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Health insurance comparisons

We cut through health insurance jargon to help you decide what’s best for your budget.
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04.Your guide to hospital insurance


Australia’s health system is layered with an intricate and seemingly impenetrable web of incentives and penalties – Private Health Insurance Rebate, Medicare Levy Surcharge, Pharmaceutical Benefits Scheme, Medicare co-payments, Lifetime Health Cover, gap payments, preferred service providers and so on.

This minefield can leave consumers confused and reluctant to switch, even though they may be missing out on big savings by not doing so. So how do you cut through the jargon to select the right health insurance for you?

Private hospital

If you're reading this page, you’ve probably already decided on going private. So here’s a feel-good list of the advantages of private health insurance:

  • If you’re a single person earning more than $90k or a couple or family earning over $180k in the 2014-15 financial year and you have private hospital insurance, you don’t have to pay the Medicare Levy Surcharge (MLS).
  • If you’ve had private health insurance since 1 July 2000 or 1 July following your 31st birthday (or were born before 1 July 1934), you don’t pay the Lifetime Health Cover (LHC) loading on private health insurance.
  • If you’re a single person earning $140k a year or less or a couple or family earning $280k or less, then the government subsidises your private hospital and extras insurance.
  • You can jump the waiting lists for elective surgery. While elective surgery is usually not life-threatening it can still be very uncomfortable and limit your life, such as if you have trouble walking because you’re waiting for a hip replacement or lose your sight waiting for cataract surgery. 
  • You can choose your own doctor and you can go to a private hospital, which generally have better conditions and service than public hospitals.

The full list of income thresholds for the Private Health Insurance Rebate and Medicare Levy Surcharge is in our health insurance buying guide.

What private hospital insurance do I need?

Why do you want it? If you just want to avoid paying extra tax (the MLS), then go for the cheapest cover.

Basic cover policies are a good fit for avoiding tax, but of little use if you actually want to use them as they commonly restrict cover to public hospital only, or exclude a long list of treatments such as:

  • Assisted reproduction and IVF 
  • Obstetrics and birth-related care
  • Cataract and eye lens surgery
  • Cardiac and cardiac related services
  • Non-cosmetic plastic surgery
  • Dialysis for chronic renal failure
  • Gastric banding and obesity surgery
  • Hip, knee and other joint replacements
  • Palliative care
  • Psychiatric care
  • Rehabilitation
  • Sterilisation.

Some basic policies are called public hospital policies as they only cover treatments in a public hospital. That means you can’t jump the waiting list, but you can choose your own doctor and possibly get preference for a private room.

Medium cover If you mainly want hospital insurance for tax reasons but also think you may still want to use it, then consider medium level cover. But peruse the policy features carefully, because these policies may still exclude or limit treatments such as:

  • Pregnancy and birth related services
  • Assisted reproductive services
  • Cataract and eye lens procedures
  • Hip, knee and other joint replacements
  • Dialysis for chronic renal failure
  • Sterilisation.

Cover that only excludes pregnancy, birth and related treatments could be a good choice for singles or more mature people. So if this fit is you, check the hospital comparison table for policies that exclude pregnancy cover.

Top cover These are the best-value policies if you want to be fully protected.

  • They cover all treatments in a private hospital.
  • The premiums are top shelf, but if you take out a policy with an excess and/or co-payments they’re often not much more expensive than medium cover.

Excesses & co-payments

By choosing an excess or co-payment, you can save on your health insurance premiums.

An excess is an expense you pay out of your own pocket once per hospital stay.

  • Be sure to check how many times the excess applies per year.
  • Some policies do not charge an excess for children, for a day stay or for treatment after an accident.
  • The highest excess you can choose without becoming liable for the Medicare Levy Surcharge is $500 per year for singles and $1000 per year for couples and families, but there is no restriction on co-payments.

A co-payment usually applies once per day for a specified number of days such as five days per hospital stay.

  • Some co-payments have a yearly cap such as $500 or only apply for a private room.
  • Check how many times the co-payment applies per year.

Hospital gap payments

If you’re going into hospital, check your health fund has a gap agreement with that hospital before you go in or you could be liable for the kind of accommodation costs that celebrities pay for penthouses.

Medical gap payments

Speaking of exorbitant costs, your first foray into the world as a private patient, in a private or public hospital, will likely be welcomed by the confusing and potentially costly world of medical gap payments.

Under private hospital insurance, the government pays 75% of the Medicare Benefits Schedule Fee for each "item" that your doctor intends to charge for, and your insurer pays the remaining 25%. However, doctors are not bound by the Medicare schedule fee so they can, and often do, charge higher. The amount that doctors charge above the fee is known as the medical gap.

Some doctors have agreements with health funds to cover this gap. If your doctor recovers the entire medical gap from your health fund it’s a "no gap" agreement. Otherwise, if the doctor recovers some of the medical gap from the health fund and the rest from you, this is a "known gap" agreement.

  • No gap = good
  • Known gap = not so good, but at least your health funds covers more than the 25% and you know how much you’re paying
Medical gaps can cost you thousands of dollars, so make sure you find out if you are liable for a gap fee. The recommended top policies with $0 excess in our review have above-average coverage of no-gap agreements with doctors in that state.

Suspending your membership

Your health fund may allow you to suspend your membership if, for example, you go overseas or become unemployed.

  • In this case you don’t pay a premium and are not covered.
  • But your LHC rating stays in place, so you won’t have to pay a surcharge later on, when you can afford to take up hospital cover again.
  • The MLS can still apply depending on your income.
If your fund does not allow you to suspend your membership you can use your LHC’s “days of absence”, which allows a maximum of 1094 days (three years minus one day) of no hospital cover without affecting your LHC.

Cheap health cover for members

Check whether you qualify to join a restricted membership fund, which are available only to people who, for example, work in the education or defence industry. They often offer good policies at a lower premium than open membership funds, especially if you’re after top cover with no excess.

Family cover

Family cover generally includes your partner and children under a certain age. The age varies from fund to fund – it could be anywhere from 16, 21 or even up to 23. Some policies may include full-time students under 25 or other dependants. Check whether an extra charge applies.

Switching & waiting periods

If you switch to hospital cover that’s considered equivalent or lower than your existing policy (check with your health fund), the waiting period you served on your previous policy will be carried across.



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