Top tips for choosing private health insurance

There’s no one-size-fits-all product when it comes to private health insurance, so it’s essential to find a policy that includes the medical services you’ll use or think you might need. Here are a few things to consider when choosing health insurance.

Hospital cover

With the introduction of hospital insurance tiers, Australia‘s private health insurance reforms made it easier to understand the inclusions and exclusions of your private hospital insurance policy. The lowest level of hospital cover available is called Basic cover. While this may be the cheapest, keep in mind that it only covers a few services, typically on a restricted basis.

Gold and Silver products are more comprehensive private hospital cover options that you could consider if you want peace of mind knowing you‘ll be covered for a broader range of medical treatments as a private patient when you are admitted to hospital.

Extras cover

You may also like to consider the level of extras cover (sometimes called ancillary or general treatment cover) you need. While extras can be beneficial if you use them, you could be spending more than you need to if you’re paying for services you don’t use. It might be worth making a list of the health services you think would be the most beneficial to you (e.g. dental check-ups, physiotherapy consultations, orthodontics) and the services you don’t think you’ll need. Then, look for a policy that includes the services you will use, and excludes most (if not all) of the ones you won’t.

You also have the option of a combined policy, which includes both hospital and extras cover.

An excellent place to start is to talk with your doctor to discuss what type of private health insurance inclusions you should consider for your healthcare needs.

If you’re taking out private health insurance for the first time or upgrading to a higher level of cover, you’ll be subject to waiting periods. This is to stop people from claiming on their policies immediately after signing up, and then cancelling before they pay any premiums (which would drive up premiums for everyone).

Both extras and hospital policies are subject to waiting periods, so consider this when choosing a health insurance product. Typical waiting periods are:

• Between 2 and 12 months for most hospital and extras products (some extras waiting periods can be longer)
• 12 months for most hospital treatments related pre-existing conditions
• 12 months for inpatient pregnancy and birth-related services
• 2 months for palliative care, rehabilitation and psychiatric care.

You’ll also need to enquire about any limits your extras policy may be subject to. There are several types of limits that could apply, the most common being annual limits (a set amount you can claim for an extras service in a year).

The Australian Government wants you to take out hospital insurance because it eases the burden on the public healthcare system if you’re being treated as an inpatient in a private hospital. Because of this, there are incentives for you to sign up for private cover:

• Private health insurance rebates. Many Australians who take out a hospital, extras or combined policy are entitled to a government rebate to help pay for premiums. The rebate is income-tested and can either be deducted from your premium or claimed at tax time when filing your tax return.
• Aged-based discounts. Australians aged between 18 and 29 can receive discounts on eligible hospital policy premiums for merely taking out cover while they’re younger.

Conversely, there are also levies imposed on people who don’t have appropriate levels of cover depending on their circumstance; including, for example:

• Lifetime Health Cover loading (LHC). People who don’t take out and maintain private hospital insurance by 1 July after their 31st birthday will pay more for hospital cover when they do take it out. The LHC loading is 2% of your hospital insurance base premium for each year you didn’t hold cover from the age of 30 (e.g. 35 year olds pay a 10% loading).
• Medicare Levy Surcharge (MLS). High-income earners are subject to a surcharge of up to 1.5% of their taxable income (depending on their income threshold) on top of their income tax if they don’t hold valid hospital cover. This is separate from the Medicare levy, which most taxpayers pay regardless of whether they have insurance or not.

Where you are in life can have a big impact on the type of cover that will best meet your needs.

Here are some questions to ask yourself which could help you determine which policy you choose:

• Do you have any pre-existing conditions that may require treatment in the near future? Remember, this cover is subject to the 12-month waiting period.
• Are there any hereditary health conditions in your family that could impact you?
• Are you planning on starting a family and so will want obstetrics cover? Remember, this cover is subject to the 12-month waiting period.
• Do you also need to take out health insurance for partners or children?
• What kinds of out-of-hospital services or therapies do you regularly use that may be included on an extras policy?
• How will your health needs change as you age, and which services will you need access to? Remember, you can upgrade at any time; however, you will be required to serve the relevant waiting periods before claiming on these services.

Private health insurance is all about giving yourself more options for treatment when you need them. As such, you’ll need to ask yourself these questions again in the future to make sure your cover still works for you.

You can usually tweak aspects of your private health insurance to make your health insurance premium more affordable. Consider the following:

• Customise your excess. Some policies allow you to choose from various excess options. If you choose a higher excess (what you agree to pay if you make a claim and are treated in hospital), it’ll usually result in lower premiums. Because your excess is a fixed amount, it won’t change whether you require treatment for one week or one month.
• Choose a co-payment. A co-payment is an out-of-pocket cost you agree to pay for every day you’re admitted as an inpatient in a hospital. If your co-payment is less than what the excess would be and you know how long you’ll be staying at the hospital, it could be the more affordable option. Some co-payments will be capped at a maximum charge per person, despite the length of your stay.

In some cases, a policy may have an excess and a co-payment, so it’s important to consider the different options available when joining or switching your private hospital insurance.

While the Queensland and Tasmanian state governments cover residents in these states, Australians elsewhere will need specific ambulance cover to avoid footing the whole bill.

This means you could be left with significant out-of-pocket expenses if you require an ambulance but don’t have ambulance cover, so this is another thing to think about when choosing health insurance. Keep in mind though that ambulance cover may also be taken out separately to private health cover, which may be more comprehensive.

Whether it’s an industry-wide premium rate rise or you’ve been with your health fund for a while and aren’t sure if it’s still the best option for you, it’s always a good idea to reassess your cover. In addition to making sure you still benefit from the services your health insurance includes, it’s an opportunity to assess whether you could pay less for the same or similar products elsewhere.

This can be achieved through research or useful tools like our health insurance comparison service. It allows you to compare policies, extras, benefits and costs from a variety of health insurance providers in one convenient location. It’s simple to use, free and takes just minutes to reach a result.

Curious how private health insurance compares to Medicare? Learn more about the difference between the public and private health system with our guide.

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• Medicare Levy Surcharge
• Basic cover
• Bronze cover
• Silver cover
• Gold cover