10 Things to consider when choosing a private health insurance policy

Everyone in Australia has the right to buy private health insurance - and 55% of us have done just that. But with the overwhelming selection on offer, how do you choose which policy is best? Here are some tips for what to look out for.

Should you take out insurance as a single, couple or family?

If you have a family or are part of a couple, it’s worth considering whether you should take out a joint health insurance policy. The cost of a couples policy is usually double the cost of a singles policy, so there may not be any savings in doing that, but it could be more convenient.

Think about whether your health needs are similar to your partner’s - if they are not, it may be better to have separate policies. Make sure you understand whether the benefit limits apply to both of you separately, or to the policy as a whole.

Children can be included on a family private health insurance policy, until they are 18. Generally speaking, after that they won’t remain on the policy, but there may be some exceptions. If you have extras insurance then that might provide them with cover for optical, dental, and physiotherapy, which could be useful.

If you’re thinking of starting a family, and want private obstetric care, check the waiting periods on maternity cover and cover for your newborn. There’s often a 12-month waiting period before you can claim pregnancy cover, so don’t wait until you’re expecting.

What level of hospital cover do you need?

Comparing what is covered under different hospital cover policies can be very difficult.

To try to simplify things, the Government is introducing a classification system of 4 tiers for hospital cover - Gold, Silver, Bronze and Basic.

Coupled with the 4 tiers, all hospital treatments have been assigned to one of 38 categories; for example “Digestive system” and “Kidney and bladder” are 2 of the categories.

Each of the 4 new tiers will guarantee cover for a certain number of categories, from a Gold policy which will cover all 38 categories, down to a Basic policy, which covers only a few.

Some categories - “Joint replacements”,  “Cataracts”, “Pregnancy and birth” are 3 examples - are guaranteed only in Gold tier products.

The categories and what services are included are standardised across all health insurers, meaning the same procedures and services are covered in each category across all health funds. This should make it easier to compare and decide which tier you require.

Slightly confusingly, some policies will label a tier “plus” or “+”, e.g. “Silver Plus”. This means, in addition to the minimum requirement set by the tier, the policy offers some additional cover.

Information on the 4 product tiers and which of the 38 categories they cover is available on the Government’s Private Health Insurance website.

These changes are being phased in from 1 April 2019, with all health funds/policies to be compliant by 1 April 2020.

What’s included in the policy?

Depending on your stage of life, your own medical history and your family medical history, the medical services you need are likely to differ. No point paying for a policy that covers you for services you may not require, such as assisted reproductive services (e.g. IVF) or weight loss surgery.

The new product tiers may allow you to save some money by selecting a policy that excludes some of the categories you don’t wish to purchase.

What about waiting periods?

If you start a new private health insurance policy or increase your level of cover, you will have to serve a waiting period. Some health funds, such as Qantas Health Insurance will recognise waiting periods already served for comparable services if you switch from another health fund.

Funds can set their own waiting periods for extras/ancillary cover, but the Government sets the maximum waiting periods for hospital cover.

If you have a pre-existing condition, take into account that health insurers are allowed to impose a 12-month waiting period before they will cover pre-existing conditions. You do not even have to have been diagnosed - if the condition is determined to have existed in the 6 months before you took out the policy, the waiting period may still apply. However, once the pre-existing condition waiting time is over you can access benefits and you won’t have to pay any extra.

There are some exceptions to the 12-month pre-existing condition waiting period - psychiatric care, rehabilitation and palliative care have 2-month waiting periods if pre-existing.

If you wish to be covered for pregnancy and birth, then you need to have “pregnancy and birth” included in your policy well before the event. The maximum waiting time is 12 months. If you want your baby covered from birth, then check with the fund whether they will be automatically covered and how far in advance you need to have the cover.

What excess should I select?

The excess is the amount you have to pay when you make a claim with your health insurance policy. Signing up for a higher excess will usually result in a lower monthly premium. An excess can be anywhere from $0 to $1000.

Some policies only charge one excess per person per annum, regardless of how many claims the person makes. Other policies will charge an excess for each separate claim in a year, meaning if you went into hospital twice that year, you would have to pay the excess charge for each admission separately. There usually isn’t an excess for children’s hospital visits.

When agreeing your excess, make sure that it’s enough to cover the “appropriate level of hospital cover” ruling for the Medicare Levy Surcharge, if this applies to you. The Medicare Levy Surcharge is payable if your income is above a certain threshold and you do not have “an appropriate level of private patient hospital cover”. Currently, to have “an appropriate level of cover”, singles must have an excess of $500 or less, and couples or families must have an excess of $1000 or less.

What about extras cover?

Extras or ancillary cover is cover for some out-of-hospital treatments that aren’t covered by Medicare. Services like dental, optical and physiotherapy.

You don’t have to take out extras cover, but some policies combine extras with their hospital policies (called Combined cover). Think about the type of services you are likely to use - and whether it is worth your while taking out extras cover. You receive a percentage of the fee back, usually between 60% and 75%, up to an annual limit. The limit is usually different for different services, e.g. $600 for major dental and $150 for chiro/osteo.

Some health funds have deals with optical providers for no gap spectacles (chosen from a specified range). Some offer free preventative dental services, e.g. a free dental clean and check-up each year.

Many complementary therapies, such as naturopathy, yoga and pilates, will not be covered from 1 April 2019 when the Government’s private health insurance reforms start.

Can I still choose my dentist or physiotherapist etc?

You may have been seeing the same dentist, physio or osteopath for many years. But will the extras policy allow you to access the maximum benefit when using them?

Many health funds now have a “Members choice” or “Preferred provider” list. The health fund has negotiated favourable rates, including discounts and capped amounts, with these providers and you should generally have lower out-of-pocket costs if you use these providers. There may be no gap for kids with the fund’s preferred providers.

If you have a family dentist or favourite physio that you want to keep using, there’s nothing to stop you, but it may be worth checking the health fund’s provider lists (available online), or giving your provider a call to see what your rebate may look like under that health fund.

Do I need ambulance cover?

Treatment and transport by ambulance is not covered by Medicare, and with high callout fees, it pays to make sure you are covered. The arrangements for ambulance costs vary between the States and Territories so check what is covered by your individual State or Territory.

For example, Australians residing in Queensland or Tasmania are fortunate in having their State governments cover the costs. In fact, for Queensland permanent residents, the cost for an ambulance anywhere in Australia is covered. Some States cover the ambulance costs of concession card holders and most cover those of pensioners.

If you do need Ambulance cover, it is available under Extras/ancillary cover - you’ll often find it’s bundled with the extras policy. 

Incentives and sign-up deals

It’s a competitive market for health funds keen on signing up new members and there are many incentives on offer. While you shouldn’t base your fund decision solely on incentives, when it comes down to the wire between a couple of funds, a relevant incentive can help seal the deal.

So, what kind of incentives are on offer? A quick survey reveals Qantas Frequent Flyer points, movie tickets, gift cards for sporting equipment and reduced wait periods as sign-up offers. But while that gift card may be tempting now, it shouldn’t outweigh the more important features of the policy.

Loyalty bonuses

Once they have your business, health funds are keen to keep it, with a raft of loyalty bonuses on offer. Usually these kick in after 12 months. One common loyalty bonus is increased claims benefits on some types of extras cover, such as dental. Sometimes these benefits increase on a sliding scale each year up to a maximum benefit level.

Discounted gym memberships or exercise classes are another type of loyalty bonus. Check the details carefully, as sometimes what’s on offer is quite specific, for example, only for certain health clubs/gyms, only for sessions with a personal trainer, or only where specified by a doctor as part of a chronic disease management plan.

Frequent flyer points are also on offer as a loyalty bonus, dependent on you signing up to an app and meeting regular health challenges.

If you’re interested in these types of bonuses, ask the insurer if they offer any wellness loyalty benefits.

The bottom line

So, when comparing different funds, make sure you focus on the important health features, and don’t be distracted by the bonuses on offer or a low cost. 

Don’t forget, all health funds now have to provide Standard Information Statements (SIS), that summarise the key features and limitations of the Hospital, Extras or Combined cover, including waiting periods, exclusions, restrictions and gap fees. These are available online.

References

1. Australian Government Private Health Insurance Ombudsman. Product tiers and clinical categories. https://www.privatehealth.gov.au/health_insurance/howitworks/producttiers.htm

2. Commonwealth Ombudsman. The pre-existing conditions rule. http://www.ombudsman.gov.au/publications/brochures-and-fact-sheets/factsheets/all-fact-sheets/phio/the-pre-existing-conditions-rule

3. Australian Government Department of Health. Private health insurance reforms. Changing coverage for some natural therapies. http://www.health.gov.au/internet/main/publishing.nsf/Content/private-health-insurance-reforms-fact-sheet-removing-coverage-for-some-natural-therapies

4. Australian Government Private Health Insurance Ombudsman. Waiting periods. https://www.privatehealth.gov.au/healthinsurance/howitworks/waitingperiods.htm

5. Australian Government Private Health Insurance Ombudsman. Standard Information Statements. https://www.privatehealth.gov.au/health_insurance/howitworks/producttiers.htm

6. Queensland Government. Ambulance. Interstate ambulance treatment and transport information for Queensland residents. Last updated Sept 2016 https://www.qld.gov.au/emergency/emergencies-services/interstate-ambulance-treatment
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