s fee for services provided in hospital and the combined Medicare benefit and health insurance benefit. Some also provide cover for alternatives to hospital treatment known as Broader Health Cover.

As with any other insurance policy, you can manage your cover by choosing comprehensive cover with higher premiums, or pay lower premiums for reduced cover. You can also reduce your premiums by opting to pay some of the costs through an excess or co-payment.

What may not be covered?

The health insurance policy you buy will have some limitations on hospital treatment, which might include:

  • Exclusions – specific services that are not covered at all.Restrictions – services that are covered to a limited extent, which means you will have greater out-of-pocket expenses. Restricted benefits are not sufficient to cover the full hospital cost of a private hospital admission and you will need to pay for the difference in cost.
  • Benefit limitation periods – which pay reduced benefits on one or more services for a set period of time after the waiting period, then pay full benefits after this period.
  • Surgery or hospital treatment that Medicare does not pay a benefit for – Medicare pays a benefit on all medical services necessary to maintain your health, but does not cover optional treatments such as elective cosmetic surgery.
  • Long stay patients – If you are in hospital for more than 35 days in succession, you will be regarded as a long stay or nursing home type patient, unless your doctor specifies otherwise. This means you will have to pay more for the cost of hospital accommodation after the initial period. The Health Insurance Act 1973 does not allow health funds to insure for this cost.
  • Single vs shared rooms – some hospital policies cover the full cost of a shared room, but not a single room. Depending on your policy, this limitation can apply in a private hospital, or a public hospital, or both. If you are admitted to a single room and your policy does not fully cover the cost, the hospital should inform you that you will need to pay the difference between the fund’s benefit and the hospital’s charge. Your health fund can also provide more information about your cover.

General Treatment Cover

General treatment cover (also called ancillary cover or extras cover) provides insurance against some or all costs of treatment by ancillary health service providers. The extent of your cover depends on the type of policy you select and may include services such as:

  • dental treatment;
  • chiropractic treatment;
  • home nursing;
  • podiatry;
  • physiotherapy, occupational, speech and eye therapy;
  • glasses and contact lenses; and
  • prostheses (e.g. hearing aids).

What may not be covered?

Nearly all services covered under general treatment are only covered to a limited extent. There are various limits that may apply, for example a limit per service, per year, or lifetime limits. Some services may not be covered at all.

You should check the Standard Information Statement about any policy you are interested in, and seek information from your insurer for details of these limitations.

Ambulance

Medicare does not cover the cost of emergency or other ambulance services. You can organise cover for this service as part of your hospital or general treatment plan, or as a stand-alone cover.

The options for ambulance cover vary depending on what State you live in. For further information please see the Ambulance section of the website.

What is the best health insurance to have?

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We’re glad you asked. The good news is, if you’re a permanent Australian resident then you already have health insurance, it’s called Medicare. For most of us, our Medicare health insurance premiums cost two per cent of our annual salary for ‘free or subsidised’ access to doctors, specialists, optometrists and treatment and accommodation in public hospitals, plus a few other perks.

Do I need health insurance?

Good question – we’re glad you asked. But we’d like you to break that question down a bit more because there’s really no such thing as “private health insurance”: there’s private hospital insurance, and there’s extras insurance. And we’re not just being sticklers here – a lot of people waste good money on one of these insurance types without using it. We don’t want you to be one of those people.

No private hospital insurance

You already have Medicare so why should you take out private hospital insurance?

  • If you earn less than $90k a year (double that for couples and families) the only financial incentive to get hospital cover is that you will have to pay the Lifetime Health Cover (LHC) loading if you take out hospital cover after you’re 31.
  • The public hospital system serves people who require emergency surgery well.
  • If you are admitted to public hospital as a public patient, Medicare will foot the doctor’s bills.
  • But if you’re admitted to a private or public hospital as a private patient, you may end up paying a ‘gap fee’ to your doctor or sometimes even to the hospital. That’s the gap between what Medicare and your health fund pays, and what the actual doctor’s fee is, and it can run into thousands of dollars.

What you should think about before getting private hospital insurance.

  • For elective surgery you’ll end up on a waiting list.
  • You won’t be able to choose your own doctor.
  • You’ll be in public hospitals instead of private hospitals (which generally have better conditions and service staff).
  • If you earn over $90k a year (double that for couples and family), you’ll be charged the Medicare levy surcharge of at least 1% of your income, it steps up to 1.25% and then 1.5% for higher income levels. It’s on top of the two percent Medicare Levy everyone pays.
  • If you’re over 31, and you do eventually decide to get private hospital insurance, then you’ll pay more for it in the form of the Lifetime Health Cover loading.

What about extras cover?

Theoretically, the whole idea of paying insurance premiums is to put a financial cap on how much money comes out of your pocket when the unexpected occurs. Rear-ended a Porsche? No problem, pay your $500 excess and the insurer will pay the rest. House burnt down? Pay the excess and the insurer will re-build. Need a new hip? Pay the excess and your insurer will pay the hospital costs, and maybe some of the doctor’s fees. OK, in reality it’s never as easy as this – but we did say theoretically.

Need to go to the dentist? Your extras insurance will pay the first $200 (for example) and you’ll pay the rest. Do you see the difference? The insurer’s liability is capped, yours isn’t.

For that reason, extras ‘insurance’ really isn’t insurance at all, it’s a budget management tool.

If you’re buying health insurance purely for tax reasons, then no. Not having private hospital insurance can mean you pay extra tax and higher premiums should you take it up again, but these penalties don’t apply to extras (ancillary) cover.

This type of insurance rarely covers the full cost of your treatment. On average (12 months to March 2017) health funds paid about:

  • just over half (55%) the cost for the dentist
  • 60% of the cost at the optometrist
  • half (52%) of physiotherapy treatments
  • over a third (39%) for medicines not covered by the Pharmaceutical Benefits Scheme (PBS)
  • a quarter for hearing aids and audiology.

And there are wide variations between funds and policies, too. The most generous health insurance fund for all extras services, for example, refunded 59% on average in 2015–16, while the most miserly health fund covered just 37%. For dental the differences are even greater: the most generous fund pays on average 70% of the costs, the least generous one pays 34%.

According to APRA, average extras benefits during the year to March 2017 were $398 per person. But there are two groups of people who benefit most from extras insurance:

Combined cover?

This is simply hospital and extras combined into one policy. It can be convenient because you only deal with one health fund for both types of insurance. It can also be useful for the health funds because they’ve just sold you two insurance policies in one go.

Ask yourself these questions before buying a combined policy:

  • Do you need both hospital and extras?
  • Do you need to get them from the same fund?

It’s worth pointing out again: private hospital and private extras insurance are separate types of insurance and a lot of people waste good money on one of these insurance types without using it.

While there are some good combined policies available, you can often get a better deal by buying the best value extras and hospital insurance from separate funds, so shop around to make sure you’re getting the best deal.