A guide to family health insurance

Co-author: Ellie McLachlan

If you want to take out health insurance for your family, choosing the right policy for you and your loved ones is important.

However, finding the right policy for a family with a child (or several) can be quite a different process compared to finding the right policy for an individual. So here’s an overview of what kinds of health insurance are available to families in Australia, and what you might want to look for in a family health insurance policy.

What types of health insurance policies are available to families?

Family health insurance policies are designed to provide financial cover for you, your partner and your children (generally up until the age of 21, or 25 if the child is a full-time student) for medical appointments or care outside of the public Medicare system. These policies generally offer one of the following three types of cover:

Family hospital cover

Family hospital policies can provide cover for treatment as a private patient in either a public or private hospital. They can help cover some of your costs for things like in-hospital treatment by a doctor of your choice, accommodation to stay in a ward and theatre fees for surgery.

Health insurance policies that include hospital cover are sorted into four tiers: Gold, Silver, Bronze and Basic. The tier of cover you choose for your family will partially determine how much you pay in premiums, and which hospital treatments and procedures you will be covered for.

Family extras cover

Extras cover (also known as ancillary or general treatment cover) can provide cover for all or some of the costs of non-hospital health services such as dental and optical. Extras policies fall into one of three levels of cover: comprehensive or top, medium and basic. Exact coverage levels will vary between different insurers, but as a general rule, comprehensive extras policies will offer a more extensive range of services and higher benefits than medium or basic policies.

Depending on your circumstances, extras benefits that may be worth considering for your family could include:

Bear in mind that not all of these treatments will be available under every extras policy, so it could be worth checking with your insurer or reading the Product Disclosure Statement (PDS) to check if a policy will meet your family’s needs.

Combined family hospital & extras cover

If you want to take out both hospital and extras cover for your family, you can do so through a combined policy. Some insurers may allow you to mix and match different hospital and extras policies to help meet your family’s needs, meaning you could potentially take out a combined Gold hospital and medium extras policy, for example.

What family health insurance policy should I get?

Family health insurance policies are designed to provide cover for families of all types and sizes. One of the more significant factors you may want to take into account is the age and lifestyle of your family members, as well as their medical history. Does anyone in your family have a chronic condition which may predispose them to certain illnesses or injuries?

Another thing to keep in mind is you and your partner’s plans for the future. If you are a growing family and are either thinking of, or have decided to have another child, then purchasing or upgrading to a hospital policy that includes pregnancy cover, or an extras policy that covers ante and/or postnatal treatment may be worth considering. It’s worth noting that there’s usually a waiting period of 12 months for pregnancy-related care, so if you’re planning on having a child you may want to take this into account. Gold-tier hospital policies are the only health insurance policies legally required to offer pregnancy cover by default, however some Silver or Silver Plus policies may also offer it.

You may also want to consider what kind of extras cover, if any, would be appropriate for your family. Looking at cover suited to a more established family, auxiliary health services such as general dental, speech therapy or podiatry may be covered depending on the policy.

If your kids are older (i.e. teenagers or young adults) but still covered by your policy, you may want to weigh up whether a different level of extras cover could be suited to your situation, as their medical needs may change over time. For example, at some point they may require prescription glasses, physiotherapy or orthodontic work.

family health insurance - orthodontic

Source: Serhii Bobyk (Shutterstock)

What does family health insurance cost?

The premium you pay for family health insurance will vary based on a number of factors, including:

  • The level of cover you decide to take out
  • The health fund you choose and the specific policy you acquire
  • Whether you or your partner have ever held health insurance – if not, you may have to pay Lifetime Health Cover Loading (LHC) on top of your premiums, depending on your age

Canstar’s research found that the average weekly premium for families with hospital and extras cover after the Australian Government Private Health Insurance Rebate of 25.059% (the base tier of the rebate for families under 65) was $86.17 at the time of writing.

However, your weekly premium may be reduced if your family qualifies for the Federal Government’s means-tested Private Health Insurance Rebate, which is a percentage reduction for eligible policyholders. The table below shows the different rebate rates applicable for families of varying incomes from 1 April 2019 to 31 March 2021.

Private health insurance rebate levels
Singles

Families

<$90,000

<$180,000

$90,001-$105,000

$180,001-$210,000

$105,001-$140,000

$210,001-$280,000

>$140,001

>$280,001

Age Base Tier Tier 1 Tier 2 Tier 3
< 65 25.059% 16.706% 8.352% 0%
65-69 29.236% 20.883% 12.529% 0%
70+ 33.413% 25.059% 16.706% 0%

Source: ATO

Taking out an appropriate level of private hospital cover may also help you avoid having to pay the Medicare Levy Surcharge, which the Australian Taxation Office (ATO) states is calculated at a rate of 1% to 1.5% of your income (for those earning above a certain amount each year). This surcharge is separate to the standard Medicare Levy of 2% paid by most Australian taxpayers, according to the ATO.

In 2020, these were the average annual premiums for hospital and extras policies during various life stages under a family policy:

Average annual family hospital & extras insurance premiums by lifestage

Life stage

Minimum hospital cover requirements

NSW

VIC QLD SA WA TAS

NT

Young (<36 yrs)

None $4,489 $4,599 $4,576 $4,426 $4,185 $4,424 $3,692

Established (36 – 59 yrs)

Heart & vascular system $4,927 $5,075 $5,049 $4,872 $4,632 $4,859 $4,179

Mature (60+ yrs)

Heart & vascular system

joint replacements

$5,342 $5,484 $5,459 $5,272 $5,077 $5,247 $4,589

Obstetrics (any age)

Pregnancy & birth $5,393 $5,502 $5,494 $5,345 $5,168 $5,284 $4,692
Source: www.canstar.com.au – 6/08/2020. The Australian Government Private Health Insurance Rebate, Base tier for under 65s, of 25.059% has been applied to premiums. All calculations exclude OSHC, Visitor and Corporate policies.

How long can my kids stay on my family health insurance policy?

Until your children turn 21, they are typically considered dependents and automatically covered under most family health insurance policies at no extra cost. Once they turn 21, they will generally only remain covered if they are a full-time student.

If your child is no longer eligible for automatic cover under your health insurance policy, you may be able to keep them on it for a while longer, in return for a greater insurance premium. From the age of 25 onward, regardless of whether they’re a student or not, your children will most likely be considered independent and unable to be covered under your health insurance policy.

What are some possible benefits of family health insurance?

Private health insurance may be a worthwhile investment for those looking for greater peace of mind, choice and flexibility when it comes to their family’s health and wellbeing.

Some of the benefits of taking out a family health insurance policy may include:

Claiming money back on health services not covered by Medicare

A key benefit of private health insurance is that you will generally be able to get money back on health services that are not covered or only partially covered by Medicare. Without private health insurance, accessing health services such as dental, optical, and physiotherapy can be more expensive, potentially putting it out of reach for some families. However, it is important to compare the total ongoing costs of having health insurance (e.g. paying premiums) with the potential benefits your family may receive from it.

While taking out health insurance may benefit your family in a number of ways, it is worth bearing in mind that health insurance is ultimately optional. Whether you decide health insurance is worth having will ultimately depend on factors including your family’s medical needs and financial circumstances.

It is also important to remember that all Australians have access to the public health system, which can provide subsidised medical treatment to you and your family, as well as possibly allowing you to access some services (such as GP visits) for free, depending on your circumstances.

Not having to pay the Medicare Levy Surcharge

According to the ATO, Australian families who earn more than $180,000 a year and don’t have private hospital cover may have to pay the Medicare Levy Surcharge (MLS). At the time of writing, the MLS ranges from 1-1.5% of your family’s taxable income depending on how much your family makes. The MLS is charged on top of the 2% Medicare Levy. The table below displays the income thresholds and rates for the MLS at the time of writing.

Base tier

Tier 1 Tier 2

Tier 3

Single threshold

$90,000 or less $90,001 – $105,000 $105,001 – $140,000 $140,001 or more

Family threshold

$180,000 or less $180,001 – $210,000 $210,001 – $280,000 $280,001 or more

Medicare levy surcharge

0% 1% 1.25% 1.50%

Source: ATO

Skipping public waiting lists

Having private health insurance may reduce the amount of time you and your family spend waiting to have elective surgeries. According to the government’s Australian Institute of Health and Welfare, the median wait time for elective surgeries in public hospitals in 2018-19 was 41 days. Elective surgery can include anything from ligament repairs to knee replacements or tonsillectomies (surgery to remove the tonsils). The Private Health Insurance Ombudsman (PHIO) warns that waiting lists may still apply in public hospitals, even if you are a private patient. However, having private health may help you reduce or avoid these waiting periods.

Choice of doctor or surgeon

The PHIO advises that private hospital insurance gives you the option of selecting your preferred doctor or surgeon to perform surgery or provide treatment when needed, even in a public hospital.

Private hospital rooms

Depending on the specifics of your policy, you and your family members may be able to request a private room when admitted to hospital, subject to availability. However, it may be prudent to check what your policy covers before choosing a private room over a shared one, as not all hospital policies will cover the full cost of a private room.

family health insurance - private room

Source: Rob Byron (Shutterstock)

What are some of the potential downsides of taking out health insurance?

As with any form of insurance, health insurance can offer a number of benefits to families but it’s not without its drawbacks. Here are some of the potentially negative aspects of health insurance that you may want to consider.

The cost

Private health insurance can be expensive, especially if it’s for a family rather than a single person. A family could pay nearly six thousand dollars a year in health insurance premiums, and potentially not need to claim any benefits, meaning you could be paying more for peace of mind than you are for actual medical services.

You and your family may want to consider whether this peace of mind is worth the cost of health insurance, especially considering that health insurance premiums usually increase by around 4% every year.

That being said, a family may be more likely to claim than an individual simply because there are more people who can get sick or injured.

Exclusions

If you do decide to take out health insurance, you may find that you can’t afford a policy that offers the cover you want. Alternatively, in the event of injury or illness, you may find that your health insurance doesn’t cover you for the treatment or medical assistance you require.

Waiting periods

There will usually be a waiting period ranging from several months to even over a year that you will need to serve after you first take out health insurance. While there are some circumstances that allow you to waive or skip these waiting periods, you may find that you are unable to avoid them.

Out-of-pocket costs

Even with a comprehensive health insurance policy in place, a hospital stay could leave you with significant out-of-pocket costs in the form of your policy excess, and potentially a gap payment as well. While you may have paid more for the same treatment without health insurance, it may be worth considering if the ongoing cost of your health insurance premiums outweighs the amount you may save in out-of-pocket costs if injury or illness strikes.

This article was reviewed by our Sub-editor Tom Letts and Finance Editor Sean Callery before it was published, as part of our fact-checking process.

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