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 health insurance they don't use. Extras insurance (sometimes called ancillary care or general treatment), which covers things like dental work, glasses or physio, is often misunderstood.
Need to know
- You don't need to get extras from the same insurer as your hospital cover. You can even buy extras on its own.
- A cheaper policy is easy to get value from. Only consider top-shelf cover to claim expensive things like orthodontic or hearing aids.
- You can expect to get 50-60% of the fee back from your health fund. Don't expect it to cover your whole bill.
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 Private Health Information Statement (PHIS) for your policy, and (if you have a combined policy) the value of the extras component of your total premium.
The claims statement lists all the services you claimed in the last year: how much they cost and how much your insurer refunded you. Compare the refund total against your premium. If you find your premium is 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 cover altogether.
The PHIS 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.
Don't expect your extras policy to cover all of your bills. In 2018 the average insurer rebate was 54% of the fee. That figure has increased over recent years, but it does mean you'll likely have out-of-pocket costs no matter how good your policy.
Budget 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.
Comprehensive top-shelf policies are generally most suitable for people with expensive claims they want to offset, such as orthodontic or hearing aids. For those services you'll be lucky to get back a third of the fee even with the best cover, so you'll still have to make claims for other things to get value.
Dental care is the biggest reason most people get extras: almost half of all claims are in this category. Dental is split into four categories:
- general dental (basic things like check-ups)
- major dental (crowns or tooth extractions)
- endodontic (root canal)
- orthodontic (braces)
Annual limits for general dental range from $200 to unlimited. Annual limits for major dental and endodontic range from $300 to unlimited. These three categories are sometimes combined under a single limit, while orthodontic is usually treated separately (see below). Individual treatments will also attract item limits, which will constrain the amount you can claim for any one visit to the dentist.
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 (lifetime limit)
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. A lot of funds offer orthodontic benefits that increase over time, so that you can't claim the full benefit unless you've been a loyal customer for several years.
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 policies will cover 100% of the bill up to your annual limit, although some will only contribute a percentage, which will leave you out of pocket. Most funds will also only cover the cost of the normal lens, not special tinting.
Clinical therapies include physiotherapy, podiatry and psychology. 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. You typically cannot claim for sessions covered by a Mental Health Care Plan, even if your provider charges you a gap. However, if you need more sessions beyond the 10 per year covered by Medicare, your extras can cover some or all of the cost.
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.
Since April 2019 a range of natural therapies have been excluded from extras cover where there is no clear scientific evidence of their efficacy. These include yoga, Pilates, homeopathy and aromatherapy, among others.
If you want cover for yoga or Pilates, look for a policy that offers discounts for gym memberships or covers physiotherapy classes for Pilates-type exercises. Treatments such as remedial massage, acupuncture and Chinese herbal medicine are still covered.
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.
You typically will have to pay the equivalent PBS copayment (ie what you'd have to pay if the medicine was listed on the PBS) before your insurer benefits kick in. In 2019 the PBS copayment is $40.30 ($6.50 for concession card holders).
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
Some 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.
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 such as 60% (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 premium has gone up, your dentist has increased their fees, and you're the one paying more out of pocket. Percentage benefits, by definition, increase as your fees increase, meaning your policy doesn't lose value over time.
One common trick 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 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.
Preferred provider schemes
A number of health funds run preferred provider schemes, where you can get higher rebates by choosing to use certain providers. 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. Some large funds like Bupa and HCF operate their own dental clinics where you can get regular checkups fully covered by the insurer.
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.