Think cover first, health insurer second. Tips on figuring out what’s important to you before you pick a fund [read]
Understand some health insurance basics and make the process of buying the best health insurance a whole lot less complicated.
Here are 7 things you need to understand when deciding on a health insurance policy that will help you to avoid wasting money on cover you’re unlikely to use.
1. Understand the difference between Hospital cover and Extras cover
When choosing a health insurance policy you’ll need to decide on what type of cover you need. There are 3 options available: hospital cover, extras cover, or a policy that includes both.
If you’re admitted to a hospital for health care, hospital cover can help you pay the cost of your stay as a private patient. This includes payments for your accommodation, theatre fees and medical treatment you receive as an in-patient.
Extras cover will help you pay for health care services provided outside of a hospital such as dental, physio, and optical. Generally, these are medical services that are not covered by Medicare Benefits. Extras cover is sometimes referred to as ancillary, or general treatment cover.
Combined cover is simply a policy that includes both hospital and extras cover. Sometimes funds offer “packages”, others allow you to mix and match your hospital and extras.
2. Understand which level of hospital cover you need
Although funds often describe their cover types using product names such as Best, Gold or Ultimate, there are officially four different levels of hospital cover according to PHIO, the Private Health Insurance Ombudsman:
- Top hospital cover
- Medium hospital cover
- Basic hospital cover
- Public hospital cover
Top cover must cover all the services where Medicare pays a benefit, whereas medium and basic cover will have some exclusions and restrictions. Public cover offers only minimum benefits in public hospitals.
As a general rule, top cover costs more than medium cover, and medium cover costs more than basic cover. The age-old rule of you get what you pay for applies, so although top cover costs more, you’re covered for more things. On medium and basic cover, the exclusions and restrictions vary from fund to fund and from cover to cover. The trick is to understand what you need from your health insurance now and in the future, then arrange cover that meets those needs.
Members Own’s health insurance experts can help you understand your hospital cover needs and match them up with appropriate cover from our panel of not-for-profit/mutual health funds.
3. Understand the different levels of extras cover
Similar to hospital cover, extras cover policies often have a myriad of different names, such as Total, Bronze, or Level 1, but there are three official levels:
- Comprehensive cover
- Medium cover
- Basic cover
Comprehensive extras cover must include cover for general and major dental, endodontic, orthodontic, optical, non-PBS pharmaceuticals, physiotherapy, podiatry and psychology. It may also include a range of other covers such as remedial massage, natural therapies and chiropractic.
Medium extras cover must include cover for general and major dental, endodontic and any five of the following: orthodontic, optical, non-PBS pharmaceuticals, physiotherapy, chiropractic, podiatry, psychology and hearing aids.
A policy that doesn’t meet the requirements of either comprehensive or medium cover is classed as basic cover.
When buying extras cover, annual limits and other conditions imposed by different funds can make it difficult to compare apples with apples. Members Own’s health insurance experts can help you understand your extras cover needs and match them up with appropriate cover from our panel of not-for-profit/mutual health funds.
4. Get to know all the health insurance jargon
There are several common terms that are used in health insurance. It’s worth getting to know their meaning when comparing policies. These include:
|Premium||This is the amount you’ll need to pay for your health insurance policy, just like you do for car insurance. If you don’t pay your premium, you may not be covered and will be unable to make a claim.|
|Excess||When you’re admitted to hospital for treatment, the excess is what you need to pay towards your hospital admission. If you choose a policy with a hospital excess, you’ll usually pay a lower premium.|
|Modality||Extras policies are structured into modalities or services: optical, physiotherapy, general dental and so on.|
|Annual limit||Extras policies generally have annual limits for each modality. You can only claim up to your limit for each modality each calendar year. Annual limits usually reset on 1 January every year.|
|Grouped annual limit||Some extras policies group modalities together to help lower the overall premium. For example, if a policy offers a grouped osteopathy, chiropractic and physiotherapy annual limit of $600, the maximum you can claim for those services combined is $600.|
|Fixed or set benefit||Some extras cover policies pay fixed amounts for certain treatments. So in the event you use a particular extras service like a dental scale and clean, the insurer will pay a fixed amount of money for that item, provided you haven’t reached your annual limit.|
|Percentage back||Other extras cover policies work on a percentage back basis, for example if you’re on a 65% back extras policy you’ll receive 65% of the cost of the treatment, provided you haven’t reached your annual limit.|
|Gap||When you’re admitted to hospital, the medical gap is the difference between what your doctors charge and what’s covered by Medicare and your hospital cover. Every procedure that can be carried out by a doctor is included in the Medicare Benefits Schedule (MBS), which is a schedule of fees that Medicare believes is fair for doctors to charge for the procedures they perform. Medicare covers 75% of the MBS fee, and your health fund covers the remaining 25%. However, in the private system, doctors can choose to charge whatever they want to perform procedures. Anything they charge over the MBS fee is known as a “medical gap”. This can leave you out of pocket, so it’s important to have this conversation with your doctor before any procedure.|
|Pre-existing conditions||This includes any ailment, illness, or condition where you have experienced signs or symptoms within a defined period prior to taking out hospital cover.|
5. Understand what policy waiting periods are
All health insurers have waiting periods on certain healthcare services. This means when you commence a new policy, there may be an amount of time before you can access particular benefits.
The Government sets a maximum waiting period for hospital services. For example, you need to wait 12 months before you can claim on obstetrics (pregnancy) services or treatment for a pre-existing medical condition. Knowing about waiting periods is particularly important if you’re planning a family, as if you wait until you are pregnant to take out hospital cover then it’s too late.
Individual funds can set their own waiting period for general treatments covered under extras. There are usually no waiting periods if you need to claim on medical treatment because of an accident that occurs after you’ve joined.
6. Figure out the level of Government Rebate you’re likely to receive
The private health insurance rebate you’ll receive is based on your income and the age of the oldest person covered under the insurance policy.
If you’re earning less than $90,000 as a single, you’ll be eligible to claim the rebate through reduced insurance premiums or as part of your tax return with the ATO.
Read more about how the Australian Government Health Insurance Rebate works here.
7. Understand the Medicare Levy Surcharge
The Medicare Levy Surcharge charged is dependent on your income. If you’re earning over $90,000 as an individual, and $180,000 as a couple or family, you’ll be charge a percentage of your income if you don’t have health insurance. You’ll also incur a surcharge if you don’t have private hospital cover with a registered health fund.
If you’re considered a high income earner, you could be paying more money in tax than a basic hospital cover. Knowing the cost of the Medicare Levy surcharge could help you save money in the long run!
Time to start comparing
Like anything new, health insurance can seem complicated at first, but once you understand the jargon and the way policies are structured it all starts to make sense. Now all you need to do is use our online comparison tool to compare health fund policies and find the right one for you. Or you could simply contact the experts in our call centre and we’ll do it for you!