Extras cover is basically a collection of discount vouchers for various treatments: $150 a year for optical treatment, or 60% off your dental bill, and so on. Because of this, it's the one insurance product where you can be certain of getting your money's worth. But it doesn't help consumers that the insurers' business model is to take more in premiums than people claim back in rebates. If you don't want to lose money on extras, you have to choose your cover wisely.
So what are people claiming? Last year alone $4.6 billion worth of refunds were paid out, of which 84% was for four treatment categories: dental, optical, physiotherapy and chiropractic. By far the most popular category is dental, which accounts for just over half of all payouts. On average, you can expect to get about 53% of your fees refunded when you make a claim on extras.
Do I need extras cover?
Not really. There's no tax incentive for getting it, like there is for hospital cover. It's certainly possible to get value out of extras, but you have to make it work for you.
The first thing you need to do before you even start comparing policies is to make a list of your expenses. If you have bad eyesight, you know how much you spend on glasses or contacts in a year. You can estimate the cost of a couple of dental check-ups, and some physio if that's something you need.
Add everything up. Make this number your premium limit. If you choose a policy that costs more than what you're already spending, you run the risk of getting nothing in return but the joy of dealing with an insurer.
Get value with a combo
The best place to find value is in the dental sublimits. Dental is split into four subcategories: general (basics like check-ups and cleaning), major (complex fillings, tooth extractions, etc.), endodontic (root canal) and orthodontic (braces). Sometimes insurers combine all or some of these categories under a single limit.
This can be useful, because you might not need root canal work done every year, so having a standalone endodontic limit sitting there unused year in, year out is just costing you. But if you take the combined approach, your entire dental budget can be allocated to the general and major subcategories in most years, while still having the option of using that limit on endodontic treatment when needed.
Combined limits aren't restricted to just dental care. Insurers use all sorts of combinations, and finding one that works for you can be a great way to have flexibility in your cover. But beware of policies that let you 'save money' by 'choosing just the treatments you need', as these often have quite high premiums for the level of cover you end up getting.
Mind the gap
Health funds often advertise how much you can claim back each year for difference services: $600 for dental, $300 for physio! Let's say you might spend $300 on physio a year. On the face of it, this looks like you'll be able to claim back your whole bill, right?
What insurers don't usually advertise are their individual item limits. While you might be able to claim a lot in a year, you might only be able to claim $30 for a single visit to the physio. That means you'd have to go to the physio ten times a year to claim all you're entitled to. These limits also mean the amount you pay to cover the gap can be more than you thought.
The same thing often happens in dental. Many policies have caps on the amount you can claim on individual items, like oral exams, fluoride treatments, and tooth extractions. These limits might be well below the average cost of the treatments, meaning you have to spend more in order to claim the full benefit.
Other policies are more up-front about the gap. They offer a percentage refund on your individual bill, up to the annual limit. This will work in your favour if your if your dentist is pricier than others, and will mean you're less likely to get "gap shock" when your refund is less than expected.
Things to consider
- Ask yourself: "How much can I expect to claim back with this policy?" If that number is lower than the premium, it's not for you.
- CHOICE recommends different extras insurers than we do for hospital cover. Taking out a combined hospital and extras policy might be the path of least resistance, but it won't save you money. There's no reason not to have one fund for hospital and another for extras, if it means you get a better deal.
- Couples policies don't make sense if you have different medical needs to each other. Look for singles policies that suit you as individuals.
- Don't forget about the waiting periods: you typically can't claim anything in the first two months, and many policies restrict claims for major dental treatments for a year. You might not come out ahead if you're just thinking of getting in, making a big claim, and getting out.
- If you qualify for restricted fund membership, you might be able to get good cover at a low cost.
- The government's private health insurance rebate does applies to extras, and can reduce your premiums by up to 35%.