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Frequently Asked Questions

Private Health Insurance FAQs

Private health insurance can be a confusing topic! Take a look through our frequently asked questions below to gain a more in depth understanding about how it works and make sense of some of the common terms we use when we talk about private health insurance.

Q: Why Private Health Insurance?

In Australia, all permanent residents have access to Medicare, the public health system, ‘for free’, yet almost 11 million people choose to supplement this service by purchasing private health insurance.

There are a number of reasons why people choose to take out private health insurance. For many people it makes sense to avoid having to pay the Medicare Levy Surcharge at the end of the financial year, or they want to get in early so they can avoid paying a Lifetime Health Cover loading when they are older.

Others enjoy the extra peace of mind of knowing that they can get faster access to medical services, or subsidised treatment for services that aren’t covered through the public health system.

Q: What are the main differences between the private and public systems?

While the Australian public health service is one of the best in the world, it does still have some limitations. The main ones are that it can take longer to access than private health services, and you get less choice about who will treat you, when you receive treatment and where you can be treated when you go through the public system.

Private health insurance can circumvent these shortcomings and, depending on your cover, should enable you to have surgery performed with far greater choice in relation to where, when and by whom the surgery is performed.

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Q: What are waiting periods and how do they work?

A waiting period is the time between when you take out a health insurance policy and when the benefits of that policy become available to you and anyone else covered under the policy.

Waiting periods are put in place to prevent people joining a health fund, making a claim straight away and then cancelling their membership. This would drive up the premium costs for everyone.

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Q: What is Hospital Cover?

Hospital Cover pays benefits towards the cost of hospitalisation. This generally includes treatment by your doctor when in hospital as well as the costs of accommodation, theatre fees, intensive/coronary care etc.

Hospital admission costs can range from a few thousand dollars to a several hundred thousand and, providing you have sufficient cover for the procedure you need, your insurer will pay the hospital directly.

Hospital Cover comes in different levels, from basic cover that will meet your obligations when it comes to minimising the Medicare Levy Surcharge and Lifetime Health Cover loading, to top tier cover to give you complete peace of mind. The more basic your level of cover, the more exclusions it might include and the less choice you might have.

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Q: What is Extras Cover?

Extras Cover provides protection for non-hospital health care services that are generally not covered by Medicare. These include: Dental, Optical, Physiotherapy, Chiropractic, Psychology, Speech Therapy, Occupational Therapy and may include a number of other therapies. If you don’t use any of these services, nor expect to use them in the future, then you may want to opt for Hospital Cover only.

In our experience, most people find that Extras Cover is a worthwhile investment but it’s important that your level of Extras Cover is tailored to your specific needs. There is a huge variation between funds when it comes to waiting periods, what you can claim for and how much you will be able to claim back on your Extras policy so comparing is crucial.

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Q: Will I have to pay Lifetime Health Cover loading?

Lifetime Health Cover is a government initiative to encourage people to take out Hospital Cover at a younger age, and to maintain that cover over their lifetime. It penalises taxpayers for taking out cover after the 1st of July following their 31st birthday (or 12 months after migrating to Australia) with a 2% loading for each year that you are over 31 if you decide to take out health insurance in the future.

Joining a health fund and getting Hospital cover before 1 July following your 31st birthday ensures that you receive the lowest rate for as long as you continue to hold Hospital cover.

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Q: What is the Medicare Levy Surcharge?

To encourage people on higher incomes to take out health insurance and reduce pressure on the public health system, the government introduced a tax surcharge known as the Medicare Levy Surcharge.

If your family income is over $180,000 in the financial year 2014/15 or for an individual you are earning over $90,000 per year and you do not have Hospital Cover, you will be required to pay a Medicare Levy Surcharge, on top of the normal 1.5% Medicare Levy that most people pay as part of their taxes.

The Medicare Levy Surcharge works out to be a minimum of $1800 for families and $900 for singles. This can be avoided by taking out Hospital Cover, which in some cases works out to be cheaper than paying the additional tax.

Read More: Link

Q: What is the Australian Government Rebate?

If you are eligible for Medicare you may also be eligible to receive a rebate on your health insurance premium paid for by the Government.
The level of rebate is determined by the age of the oldest member covered by your health insurance policy, and household income. People aged over 65 are eligible for a higher rebate.

The vast majority of people access their rebate by registering for the rebate at the time they take out the insurance and requesting that it is deducted from their premiums upfront. We quote prices assuming that this is your choice.

Alternatively you can choose to claim the rebate, if you are eligible, when you complete your tax return each year.

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Q: What happens if I have a pre-existing condition?

If you have a pre-existing medical condition when you first join a Hospital Cover, you will usually be required to wait 12 months before you can make a claim for treatment for the pre-existing condition. If you have already had Hospital Cover for 12 months you can switch to another fund on an equivalent or lesser cover without serving new waiting periods.

A pre-existing condition is one that occurred before you first joined a health fund or upgraded your level of cover. For a condition to be defined as pre-existing you had to have had symptoms in the 6 months prior to first joining cover or upgrading your policy.

The usual waiting period for claiming for pre-existing conditions is 12 months.

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How does Private Insurance give me choice?

When you are a public patient in the public system you will usually be directed to a particular hospital (when the hospitals workload permits) and allocated a doctor or a series of doctors by a hospital administrator. The public system doesn’t necessarily give you choice about who treats you or about when and where you are treated.

Private Health Insurance allows you to choose the doctor and the hospital. Your GP will recommend a specialist/s who they believe is best qualified to help. If an admission to hospital is required, the specialist will generally recommend a couple of hospitals in which they work for you to choose from. If you’re not happy with the specialist or the hospital they recommend, you can choose a different Doctor.

In cases of emergency, there may not be time to make these choices.

Hospital cover

Hospital cover pays benefit towards the cost of hospitalization. This includes treatment by your doctor when in hospital and the costs of accommodation and theatre fees. A ‘minor’ operation and short hospital admission will cost several thousand dollars. 1 out of every 3 hospitalisations will cost over $10,000. In rare cases the cost of hospitalization can be $200,000+ (see privatehealthcareaustralia.org.au for details). So long as you are covered for the procedure, the insurer will pay benefits towards the hospital accommodation and contribute to the charges by your doctor.

Health funds offer various combinations of hospital cover. Full cover for accommodation and in-hospital medical charges obviously commands higher premiums, but you can reduce your premiums by agreeing not to be fully covered for some conditions or taking an excess, which is payable when you go to hospital.

Unless you are expecting to be in hospital (for example, you are planning to have children), Choosewell will recommend that you take cover with an excess because it will most likely save you money in the long term. It’s for the same reason you probably have an excess on your car or home insurance. What’s more, some of the covers we offer waive the excess when dependent children (under 21) are admitted to hospital.

The most basic covers often have lots of exclusions but meet the objective of avoiding or minimising the Medicare Levy Surcharge and Lifetime Health Cover. A more comprehensive cover is available from mid covers while top covers provide complete peace of mind.

To gain access to Private Hospitals, avoid/minimise the Medicare Levy Surcharge and Lifetime Health Cover, you’ll need to take out mid-tip hospital cover.

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Extras cover

Extras cover provides protection for non-hospital health care services that are generally not covered by Medicare. These include: Dental, Optical, Physiotherapy, Chiropractic, Psychology, Speech Therapy, Occupational Therapy and several other therapies. If you don’t use any of these services, nor expect to use them in the future, then you may want to only take hospital cover. We’ve found that unless; your mum or uncle is a dentist, and treats for free, + you have 20:20 vision + a perfectly straight back etc , then Extras cover is a worthwhile investment. To maximise the benefits you receive for your extras you’ll need to take a close look at how the benefits offered by the provider correspond to the services that you use. Some insurers will be very generous at their preferred providers but only offer small rebates at other providers. Others, will offer a consistent % based on your level of cover -50% for a ‘silver’ level cover up to 80% for a platinum cover.

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Combined cover – Hospital and Extras

More than 80% of people, who buy hospital cover also buy extras cover. Some funds offer these as separate products, others bundle them into a package. If the products are separate you can mix and match easily.

Waiting periods

A waiting period is the time between taking out a health insurance policy, and when the benefits of that policy is available to you and others covered under the policy.

The government has set portability rules to ensure that members can transfer from one fund to another without penalty.

You will not have to serve additional waiting periods if you transfer from one health fund to another with the same or a lower level of benefits, as any waiting periods you have already served are credited to you. Your new health fund may require waiting periods to be served before you are eligible for any new or higher benefits on your new health insurance policy.

For people new to hospital cover, or upgrading from a lower level of cover, waiting periods will typically be as follows:

  • 12 months for pre-existing conditions
  • 12 months for obstetrics
  • 2 months for psychiatric care, rehabilitation or palliative care (whether or not these are pre-existing conditions)
  • 2 months in all other circumstances

While there are no Government regulations covering waiting periods for benefits under extras cover, the funds will generally have waiting periods of between 2 & 12 months. Again these will not apply to members whom switch to a policy with equivalent or lower benefits with another fund. In addition, funds are often willing to waive some waiting periods on extras to attract new members. Ask us if we can arrange for your Extras cover waiting periods to be waived.

Lifetime Health Cover

Lifetime Health Cover is a Government initiative to encourage people to take out hospital cover at a younger age, and to maintain that cover over their lifetime. It penalizes people for taking out cover at any time over the age of 31 (or 12 months after migrating to Australia) with a 2% loading for each year that you are over 30 if you decide to take out health insurance in the future.

For example, someone who takes out cover aged 44 will pay a 28% loading for their insurance. While having Extras cover is not required to avoid the loading. If a loading is payable, it applies to the hospital cover – it does not apply to the cost of extras.

Joining a health fund and getting Hospital Cover before 1 July following your 30th birthday ensures that you receive the lowest rate for as long as you continue to hold Hospital Cover.

Switching health funds will not affect your Lifetime Health Cover entitlements so long as the health insurance transfer includes Hospital Cover.

The Medicare Levy Surcharge

To encourage people on higher incomes to take out health insurance, the government introduced a tax surcharge.

If your family income is over $176,000 in financial year 2014/15 or for an individual you are earning over $88,000 p/a and you do not have Hospital Cover, you will be required to pay an additional Medicare Levy Surcharge, on top of the 1.5% Medicare Levy that most people pay as part of their taxes.

Income threshholds
Tier 0 Tier 1 Tier 2 Tier 3
Singles $90,000 or less $90,001 – $105,000 $105,001 – $140,000 $140,001 or more
Families $180,000 or less $180,001 – $210,000 $210,001 – $280,000 $280,001 or more
Medicare levy surcharge rate 0% 1% 1.25% 1.5%

The Medicare Levy Surcharge works out to be a minimum of $1540 for families and $770 for singles. This can be avoided by taking out Hospital Cover. In some cases the Hospital cover can be cheaper than the additional tax.

Federal Government Rebate

If you are eligible for Medicare you may also be eligible to receive a rebate on your health insurance premium paid for by the Government. People aged over 65 are eligible for a higher rebate.

The level of rebate is determined by the age of the oldest member covered by the health insurance policy, and household income. Please refer to the above table.

The vast majority of people access their rebate by registering for the rebate at the time they take out the insurance and requesting that it is deducted from their premiums upfront. We quote prices assuming that this is your choice.

Alternatively you can choose to claim the rebate, if you are eligible, when you complete your tax return each year.

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