What Do I Need To Know About Health Insurance?

If you feel like your understanding of private health cover is less than comprehensive, read the CANSTAR Guide to health insurance.

As with many other insurance products, health insurance isn’t mandatory unless you are an overseas visitor coming here to work or study. For the average Aussie, if you can afford the premiums (as many Australians can’t) then it’s definitely not a bad idea to put a policy in place, as nearly half of Australians have. This will allow you to avoid the pitfalls of Australia’s public healthcare system and get all the benefits of private cover.

 

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While health insurance may be one of the better insurance products to have, it’s also one of the knottier when it comes to fully understanding it. It has a lot of its own complicated terminology, leaving many asking, “What do I need to know about health insurance?” With that in mind, CANSTAR has put together a guide to what to know about health insurance.

What is health insurance?

Private health insurance is an insurance product that covers you for costs you may incur as a result of sickness, injury, or chronic health problems.

There are two main types of private health insurance policies: hospital cover, and general treatment (ancillary cover or extras cover). You can choose to hold one or the other, or both through a combined package policy.

Hospital cover includes benefits you can claim for the cost of:

  • Hospital bills
  • The cost of medical treatment
  • Ambulance expenses

Extras cover may – depending on your choice of policy – include benefits you can claim for the cost of:

  • Dental
  • Optical
  • Chiropractic
  • Physiotherapy

You can choose to include various extras in your policy based on what you suspect you may need cover for in the future, but if you’re unsure of what extras you might need, have a look at what kind of extras claims Australians are making the most.

Here’s a more in-depth explanation of the ins and outs of health insurance, and how to choose a health insurance policy.

 

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Why do I need health insurance?

Do you need health insurance? The short answer is that no, the average Australian doesn’t need health insurance. However as we mentioned, there’s a number of things that make it an incredibly good idea to have a policy in place, especially for those planning a family or expecting to need elective surgery in the future.

If you’re an overseas visitor coming to Australia to work or study, health insurance is compulsory – you have to have health insurance.

Financial incentives to take out private health cover

Some of these reasons are financial. For example, if you earn over $90,000 p.a. and don’t have private hospital cover, you’ll have to pay the Medicare Levy Surcharge, which is at least 1% of your income, and up to 1.5%.

The second financial penalty you might attract by not having private hospital cover is Lifetime Health Cover loading. This initiative means that if you don’t take out private hospital cover (extras cover isn’t good enough) before your 30th birthday, you’ll pay at least 2% extra on your premiums when you do end up taking out cover.

The loading increases by a further 2% for every year you remain without cover, meaning that if you decide to finally take out cover at the age of say, 40, you’ll be paying 20% more for health insurance than you would be if you’d taken out the very same policy at the age of 29.

With the above in mind, though, it’s important to note that obtaining a basic private health insurance policy purely for tax benefits isn’t necessarily a good move. Make sure you shop around for health insurance and choose a policy that will genuinely benefit you.

The ultimate financial incentive for taking out private health insurance though is the fact that most specialist medical care and treatment is expensive! Without cover, specialist care and treatments that are not covered by Medicare and elective surgeries in the private system would be paid 100% out of your pocket, which could cost thousands of dollars. However, health insurance redirects those costs to the insurer – sounds good, right?

Other incentives to take out private health cover

Private health insurance offers a number of benefits that extend beyond your bank account, including:

  • Shorter wait times for most treatments and surgeries
  • A private room as opposed to a shared one (subject to room availability)
  • The ability to choose your obstetrician doctor when giving birth or choose your surgeon when undergoing surgery
  • Extras cover can help with the cost of medical and health-related costs such as prescription glasses and sunglasses, dentist check-ups and treatment, and even sometimes subsidised gym memberships

What does health insurance cost?

As mentioned previously, health insurance can come in different shapes and sizes based on what kind of policy you take out and what extras you need. That being said, we can provide you with a rough guide to how much you can expect to pay for health insurance on average.

Health insurance premiums: The cost of a policy

CANSTAR has calculated the average premiums across the health policies we assessed for the most recent star ratings for health insurance, based on a combined Hospital and Extras policy, as follows:

Health Insurance Premiums – Hospital and Extras Packages
NSW NT QLD SA TAS VIC WA
Young Singles – Female  $1,818  $1,313  $1,831  $1,758  $1,792  $1,866  $1,737
Young Singles – Male  $1,818  $1,313  $1,831  $1,758  $1,792  $1,866  $1,737
Young Couples – Non Obstetrics  $3,673  $2,689  $3,699  $3,573  $3,618  $3,779  $3,479
Young Single Parents – Non Obstetrics  $3,340  $2,502  $3,312  $3,179  $3,278  $3,384  $3,358
Young Family – Non Obstetrics  $3,813  $2,871  $3,874  $3,739  $3,780  $3,962  $3,700
Couples and Families – With Obstetrics  $4,318  $3,271  $4,450  $4,235  $4,277  $4,480  $4,011
Established Singles – Female  $1,992  $  1,479  $2,048  $1,960  $1,998  $2,063  $1,970
Established Singles – Male  $1,992  $1,479  $2,048  $1,960  $1,998  $2,063  $1,970
Established Couples  $4,000  $3,004  $4,108  $3,944  $4,006  $4,156  $3,921
Established Single Parent  $3,513  $2,657  $3,553  $3,369  $3,476  $3,600  $3,554
Established Families  $3,984  $3,034  $4,127  $3,924  $3,961  $4,173  $3,905
Mature Singles  $2,128  $1,601  $2,174  $2,137  $2,159  $2,176  $2,169
Mature Couples  $4,278  $3,265  $4,374  $4,307  $4,338  $4,387  $4,338

Source: Based on packaged cover policies considered for 2016 CANSTAR Health Insurance Star Ratings. Premiums include Base Tier Australian Government Rebate of 26.791%. “Mature” profile only includes products that include cover for cardiac and hip/knee replacements. “Established” profile only includes products that include cover for cardiac.

For a more detailed explanation of the costs of health insurance, along with detailed breakdowns of the costs of different health insurance policies, read this article.

It’s important to note that the cost of private health insurance is frequently on the rise, with premiums increasingly every year or so to the tune of roughly 5%. This is something you should definitely consider before taking out a health insurance policy. It’s also worth considering the value offered by any Extras policy you’re considering taking out, or your out-of-pocket expenses may end up exceeding the value of your policy.

But at the end of the day, you should know that despite constantly rising premiums, a vast majority of insurance premiums come back to policy holders in the form of benefits claimed on medical care. There is currently only a 5.23% margin between inflows and outflows.

Health insurance excess: The cost of a claim

As with most insurance products, health insurance policies have an excess attached to them that you have to pay in order to make a claim. When you take out your policy you can usually adjust the size of your excess; a larger excess means smaller premiums, and a smaller excess means larger premiums. Your decision should generally be based on what you can afford to pay in premiums on a regular basis; there’s no point in going with a small excess if it inflates your premiums beyond affordability.

For more on health insurance excesses, read this article.

How do I make a health insurance claim?

Actually making a claim on your insurance can be easy or tricky depending on which health fund you are with and what your policy covers, even though you take out insurance with the assumption that a claim (or several) will be made at some point. Here’s what you need to know when you need to make a health insurance claim.

The process of making a claim

Depending on your individual circumstances, making a claim on your health insurances can either be easy as cake, or an incredibly frustrating process.

A health insurance claim can be made incredibly easy by a service called HICAPS. This allows a health service provider such as a dentist or a GP to process your private health insurance and/or Medicare for you in real time, on the spot, almost instantly. Members of most private health funds can use it, and most health service providers offer the use of HICAPS.

If for some reason you can’t make use of HICAPS, you’ll have to make your insurance claim manually. This can be done through your insurer’s mobile app, website (the difficulty of this varies by insurer), or the old-fashioned way by filling out a claim form and mailing it to your insurer (uniformly awful).

Thankfully, in some situations such as a hospital stay, you may not need to make a claim manually. The hospital or your specialist may send their bills straight to your insurer, meaning that no effort is required on your part unless there’s an outstanding gap amount that you need to pay.

Be aware of benefit limitation periods

Even if you have a health insurance policy that covers you for a certain surgery or condition, you may not be fully covered for said surgery or condition just yet. It’s due to something called a benefit limitation period, which is like a waiting period. It is essentially a period of time after you take out your policy in which the benefit you can receive for nominated procedures is either reduced or eliminated.

Read this article for more details about the implications of benefit limitation periods.

If your insurer disputes your claim, you can dispute right back

If your insurer denies your claim or only pays a limited amount for some reason, you don’t have to roll over and accept it if you feel that the claim is legitimate. The Private Health Insurance Ombudsman provides a way for private health insurance holders to resolve disputes with their insurer. For more information about the Private Health Insurance Ombudsman and how to make a complaint, read this article.

If you’re considering taking out private health insurance, why not start your search using CANSTAR’s online health insurance comparison tool?

 

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