Types of insurance
Broadly speaking, you can choose hospital cover and extras/ancillary cover. These are available separately or combined.
Hospital cover pays:
Some of the doctors’ fees.
A benefit for accommodation.
Some treatment costs in hospitals the fund has an agreement with.
It may not include cover for other costs such as phone calls or television sets.
Extras/ancillary cover contributes to:
The range of benefits paid varies between funds, and the payout is unlikely to cover the whole cost of the treatment. Private hospital insurance means you can be more certain of having your choice of doctor. If you’re admitted as a public patient, the hospital assigns a doctor to you.
The other key attraction is that private patients usually have shorter waiting times for elective surgery. 'Elective surgery' is treatment for a condition that isn’t immediately life-threatening. But that doesn’t mean that the surgery is unnecessary or the condition is not painful. For example, if you need a back operation or kidney stones removed, the shorter the wait, the better. Check out our page Do you need it? to see some other common considerations.
Levels of hospital cover
There are four different levels of hospital cover:
Full (top) cover
These policies cover you in private and public hospitals as a private patient, allowing you to choose your own doctor and jump hospital waiting lists. Top level policies must cover all services where Medicare pays a benefit. This is usually the best option if you expect you’ll need treatment in a hospital over the next few years, or want to make sure you’re fully covered should something unexpected happen. Close to four in five CHOICE members with hospital insurance choose this type of cover.
Medium and basic cover
We put these two categories together because both levels of cover will restrict or exclude some services.
- Restricted: If a service is restricted, you are only covered in a public hospital as a private patient, not in a private hospital. This means you can choose your own doctor, but normally can’t jump public hospital waiting lists.
- Excluded: For an excluded service, you’re treated the same as someone without insurance. Some budget policies increasingly cover only a short list of services, exclude some and restrict all others.
Commonly restricted and excluded services include major heart surgery, hip and knee replacements, eye surgery, plastic and reconstructive surgery, pregnancy and assisted IVF, psychiatric care, rehabilitation, renal dialysis and palliative care. For services that are not restricted or excluded, you will be treated as a private patient in a public or private hospital (often, this will depend on your fund, its agreement hospitals and your own personal preferences).
Public hospital only
All services are restricted to cover you in a public hospital as a private patient.
Levels of extras cover
There are three different levels of extras cover available. Extras may also be called general treatment or ancillary.
Should include most services, including all dental. This level of cover generally has the highest annual benefit limits (the most you can claim once waiting periods are served) and sub limits should be above average (most services also have sub limits, which is the max you can claim in a single visit). Use our tips on comparing health insurance
if you're unsure about what limits you need.
Medium Still covers most services, including dental. The maximum annual benefit limit is lower, so this level is typically more suitable when less people are on the policy or for those who find they aren't claiming enough to justify top extras. Keep an eye on sub-limits as this restricts the amount you can claim at the one time.
You won't have cover for all services at this level, but you can compare policies
and pick and choose between things you think you might use. Check the sub limits carefully and factor this into your overall budget.
Excess and co-payments
You can choose an excess or co-payment to save on your premiums. The higher the excess or co-payment, the cheaper your premium.
- An excess means you pay a certain amount (such as $500) towards the cost of your treatment, usually once per hospital stay.
- With a co-payment you pay an amount (for example $50 a day) for a certain number of days each hospital stay. We've only included policies which have an annual maximum limit for excess and/or co-payment.
TIP: Some funds don't charge excesses or co-payments for children on a family or single-parent policy.
Gap (out-of-pocket expenses)
When you have hospital treatment as a private patient, Medicare will pay 75% of the MBS fee (a fee for every medical service set by the government). Your private health insurer will pay 25%.
Gaps for doctor's fees come about when you're charged an amount above the MBS fee. This includes not only your doctor/specialist but also other doctors involved, such as an anaesthetist. If the doctor uses your health insurer's gap cover scheme, the insurer can pay more than the usual 25%, resulting in less out-of-pocket expenses for you.
Your insurer may offer:
- No Gap schemes: You won't occur an out-of-pocket expense.
- Known Gap schemes: You will be informed about any out-of-pocket expense beforehand.
The amount different health funds pay under these schemes differ. You may have a better chance of your doctor deciding to use the fund's scheme if the fund allows for a greater amount. This also means that your chances may not be as good if your fund only offers a No Gap scheme.
Always check with your doctor if they will use the fund's gap scheme, as doctors can decide on a case-by-case basis whether they use your insurer's gap cover scheme. Also always check with your hospital if it has an agreement with your fund to make sure you won't incur a gap for hospital costs such as accommodation.
Lifetime health cover
Lifetime health cover penalises people who take out hospital insurance later in life, by increasing their premiums. If you're aged 31 or more and have not already signed up for health insurance, you'll pay higher premiums than someone who joined at age 30 or younger.
- Age 31 is not the exact cut-off point. Depending on when your birthday is, you may have a little more time to avoid the additional surcharge. The cut-off date is the first time 1 July occurs after your 31st birthday. If you turn 31 in January, you'll have until 1 July that year to apply, before you'll go into the age category that does incur a surcharge.
- If you are affected by the surcharge, it amounts to 2% extra per year, up to a maximum surcharge of 70%. So, for example, if you join at 45 you pay 30% more than someone who joined at age 30.
- After you've paid the surcharge for 10 years, your premiums revert back to the normal premium paid by people who joined before their 31st birthday.
Medicare levy surcharge
Medicare Levy is a 1.5% tax paid by everyone, regardless of whether they have private health insurance (unless they’re able to qualify for an exemption or reduction).
Medicare Levy Surcharge (MLS) is 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). It was 1% for everyone above the cut-off, but from 1 July a stepped rate of 1-1.5% will apply. See our report.
All premiums shown in this article are rounded monthly family or couple premiums, without any government rebate.
Some funds may give you a discount if you pay by direct debit and/or annually instead of monthly.
Hospital insurance waiting periods are regulated and can be a maximum of 12 months for obstetrics and pre-existing conditions and two months for any other condition.
Extras insurance waiting periods vary from fund to fund and can range for two months for a dental check-up, six months for new glasses, 12 months for major dental and up to three years for hearing aids.