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Private Health Insurance

Written by

Shaun McGowan

First things first – what is private health insurance?

In a nutshell, private health insurance is a policy you can take out to cover your medical bills if you get sick or need to go to hospital.

But if you live in Australia and you fall ill, the Medicare public health system will take care of you, right? So what’s the point of spending your hard-earned cash on private health insurance?

Why bother with private health insurance?

Well, the first thing you need to know is that Medicare doesn’t cover everything

  • If things go very wrong (think sudden illness or accident) and you need emergency medical treatment in hospital, Medicare certainly has you covered.  Medicare covers part of the cost of most everyday medical care too. You’ll get an on-the-spot partial refund for the cost of seeing a GP, for example. And some doctors even ‘bulk bill’ the entire cost of your appointment straight to the government, so you don’t pay a cent.  Medicare also covers part of the cost of consultations with specialists, and of diagnostic scans and tests.
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  • But if your medical condition isn’t an emergency, it can take months or even years to get non-urgent treatment or surgery through the Medicare system. Private health insurance gives you options.  While private health insurance can’t (by law) cover the cost of a private consultation with a specialist, your policy may cover you for treatment in hospital by whichever specialist you want to see. And when it comes to your health, you want the best, right?
  • There’s also a very good chance you’ll be able to get your treatment much more quickly by ‘going private’, too.  
  • And like I said, there’s a lot that simply doesn’t fall under Medicare – like dental care, eye care, and physiotherapy. Depending on your policy, private health insurance can cover a lot of those services, giving you a bit of extra peace of mind.
  • You may also pay less tax if you have private health insurance. More on that later.
  • Finally, having private health insurance with hospital cover means you can choose to be a private patient in hospital (even if it’s a public hospital). Which is likely to mean better non-medical facilities (like a private room, if you’re lucky), and more choice over which doctors treat you. This may surprise you, but it actually helps public hospitals if you choose to use your health insurance to go private, as the fees they get from health funds are a useful cash boost that goes towards public health care.

So does private health insurance mean everything’s covered?

Sadly not. As I said, by law, private health insurance policies in Australia are not allowed to cover:

  • Appointments with your GP
  • Private consultations with specialists
  • MRI, CT scans, and other diagnostics and tests

Depending on which type and level of insurance you choose, the cost of other services may not be covered either. I’ll get into that in a bit.

The other thing you need to know is that health insurers work from the Medical Benefits Schedule (MBS) fee, which is a standard rate set by the government for medical services. 

But medical practitioners set their own charges for their services – and depending on the specialist you choose, this could be higher (sometimes A LOT higher) than the amount your health insurance company will pay for your treatment.  

The difference is known as the ‘gap’. Make sure you check how much your health insurance will pay and find out how much that gap will be when you book an appointment, as it’ll have to come straight out of your pocket.

What’s this about tax benefits?

If you pay tax in Australia, the chances are you’re also paying the Medicare Levy – an extra 2% tax on your income to pay for your access to Medicare. 

If you earn above $90,000 per year (or $180,000 as a family), you’ll also pay the Medicare Surcharge Levy, which can be up to another 1.5%. But not if you have private health insurance with hospital cover. 

If you’re a high earner, this can make private health care very attractive!

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Pros and cons of private health insurance at a glance

Pros

  • Jump the waiting list for non-urgent surgery
  • Be treated by the doctor or specialist of your choice
  • Have your surgery at a private hospital, or in the private wing of a public hospital

Cons

  • Despite what some people may say, public hospitals provide excellent medical services, especially if you need urgent care or surgery.
  • Monthly insurance premiums can put serious a dent in your wallet, which is why so many Australians can’t afford it.
  • Private health insurance may cover a large chunk of your treatment cost, but there’s a good chance the gap payment will be hefty. ****

Can I get private health insurance?

Too right you can! Private health insurance is ‘community rated’ in Australia – which means that absolutely everyone has the right to buy the same product, at the same basic price. This is very different from other types of insurance, where the amount you pay (or if you can even get cover) will depend on how much of a risk the insurer thinks you are.  

No health insurer in Australia can refuse to sell you an insurance policy – any policy you choose – and you always have the right to renew, no matter how much you’ve claimed during the previous year.

You won’t necessarily get cover from the day you take out your policy though. You can expect your insurer to apply waiting periods of either 2 or 12 months for different conditions before you can make a claim.  

These are: 

  • 12 months for pregnancy and birth-related services
  • 2 months for all other services
Australia

What if I have a pre-existing condition?

You can still get hospital cover, even if you have a pre-existing condition – but in most cases, you’ll have to wait 12 months before you can claim any benefits for that condition.

If you need rehabilitative, palliative, or psychiatric care, the waiting period is only 2 months, even if your condition is pre-existing.

You may not be able to get extras cover for pre-existing conditions, so make sure you check what’s will be covered when you sign up.

Types of private health insurance

Ok, so here’s where you have to start making choices. There are three types of private health insurance policy you can buy in Australia.

1) Ambulance cover

Unless you live in Tasmania or Queensland, an ambulance is not a free service in Australia. So if you don’t have ambulance cover, you’ll have to pay if you need transport by ambulance (on the road or by air). That fee can be as much as $6000 for one trip in some states. Yep, you read that right. Pretty steep!

You can buy a subscription from the ambulance service in some states – in others, you’ll need private health insurance policy if you don’t want to risk a hefty ambulance bill.

Ambulance cover does exactly what you’d expect – pays for the cost of your ambulance if you need one. Some policies will only cover emergency transport to your nearest hospital. Others will cover trips between hospitals too – say if you need to be moved during your treatment.

2) Hospital cover

This covers the cost of going to hospital for any of the conditions covered in your policy.

It’s important to know that you don’t NEED private health insurance to get free hospital care in Australia. If you have an emergency and need to be admitted to hospital, everything will be covered by Medicare.

But say you’re having severe back pain and your specialist recommends surgery. Rather than sitting on a waitlist for a public appointment, private health insurance can mean you can schedule your treatment right away.

Hospital cover takes care of the cost of your stay in hospital, the operating theatre charges (you don’t even want to know how much they’re likely to be), plus your medical treatments.

Again, watch out for the gap between the amount your insurance will cover and the amount your specialist and anaesthetist plan to charge, before you decide to go private.

3) General healthcare (also knowns as extras or ancillary) cover

This is health insurance for treatments not covered by Medicare (like dental treatments, podiatry, physiotherapy).

This type of cover can be a big money drain if you don’t pay attention. As part of your extras cover, you’ll be paying for regular benefits (e.g., like an annual eye check and twice-yearly dental check-ups and cleans), and if you don’t need these services (or don’t remember to use them) you’ll be out of pocket for nothing.

If you’re wondering whether to buy extras cover for your family, it can work out worthwhile since you’ll pay one premium to cover everyone – as long as you all take advantage of the benefits.

By the way, extras cover won’t help you out come tax time. Only hospital cover has any impact on the amount of tax you’ll pay.

Most health insurance companies offer policies that blend all three types of health insurance, which can be pretty handy.

But it’s totally up to you what type and level of cover you want and you’re free to pick and choose.

How do I get my private health insurance?

Once you know what you want, applying for private insurance is pretty easy. 

You’ll have to buy your policy from a registered health insurance company in Australia – there are lots – and pay regular premiums, just like any other type of insurance. 

To buy your policy you can visit a store, buy over the phone or sign up online.

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How much will I pay?

As I said, the amount you pay for private health insurance in Australia won’t depend on your ‘risk’ level or how many claims you made in the past. So your premium will depend on what type of insurance you buy (ambulance, hospital, extras or a combination), and what level of cover you opt for. 

It’s now quite easy to compare policies (especially for hospital cover) by bringing in a series of ‘tiers’. I’ll explain those in a sec, but first, I should mention that you may qualify for an ‘age discount’ of up to 10% on your health insurance if you’re aged 18 – 29.

You may also have to pay an extra ‘lifetime health cover loading’ of up to 70% if you wait until after you’re 30 to buy hospital cover.

The government also offers rebates on private health insurance policies that include hospital or extras cover, which will cut the cost of your insurance if your income is below $140,000 per year. 

Be sure to check if your insurer has already factored in that rebate before quoting your premium!

As you can see, the Aussie government is really keen for residents to get private health insurance, so fewer people are relying on the Medicare system. 

Comparing insurance policies

These days it’s really easy to compare health insurance policies, because the Aussie government has set out series of tiers (gold, silver, bronze and basic) and a list of ‘categories’ (e.g., ear, nose and throat conditions, or kidney and bladder conditions). 

You’ll find that all hospital cover policies fall into one of four tiers, and there are rules on what categories each tier must include.

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Gold 

Comprehensive health cover in both private and public hospitals

Gold policies must cover all categories, with no restrictions. This includes categories that aren’t mandatory for any other tier (although your insurer may choose to include them in a lower-tier policy as an extra benefit).

Note: Gold policies are expensive, so if you’re looking for lower premiums, going gold may not be for you! 

Silver 

Medium level cover, which must include several important categories that are optional for bronze cover – such as heart, lung and chest conditions, back and spine injuries and dental surgery. 

Note: A silver policy may only offer ‘restricted cover’ for rehab, psychiatric services or palliative care. Which means you can only claim a portion of your costs and may end up with very high expenses if you want private treatment for these categories. 

Bronze

A lower-cost option, with a reasonable level of cover for important categories such as cancer treatment, broken bones, and ear nose and throat conditions.

Note: While this might all sound essential, don’t forget that you can get excellent care through the Medicare system for conditions like cancer. Especially in larger public hospitals with dedicated oncology centres. 

Basic 

This is a bare minimum cover. 

The only categories your basic policy must include are restricted cover for rehab, palliative care, and hospital-based psychiatric services. 

Your insurer may also offer full or restricted cover for any other category – but you can expect to pay more for anything extra that you get. 

You may choose this policy to avoid paying the Medical Surcharge Levy or to give you some choice about which doctors you see. 

Clinical CategoryBasicBronzeSilverGold

Rehabilitation

Restricted

Restricted

Restricted

Hospital psychiatric services

Restricted

Restricted

Restricted

Palliative care

Restricted

Restricted

Restricted

Brain and nervous system

Optional Restricted

Eye (not cataracts)

Optional Restricted

Ear, nose and throat

Optional Restricted

Tonsils, adenoids and grommets

Optional Restricted

Bone, joint and muscle

Optional Restricted

Joint reconstructions

Optional Restricted

Kidney and bladder

Optional Restricted

Male reproductive system

Optional Restricted

Digestive system

Optional Restricted

Hernia and appendix

Optional Restricted

Gastrointestinal endoscopy

Optional Restricted

Gynaecology

Optional Restricted

Miscarriage and termination of pregnancy

Optional Restricted

Chemotherapy, radiotherapy and immunotherapy for cancer

Optional Restricted

Pain management

Optional Restricted

Skin

Optional Restricted

Breast surgery (medically necessary)

Optional Restricted

Diabetes management (excluding insulin pumps)

Optional Restricted

Heart and vascular system

Optional Restricted

Optional

Lung and chest

Optional Restricted

Optional

Blood

Optional Restricted

Optional

Back, neck and spine

Optional Restricted

Optional

Plastic and reconstructive surgery (medically necessary)

Optional Restricted

Optional

Dental surgery

Optional Restricted

Optional

Podiatric surgery (provided by a registered podiatric surgeon)

Optional Restricted

Optional

Implantation of hearing devices

Optional Restricted

Optional

Cataracts

Optional Restricted

Optional

Optional

Joint replacements

Optional Restricted

Optional

Optional

Dialysis for chronic kidney failure

Optional Restricted

Optional

Optional

Pregnancy and birth

Optional Restricted

Optional

Optional

Assisted reproductive services

Optional Restricted

Optional

Optional

Weight loss surgery

Optional Restricted

Optional

Optional

Insulin pumps

Optional Restricted

Optional

Optional

Insulin pumps

Optional Restricted

Optional

Optional

Sleep studies

Optional Restricted

Optional

Optional

Restricted: insurers are allowed to offer cover for this clinical category on a restricted basis. A restricted benefit means you are partially covered for hospital costs as a private patient in a public hospital. You may incur significant expenses in a private room or private hospital so you should check with your insurer and hospital for details. Optional: for the insurer to include: insurers may choose to offer these as additional clinical categories.

What next?

Still have questions about private health insurance in Australia? Check out these Aussie government websites for the latest information:

Privatehealth.gov.au

Health.gov.au

Ato.gov.uk

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About the Author

Shaun McGowan from money.com.au

Shaun

McGowan

Shaun McGowan

Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

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