Extras health insurance buying guide
What type of cover do you need? And do you need it at all?
What to look for in extras cover
If there's one thing you should take away from reading our health insurance buying guides it's that a lot of people waste good money on insurance they don't use. When it comes to extras (sometimes called ancillary care, or general treatment), there are three common misconceptions:
- You don't need to get extras from the same health fund as your hospital cover. Shop around.
- You don't need to have hospital cover in order to buy extras. The vast majority of private health customers have a combined policy, but that doesn't mean you have to.
- There are no tax implications for having or not having extras cover. Penalties for not getting health insurance only refer to hospital cover, not extras.
- Is my current extras insurance policy right for me?
- What level of extras cover do I need?
- Do I need an expensive policy?
- How much can I expect to claim?
- Extras health insurance tips
Extras cover isn't really insurance, in the traditional sense of buying cover for "just in case". You know you're going to need one or two dental check-ups a year, or perhaps glasses, or a certain number of physio sessions. Extras insurance can help you budget for that, and ideally reduce your out-of-pocket expenses. In other words, the trick is to pay less in premiums than you get back in benefits.
To work out if your extras health insurance is giving you value for money:
- Ask your health fund for three things: a claims statement from the last year, the Standard Information Statement (SIS) for your policy, and (if you have a combined policy) the value of the extras component of your total premium.
- The claims statement tells you how much the insurer paid you back. Compare the total against your premium. If you find your premium is substantially higher than the benefits you receive and you don't anticipate your health needs will change any time soon, consider switching to a less expensive policy or cancelling extras (ancillary) health insurance altogether.
- The SIS sheet will tell you the basic information about what you can claim with your policy. If you skipped a dental check-up last year, or you know you're going to visit the physio more this year, you can work out how much you can get back if you really put the effort in to get value out of the policy.
It all depends on how you use the services covered by extras.
- Do you have ongoing dental problems, get monthly massages, buy a new pair of glasses each year and plan to get braces for your kids? You'll probably benefit from a more expensive comprehensive cover.
- If you're just after the basics – many people only want cover for dental, optical, and physiotherapy – then you should consider a budget or medium policy.
Cheaper policies aren't necessarily worse than the expensive options. You could get cover with the highest benefits limits and all the bells and whistles available, but if you're spending more on premiums than you're claiming, it's still a bad purchase.
Cheaper policies can actually be a better option: the benefits tend to be a bit lower, and the range of services more restricted, but the lower premium give you an easier claims target to hit.
Don't expect your extras policy to cover all of your bills, either. For most categories the average benefit-to-fee ratio is between 50 and 60%, meaning you'll still have out-of-pocket costs.
How much can I expect to claim?
Dental care is the biggest reason most people get extras: more than half of all claims payouts are for this category.
- Annual limits for general dental (basic things like check-ups) range from $200 to unlimited.
- Annual limits for major dental (bridges, crowns and surgical tooth extractions, for example) and endodontic (root canal) range from $300 to unlimited.
- These categories are often combined under a single limit. Individual treatments will also attract item limits, which will constrain the amount you can claim for any one visit to the dentist.
- Read our dental fees shadow shop to see whether your dentist is cheap or expensive.
This is treated differently to other dental services. Orthodontic often comes with item limits, annual limits, and lifetime limits. For example, you might be able to claim:
- 60% (item limit) of your orthodontic bill
- up to $1000 per year (annual limit)
- up to a cap of $2500 over the three-year course of treatment.
These caps apply per person, so if you're thinking about getting braces for all of your kids, the lifetime limit will apply to the individual. Keep in mind that if you're thinking of getting extras to cover the cost of orthodontic, there's typically a 12-month waiting period.
- The typical benefit for optical is $250.
- Some policies will also add extra sublimits for frames, single- or multi-focal lenses and contact lenses, so check with the fund before joining to confirm how much you can claim.
- Most funds will also only cover the cost of the basic lens, not special tinting.
Clinical and natural therapies
- Clinical therapies include physiotherapy, podiatry and psychology. Comprehensive policies must cover all of these.
- Some policies will also cover things like chiropractic, naturopathy, remedial massage and acupuncture. Depending on the insurer's definitions, naturopathy can encompass a range of natural therapies such as Alexander technique, herbal medicine and aromatherapy.
- Benefits for these services are paid per visit. Usually a policy will have a slightly higher benefit for the first visit than subsequent visits. Under psychology, there may be different benefits for a private counselling session and group therapy sessions.
- If you require appliances for physiotherapy or podiatric treatment (e.g. pressure therapy garments or orthotic devices), the health fund may cover these as well if your GP or allied health professional prescribes them.
Pharmaceuticals not listed on the PBS
Extras can cover you for the cost of some prescription medicines that aren't subsidised by the government. Typically these are medicines which are only available with a prescription, and not listed on the Pharmaceutical Benefits Scheme (PBS) schedule.
Common restrictions on this item:
- You typically will have to pay the equivalent PBS copayment (i.e. what you'd have to pay if the medicine was listed on the PBS) before your insurer benefits kick in. In 2017 the PBS copayment is $38.80.
- Some funds won't pay a benefit for oral contraceptives, and some only allow members to claim for travel vaccinations.
- Medicines prescribed as part of inpatient hospital treatment are usually not covered (but they are in hospital cover).
Hearing aids and blood glucose monitors
Comprehensive and some medium cover extras policies offer benefits for some health devices, most commonly hearing aids and blood glucose monitors for diabetics. Benefits are typically for the cost of the appliance and for repairs (although, never forget in many instances you have rights to a repair under the ACL). There are usually service limits: for example, you may only be able claim the cost of a new appliance every three years.
Some health funds will throw in a range of other services, including maternity classes, occupational therapy, gym membership as part of a weight loss program, and courses for giving up smoking. Depending on your state, you might also get the cost of an ambulance subscription covered by your policy.
Annual limits and item limits
Health funds usually advertise the top-line benefit you can receive. "$400 for physiotherapy!" sounds like a great deal, but hidden under that are usually item limits on individual claims. You might only be able to claim $40 per visit, even if your physio charges $80 a session. Not only are you still $40 out of pocket every time you go the the physio, it will take 10 visits before you can actually claim your full annual limit.
These item limits are found in every service covered by extras, so before you go jumping into a product because of its high annual caps, it pays to do some personal accounting and figure out how much you can actually expect to claim.
Look for percentage benefits
Item limits come in two forms: set benefit and percentage benefit. If you have a set benefit, your insurer has listed a specific dollar amount for your item: $40 for a physio visit, for example. If you have a percentage benefit, the insurer picks up an agreed portion of the bill (up to your annual limit), and you pay the rest.
Percentage benefits can be better over the long term. Our research has shown that insurers don't like to increase their set benefit amounts: the policy you buy today will more than likely pay the same amount for a dental check-up in three years time. Meanwhile, your dentist has increased their fees, and you're the one paying more out of pocket. (Your premiums have also increased.) Percentage benefits, by definition, increase as your fees increase, meaning your policy doesn't lose value over time.
A couple of things to watch out for:
- An unfortunately common trick among insurers is to combine the two types of benefit. This might mean the health fund will pay 80% of your physio bill, up to $40. In this example you won't see the full benefit unless the bill is $50. This means that even if you have a cheap provider, you're always going to be at least a little bit out of pocket.
- Percentage benefits for optical are usually a bad deal, unless they're 100%. Because many people only make one optical purchase per year, most policies let you claim the entire annual limit in one go – essentially this is a 100% benefit. Some policies offer 60% on every service, which can be a good deal, but that 60% also applies to glasses, meaning you have to spend more to claim the full annual limit.
Look for funds with provider schemes near you
A number of health funds offer provider schemes or even their own optical or dental centres. The fund will have negotiated a price (usually lower than the normal price) with, for example, the dentist or optical store, and will also pay a higher benefit to you. No-gap cover is sometimes available. Be aware that professional bodies like the Australian Dental Association are opposed to these schemes on the grounds they don't offer continuity of care. There are also reports that these kinds of dental clinics provide medically unnecessary treatments in order to meet targets.
Check for loyalty bonuses
Some health funds pay higher benefits to loyal members. While this is good for you if you've been with them for a long time, it can be a disadvantage for new members since your time with another fund is not counted towards these bonuses. Common bonuses are in orthodontic and major dental benefits, which can increase annually for up to 10 years.