1. The new tiers
The biggest change is that the government has created four tiers of health insurance, and health funds must categorise their policies by these tiers:
- Basic – very little if any cover in private hospital
- Bronze – low cover
- Silver – medium cover
- Gold – full or top cover
There are also Basic Plus, Bronze Plus and Silver Plus policies, which cover at least one service more than normal Basic, Bronze or Silver policies.
Your insurer will have moved you from your old policy to a replacement policy, which will fall under one of these tiers.
Items that were covered under your previous policy may now be split across tiers, so the first thing you should do is check if your new policy covers you for what you need.
2. Do you need to upgrade your cover?
As you age, you're more likely to need certain types of treatments and surgeries.
For instance, about 65% of hip and knee replacements carried out in Australia are for people aged over 65.
Older people are also more likely to end up in hospital, with over 65s accounting for more than 40% of day and overnight hospital admissions (yet they're only 15% of the population).
Which tier do you need for these common treatments?
|To be assured of cover for:
|| Silver or Gold
You might find cover for these items in lower-level tiers, but it's not guaranteed. If you go for a lower level, you'd want to keep an eye on the policy over time to make sure it doesn't drop the cover.
CHOICE tip: If you're upgrading your cover, a 12-month waiting period applies for conditions you weren't covered for on your old policy. So if you require surgery, make sure it's scheduled for after you've served the waiting period.
3. Should you downgrade to a policy that doesn't cover pregnancy?
Whether you should downgrade to a policy that doesn't include cover for pregnancy and fertility is not as simple a decision as it seems – even if you're done having kids.
Under the new system, pregnancy and IVF are covered by Gold and some Silver Plus policies – but these tiers are also suited for people over 65 who want to covered for surgery typically needed later in life, such as cataract eye surgery, or hip or knee replacements.
A few health funds offer Silver Plus policies without pregnancy, but before taking one out, make sure:
- it's actually cheaper than the cheapest Gold policies
- there aren't other restrictions on things you do need – for example, many Silver Plus policies do cover hip and knee replacements or rehabilitation in private hospital.
4. Should you take advantage of a new higher excess, and reduce your premiums?
Under the reforms, you can now pay a higher excess than previously (up to $750 per person and $1500 per couple/family) which will reduce your premiums. (An excess is an amount of money you pay towards a hospital visit.)
But if you think you'll need surgery within the next two years, we think you're better off with a policy that has a lower or no excess – you might pay a bit more for the premiums, but you won't be as out of pocket from the hospital stay.
And if this does apply to you, and you don't currently have a policy with low or no excess, you should probably switch as soon as possible, as it'll take 12 months to come into effect.
If you only need day surgery such as cataract eye surgery, look for a policy that doesn't charge you an excess for day surgery.
Note: You pay an excess once per hospital visit. It's usually capped at once (single) or twice (couple and family) per year.
5. Should you drop health insurance altogether and self-fund your health needs?
If you've already got health insurance, we don't recommend self-funding your hospital cover – many insured people already pay thousands of dollars in out-of-pocket costs, so paying hospital costs and the full medical gap could be a very expensive proposition.
Consider also these factors:
- Increasing value for money: Australians aged 60 to 79 use their hospital insurance more than any other age group.
- Higher rebates: When you hit 65, you're entitled to a higher rebate – that's the amount the government pays that helps reduce your premiums. For singles earning up to $90,000 and couples/families earning up to $180,000, you'll go from a 25.1% rebate to a 29.2% rebate. This will increase to 33.4% at 75.
- Partners and families benefit: When one member of a family or a couple is 65, the government rebate applies to the whole family or couples policy.
You could, however, consider dropping your extras cover and funding those services (dental, optical, physio etc.) yourself. It doesn't make sense to have extras cover unless you claim back more than you pay for it each year.
We'll be busy analysing the best health insurance policies over the next couple of months, so if you want to be among the first to know, sign up for updates below.