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What to know before you buy health insurance

An overview of hospital and extras insurance, what it covers, and how it works.

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Last updated: 14 February 2022
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Checked for accuracy by our qualified fact-checkers and verifiers. Find out more about fact-checking at CHOICE.

If you're a permanent resident in Australia and don't have private health insurance, you'll be covered by Medicare, Australia's public healthcare system. For most of us, Medicare pays for 'free or subsidised' access to doctors, specialists, optometrists and treatment and accommodation in public hospitals, plus a few other perks.

But some people choose to get private health insurance. This term covers two types of insurance: hospital insurance and extras insurance.

A lot of people waste good money on one of these insurance types without using it. We don't want you to be one of those people.

Private health insurance can sometimes save you money on taxes. Use our quick quiz to find out if you need health insurance for tax reasons.

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What is hospital cover?

If you're already covered by Medicare, you might be wondering why you should take out private hospital insurance. As with many things, there are arguments for and against.

Reasons to get private hospital insurance

  • For elective surgery (surgery that is non-emergency) such as a knee or hip replacement, you can skip the public hospital waiting list.
  • You can choose your own doctor.
  • You can go to private hospitals (which some people believe have better conditions and service).
  • You can go to a public hospital as a private patient and have a better chance of getting a private room.
  • You can avoid paying the Medicare Levy Surcharge (see more below). This applies if you earn more than $90,000 a year, or $180,000 for couples and families.
  • You can avoid paying the Lifetime Health Cover loading (see more below). This penalty applies if you haven't taken out hospital insurance by the time you're 31 and you decide to get it later in life.

Reasons to NOT get private hospital insurance

  • The public hospital system provides a good service for people who need emergency surgery.
  • For more complex and expensive medical conditions, you'll end up in a public hospital anyway, regardless of whether you have private hospital cover, because public hospitals tend to have a wider range of equipment.
  • The health insurance premium (what you pay for your policy) can cost a lot of money and can be unaffordable for many Australians.
  • You can end up paying a lot more out of your own pocket for doctors' fees (doctors generally charge private patients more than they charge public patients, and private health insurance will likely only cover part of it).

What is extras cover?

The whole idea of paying insurance premiums is to put a cap on how much money comes out of your pocket when something unexpected happens. 

For instance, if you've crashed your car, you pay your $500 excess and the insurer will pay the rest. 

But extras insurance works differently. The insurer's liability is capped, but yours isn't.

For example, if you need to go to the dentist and it costs $350, your extras insurance might pay the first $200 and you'll pay the rest, so you'll have to cover the 'gap' of $150. 

For that reason, extras 'insurance' isn't really insurance at all – it just brings down the costs you'll still have to pay. 

CHOICE tip: Some health funds offer no-gap extras cover for kids, particularly for dental.

Do you need extras cover?

Extras cover (also known as ancillary or general cover) is for services such as dental, glasses, physiotherapy, massage and other allied health services. If you don't use these much, or at all, then having extras cover probably isn't worth it.

Extras cover also won't help you at tax time, the way having private hospital insurance can, as the Medicare Levy Surcharge is only waived for people with hospital cover. The Lifetime Health Cover loading also doesn't apply to extras, so don't sign up for a policy with the hope you'll avoid that.

There are two groups of people who benefit most from extras insurance.

Families

Families pay the same health insurance premium as couples – or double the singles premium – so children are effectively insured for free. 

But beware: parents with children under five receive, on average, less than $100 of benefit for their child per year, whereas children aged between 10 and 14 clock up an average benefit of nearly $400 a year – which could have something to do with the high costs of orthodontic braces. 

People aged 55–79

This group makes the most of their extras cover benefits, compared with other age groups, receiving an average benefit of more than $600 per person per year. 

What is combined cover?

Combined cover is simply hospital and extras insurance combined into one policy. It can be convenient because you only deal with one health fund for both types of insurance, and it can also be useful for health funds because it means they've sold you two insurance policies in one go.

Consider these questions before buying a combined policy.

  • Do you need both hospital and extras insurance?
  • Do you need to get them from the same fund?

Remember: private hospital and extras insurance are separate types of insurance – and a lot of people waste their money on one of these insurance types without actually using it.

CHOICE tip: You can often get a better deal by buying the best value extras and hospital insurance from separate funds, so compare your policy options and shop around.

Do you have ambulance cover?

It can come as a surprise to many people that ambulance expenses are not covered by Medicare. 

Some people will be covered for ambulance by their state government. For everyone else, the options are an ambulance subscription or private health insurance if you don't want to be saddled with an ambulance bill that can easily be in the high hundreds.

Ambulance cover by state

  • Queensland and Tasmania residents are covered by their state government.
  • Northern Territory, South Australia, Victoria and rural Western Australia residents can subscribe to the state ambulance service or buy ambulance insurance through a private health fund – it's sometimes included with hospital cover and sometimes with extras, so be sure to check your cover.
  • In New South Wales, the Australian Capital Territory and metro Western Australia, ambulance cover is included in private hospital insurance and some extras insurance.

CHOICE tip: Check with your health fund to see what kind of ambulance cover you have. Some funds only cover ground transport and exclude air ambulance, for example. Others may only cover emergency ambulance and exclude, say, transfers between hospitals. Read more about ambulance cover.

Waiting periods and switching: what you need to know

If you switch health insurance policies, you may have to wait for a period of time before being eligible to be paid benefits (the money you can claim back) for some treatments or services.

  • For extras, waiting periods vary between policies: it'll usually be two months for most services, 12 months for major dental and orthodontics, and 36 months for hearing aids.
  • For hospital cover, waiting periods for pre-existing conditions and having a baby are generally 12 months.
  • If you switch to hospital cover that's considered the same cover or lower than your existing policy (check with the health fund), the waiting period you served on your previous policy will be carried over.
  • If you upgrade your cover or lower your excess, you'll have to serve a new waiting period for the difference in cover.

Health insurance terms and what they mean

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