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4 in 5 Aussies bamboozled by private health insurance lingo

5 min read
15 Jun 2016

Private health insurance terminology can leave many people baffled and confused. From sub-limits to community rating, and co-payment to gap cover, this type of lingo has 4 in 5 Aussies scratching their head!

Through our independent survey, we asked 1,200 Australian adults across the country if they understood 12 common terms identified in private health insurance policies. The results were pretty worrying, to say the least.

It was alarming to see that the majority of Australians didn’t clearly understand most of the common health insurance terms. With average private health premiums surging 25% percent in the past four years, it’s incredibly important that the industry demystifies these terms as they can impact which health insurance policy is right for you. Ultimately, knowledge is definitely power.

Health insurance terms popularity in a chart

One thing is clear: confusion surrounds health insurance. It’s vital now more than ever that Aussies get their facts straight!

According to our survey data, all 12 of the common health insurance terms had Australians scratching their heads to varying degrees. Of all the terms listed; ‘community rating,’ ‘informed financial consent,’ and ‘sub-limits’ seemed to baffle policyholders the most.

Community rating (84.0% of Aussies confused)

Health insurance is ‘community rated,’ which means a health insurer must sell you a policy at the same price as everybody else, no matter how likely you are to claim. This is important – especially for the older generations – as it means they are not penalised financially for having pre-existing medical conditions.

What it means: a health insurer must sell you a policy at the same price as everybody else; no matter how likely you are to claim.

Informed financial consent (73.4% confused)

When it comes to ‘informed financial consent’ it’s a common misconception for consumers to think once they have health insurance, all of their health-related expenses will be covered.  Unfortunately, it depends on the policy, their level of cover and their choice of medical practitioner.

What it means: policyholders have a right to demand all cost information relevant to their upcoming health procedure, including fees, co-payments and likely out-of-pocket expenses (gaps).

Sub-limits (73.4% confused)

Australians should look out for policies that offer a combined annual limit for all treatments, as opposed to separate sub-limits for individual treatments, as they can offer much better value for policyholders.

What it means: The maximum benefit payable from your health fund for a particular health treatment within a 12 month period.

The following terms caused all sorts of confusion with more than half of those surveyed saying they didn’t fully understand what they meant or how it affected them.  ‘Benefit limitation periods’ and ‘ancillary services’ seem to catch out the younger generation the most, with 76 per cent of 18-34 year olds saying they didn’t fully understand these terms. However, it was lifetime health cover and the student dependents/young adult dependents which had the older generation (55+) most confused.

Benefit limitation period (61.0% of Aussies confused)

What it means:  you are only entitled to restricted benefits for a particular condition or treatment for a set period of time.

Ancillary services (56.6% confused)

What it means:  another term for extras cover or general treatment. It’s the coverage you get for out-of-hospital medical care such as dental treatment, optometry, physiotherapy and more.

Lifetime Health Cover (54.2% confused)

What it means: LHC loading is an initiative designed by the Government to encourage people to take out private hospital cover earlier in life… and penalise those who fail to do so. If you don’t take out cover by your 31st birthday, your monthly health insurance premiums will cost more if you eventually take out cover later on. You can read more about it here.

Student dependent / young adult dependents (50.8% confused)

What it means: dependants (typically between 21 and 24 years of age) may be covered under their parent’s health insurance policy in exchange for a higher premium.

‘Private health insurance rebate’, ‘Medicare Levy Surcharge’ and ‘excess or co-payment’ still caused some confusion.  Some 40 per cent of Australians said they didn’t fully understand the meaning and their implications, but luckily more understood the lingo than didn’t.

Private health insurance rebate (40.1%)

What it means: most Australians with private health insurance receive a rebate from the Government to help make their premiums more affordable.

Medicare Levy Surcharge (41%)

What it means: it is an extra tax levied on higher income earners (singles earning $90k + and couples earning $180k) who don’t hold private hospital cover. You can watch our helpful explanation video here.

Excess or co-payment (41.3%)

What it means: it is the amount you agree to pay for a hospital admission (which reduces your premium).

Of all the terms listed, ‘waiting period’ and ‘gap cover’ came out top as the easiest private health insurance terms for Australians to wrap their heads around. Some 84 per cent and 67 per cent respectively said they were completely clear about what the terms meant and how both affected them.  This knowledge also rose with age, meaning by the time they hit retirement age (65+) the majority of Australians are clued up. The older you get, the wiser you become it seems!

Gap cover (34.6%)

Gap fees can largely be avoided or reduced by using doctors that have gap cover agreements with your health fund, so it’s important that people do their research before committing to a medical procedure.

What it means: it is the amount you need to pay when your treatment costs are higher than Medicare and your cover allows.

Waiting period (15.3%)

New members to health funds have to serve ‘waiting periods’ on benefits before they’re able to claim. If you’re switching policies, then you don’t have to re-serve waiting periods if the new policy offers the same or a lower level of cover.

What it means: the amount of time you will have to wait before you can claim on your private health insurance policy.

If you feel like you have a better understanding of health insurance in general why not use our health insurance comparison tool and see if you can find a better deal. If you are still feeling confused talk to one of our health insurance experts on 13 32 32.

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