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Health insurance comparisons

Our health insurance reviews are a prescription for painless health cover.
 
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01 .Review your cover

health insurance

Last year we compared health insurance policies from 20 open membership funds in Australia and made recommendations based on the best value policies to suit a variety of people in different life stages.

Our review found health insurance policies are increasing your out-of-pocket expenses while restricting the items you are covered for.

As of 1 April, health insurance premiums increase by 6.2% on average. So now’s a good time to check that the amount you’re paying is justified by what you’re getting in return.

Please note: this information was current as of June 2013 but is still a useful guide to today's market. We are currently working on an updated review for 2014.

Higher premiums aren’t the only source of pain. In the financial year 2013/14, Australians who earn more than $88,000 (single) or $176,000 (couple/family) aren't eligible for the full 30% Private Health Insurance Rebate. 

Fortunately, we've identified some steps you can take to cut your health insurance premium back to a reasonable level:

Also check out our Jargon buster, to help decode the industry jargon.

Review your extras cover

Unlike with hospital cover, the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) don’t apply to extras cover, so you can cancel it without any impact on your tax or having to pay more if you wish to take it up again later. Be aware, though, that waiting periods will apply, and you may lose accumulated benefits, such as for orthodontics, should you take it up later.

Extras cover normally provides benefits for services such as dental check-ups, braces, new spectacles or a visit to the chiropractor or physio, but doesn’t fully cover you for any treatments you receive.

For example, according to an IBISWorld report, dental benefits received covered less than half the costs for those with extras insurance in 2010-11.So it’s important to check the premium you pay against the benefits you receive. If the premiums are higher, find out whether another policy would cover your needs better, then consider ditching extras cover altogether.

Take a look at your hospital cover

Ask yourself why you have it – is it to protect your LHC so that you don’t need to pay a surcharge, or is it to avoid paying the MLS? Or are you wanting to be protected just in case you end up in hospital? If your only reason relates to the LHC or MLS, you could take the least expensive policy you can find and upgrade later. But if you want to be protected, you need to check how your policy matches up.

Tip: Check for a discount – some funds provide a four per cent discount for paying by direct debit or by prepaying your annual premium.

If you can’t afford hospital cover for the moment, there is a way to drop it for a while without incurring any damage to your LHC.

LHC bonuses

Your health fund may allow you to suspend your membership if, for example, you go overseas or become unemployed. This means you no longer pay a premium and are not covered, but your LHC stays in place, so later on, when you can afford to take up hospital cover again, you won’t have to pay a surcharge. (The MLS can still apply depending on your income.)

You can also use what are known as your LHC “days of absence”. If you’re aged 31 years or older and have hospital cover, you can cancel it and be without cover for 1094 days in total (three years minus one day) without having to pay a surcharge when you take it up again. From the 1095th day you’ll pay a two per cent surcharge; another two per cent applies for every year after up to a maximum of 70%.

Jargon Buster
Private Health Insurance Rebate
Paid by the government on your hospital and extras cover premiums; means tested since 1 July 2012. In the financial year 2013/14, if you earn up to $88,000 (single) or 176,000 (couple, family), the full 30% rebate applies; up to $102,000 (single) and $204,000 (couple, family), a 20% rebate applies; up to $136,000 (single) and $272,000 (couple, family), a 10% rebate applies. If you’re aged between 65 and 69 you receive a five per cent higher rebate, or a 10% higher rebate if you’re aged 70 or older. If you earn more than $136,000 (single) and $276,000 (couple, family), you don’t qualify for a rebate

Lifetime Health Cover (LHC)

A surcharge that adds two per cent to your premium for every year you don’t have hospital insurance after age 31. It can add up to 70% and applies for the first 10 years of your hospital cover, but doesn’t apply if you were born on or before 1 July 1934.

Medicare Levy Surcharge (MLS)

An extra tax for high-income earners on top of the Medicare Levy that you can avoid by taking out hospital cover. You can choose cover with an annual excess of up to $500 (single) or $1000 (family). Since 1 July 2012 a stepped rate of 1-1.5% has applied; the steps are the same as for the Private Health Insurance Rebate. That’s why it usually costs less to take out hospital cover than paying the MLS – see our report.

 
 

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Health funds provide a one-page fact sheet called the Standard Information Sheet (SIS) for each policy, which allows you to compare your cover. You can review the SIS for your fund and compare all policies at privatehealth.gov.au.

Extras

For extras cover, consider the services you use most, such as dental, and check the annual limit per person and per family. Sometimes the family limit is only twice the per-person limit, while with other policies it’s four times the per-person limit.

Benefit limits

Next, look at the benefit limits for specific services. They’re usually a fixed amount. Benefit limits are usually listed as a dollar amount, but occasionally you may see a benefit limit listed as a percentage on the SIS. This means the fund will give you that percentage of the actual cost of the service (for example, 50% of your dental bills). However, if you see a benefit listed as a percentage in a fund’s marketing material it may mean something else, so always go by the SIS.

Lifetime limits

Beware of lifetime limits (some funds have them for orthodontics) and combined annual limits for a range of services, such as $400 for physiotherapy, natural therapies and chiropractic. This means that once you’ve claimed $400 for physiotherapy (for example), you won’t receive anything for the other therapies during that 12-month period.

Policy types

  • Top-cover hospital policies cover you for all conditions that Medicare covers.
  • Basic- and medium-cover policies commonly restrict or exclude one or more conditions – this means you can’t jump elective surgery waiting lists and you may be treated the same as someone without insurance. Commonly restricted treatments are joint replacements, heart surgery, cataract eye surgery, dialysis, gastric banding, obstetrics and IVF, rehabilitation, psychiatric, non-cosmetic plastic surgery, palliative care and sterilisation.

Excess

By choosing an excess or co-payment, you can save on the premium. The highest excess you can choose without becoming liable for the MLS is $500 for singles or $1000 for couples and families, but there is no restriction on co-payments.

Tip: Check whether you qualify to join a restricted membership fund – for example, for people working in the education or defence industry. They often offer good policies at a lower premium than open membership funds.

Before changing policies, check any waiting periods. For extras cover, they’re usually two months for most services, 12 months for major dental and 36 months for hearing aids. Funds often waive the shorter waiting periods and may even waive all waiting periods.

Some funds have loyalty bonuses that you’ll usually lose should you switch to a new fund, though you can always try negotiating with the new fund to maintain the bonus.

Once you’ve had hospital cover for 12 months you generally don’t need to worry about waiting periods so long as you change to a comparable policy. But if you change to a policy with a lower excess or higher cover, you’ll have to serve a waiting period for up to 12 months for extra services or savings.

Some policies also have benefit limitation periods (BLPs)– for example, they only cover you for rehabilitation in a public but not private hospital for the first 24 months. If you’ve already been covered for rehabilitation for 24 months or longer by another policy, the BLP won’t apply to you as it only applies the first time you take up cover.

Once you’re ready to switch, there are some steps you’ll need to take:

Health-insurance-switching-infographic

If you receive treatment as a private patient, your hospital insurance will not always cover the full cost. This difference between the hospital and/or doctor’s bill after you receive your Medicare and health fund benefits is called a gap. This is on top of any excess and co-payment you agree to pay when taking out your policy.

A 2007 report from the Department of Health and Ageing found the average gap was $1011 for overnight patients in a private hospital and $557 for overnight patients receiving treatment as a private patient in a public hospital. These charges vary state by state, with the highest average gaps occurring in NSW. Before you are charged a gap, you must give informed financial consent beforehand, which means you will know about additional charges. 

Gaps can apply to hospital bills but are mainly charged on doctor’s fees, such as those for specialists. There may also be a number of doctors involved in your treatment; the 2007 survey found close to 70% of hospital patients were treated by an anaesthetist, of which about a third had to pay a gap charge for this treatment. The average out-of-pocket expense was $320 for the anaesthetist alone.

How to avoid the gap

Many hospitals have agreements with private health insurers under which you are not charged a gap for hospital fees. Health insurers also have arrangements with doctors under which the doctor does not charge you a gap, or you may pay a “known gap” amount. 

The doctor is free to decide on a case-by-case basis if they will treat you under these arrangements. By using a hospital and doctors that have an agreement with your fund, you have a better chance of reducing out-of-pocket costs. 

Your local hospital or doctor may not have an arrangement with your fund, in which case you may be able to save money by switching to a fund that does. You can do this even a short time before treatment, such as surgery, without having to serve a waiting period, so long as you switch to the same level of cover (such as full cover with no excess) with the new fund.

Fast tips for avoiding out-of-pocket fees

  • Doctor’s gap cover arrangements Ask your doctor if he/she has gap cover arrangements with your fund and if you will have to pay any out-of-pocket costs. Get this information in writing.
  • Other services Ask your doctor if you will be billed by other doctors who may treat you, such as an anaesthetist or surgeon’s assistant, and how you can get an estimate of their fees.
  • Hospital gap agreement Ask the hospital if it has a current agreement with your fund and if there will be any out-of-pocket costs. Confirm any information you get from the hospital and doctor with your fund.

Before signing up with any fund, read its brochure and key features guide thoroughly. If there’s anything you don’t completely understand about your entitlements, write to the insurer and get written answers to your questions before you join.

It may seem like a hassle, but not in comparison to the problems you’ll encounter if your cover doesn’t match your expectations.

Fine print checklist

Here are a few of the questions to ask the fund — when you take out insurance, when you’re reviewing it, and before you go into hospital:

  • Who counts as a member? Family cover generally includes your partner and children under a certain age. The age varies from fund to fund - it could be 16, 21 or even up to 23. Some policies may include full-time students under 25 or other dependants. If this extended cover for family members is offered, does it cost extra?
  • Are there any advantages to longer membership? These may include higher benefits or benefit limits, or lower excesses the longer you’re a member.
  • What waiting periods will apply?
  • If you want to go to a specific private hospital or be covered for treatment by a specific health practitioner will there be out-of-pocket expenses?
Hospital cover
  • Are any treatments excluded?
  • Are any treatments restricted to public hospitals?
  • Are any treatments initially limited to care as a private patient in a public hospital?
  • Are there any limits to treatment, even with so-called 100% cover? For example, you may only be entitled to a certain number of overnight stays overall, or there may be day limits for specific treatments such as for psychiatric or intensive care.
  • What excess/co-payment applies? Is there an annual maximum per membership? How does your excess or co-payment work?
  • Is the hospital you want to go to an agreement hospital with the fund?
  • Does the fund have an agreement with your doctor to cover the ‘gap’ between the actual charge and the Medicare Schedule fee?
Extras/ancillary cover
  • If extras benefits are listed as a percentage, is it a percentage of any fee charged, or a percentage of a ‘reasonable fee’ set by the fund?
  • What are the annual limits for extras benefits and do these apply per person or per membership?
  • Do providers of extras services need to be registered with the fund? Some funds require practitioners to be registered with the appropriate state board. Others require them to be specifically registered with the fund, which can limit the practitioners you can go to. If there is a specific register, make sure you contact the fund to find out if a practitioner is on it before you get treatment, otherwise you won’t get a benefit.
Ambulance cover
  • Usually included in hospital policies and sometimes offered with extras policies. Ambulance cover can vary greatly between funds. Some only cover emergency transport direct to hospital after an accident (and no further transport if you need to be sent on to another hospital).
  • Others cover all types of ambulance transport. Check the fine print, as your cover may not be as good as you think.
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