Health insurance
Private health cover is a complex issue but it pays to look closely at the detail
Q When should I take out health insurance?
There isn’t a hard and fast deadline. Many people chose to take it out when their life stage or health needs change, such as turning 25 and coming off their parents’ policy, deciding to try for a baby or experiencing a health issue that comes with growing older.
But there are a couple of government policies that encourage people to take out private cover at particular times. The lifetime health cover loading (LHC) means that if you don’t have private hospital cover by the time you turn 31 you’ll have to pay more if you do decide to take it out down the track (anywhere between 2% and 70% extra depending on how long you wait). The Medicare levy surcharge (MLS) means that if you earn over $90,000 and don’t have hospital cover you’ll have to pay extra tax (minimum of $900). So if you are approaching 31 or have just started earning more than $90,000, now is a good time to think about taking out private cover. LAURA CROWDEN
Q It’s so expensive – should I just self-insure?
The cost of treatment in a private hospital can be prohibitively expensive for most people, and it’s not something anyone should consider self-insurance for. If you’re worried about costs, consider taking up a higher excess or shopping around for a cheaper policy. Our analysis has found that families with top-tier hospital cover with an excess could save up to $1400 a year by getting a cheaper policy that offers the same level of cover.
Many people don’t get value out of their extras cover – they spend more on premiums than they get back in claims. That’s a waste of money, and you should consider taking out a more suitable policy or just dropping it. Take a night to do some personal accounting to figure out whether your extras policy is working for you or for your health fund. DANIEL GRAHAM
Q Can I choose to be treated as a public patient in a public hospital if I have private cover?
All Australians have the right to be treated as a public patient at a public hospital under the Medicare system, including those with private health insurance.
The benefit of being admitted as a public patient is that you may avoid the excess, co-payment and other costs associated with your hospital cover. On the other hand, the benefit of being admitted as a private patient has always been that you would get a choice over who treats you and how soon the treatment comes. However, that’s unlikely to matter in an emergency where regardless of whether you’re a public or private patient you would be seen by the next available doctor as soon as possible.
So in many cases presenting as a private patient in a public hospital may not provide any real difference. JOSH CALLAGHAN
Q Will a pre-existing condition affect my insurance policy and will I pay more for cover?
Private health insurance is community rated. This means that anyone is entitled to buy or renew a health insurance policy at the same price as anyone else. Someone young and healthy pays exactly the same for a policy as an elderly person with numerous pre-existing conditions (unless a lifetime health cover loading is applicable).
Unlikee othe other types of insurance, health cover er is notno risk rated – that is, you don’t pay more if you’re considered more likely to make a claim.
However, if you do have pre- existing conditions then you will need to serve a 12-month waiting period before you can claim when purchasing private cover for the first time or upgrading your policy.
Community rating is important, as it means those people who are reliant on their health cover don’t have to pay more or find their health insurance prohibitively expensive because of their underlying health issues. ABIGAIL KOCH
Q Why are there waiting periods and will I need to start a waiting period again if I change insurers?
Once you know why waiting periods exist then they do make sense, even though they can be frustrating if you weren’t aware you had to serve one before making a claim. The government sets waiting periods for hospital cover to ensure people don’t join a fund, make a claim and then leave, as this would push up the price of private cover for everyone. Waiting period lengths change depending on the hospital treatment but you’ll never have to wait longer than 12 months for anything, including pre- existing conditions and pregnancy. When you’ve served your waiting period, you won’t need to serve it again if you move to another fund, as long as you’ve chosen the same or a lower level of cover. ABIGAIL KOCH
Q Am I better off having couples cover or just cover on my own?
For couples without dependent children, there is no real benefit to a couples policy. Generally, a couples policy will cost the same as two singles policies (assuming they are otherwise exactly the same policy). It can actually be better to have separate policies, particularly if you have different health needs. For example, a couple trying for a baby could save by only upgrading the female to a more expensive policy that includes pregnancy cover while the male stays on a cheaper policy. Keeping your policies separate also allows you to tailor your own policy to your specific health needs.
That said, while there isn’t a financial benefit to having a couples policy it can be less hassle from an administrative perspective as you’ll have just the one policy with the same fund and just the one premium to pay. And remember, if you have kids that changes everything. If you have a child you’ll need
In many cases presenting as a private patient in a public hospital may not provide any real difference
Once your kids are adults, encourage them to take out their own policy before they turn 31 or they will have to pay the loading
to move to a family policy, which is always cheaper than a single-parent policy and a single policy. LAURA CROWDEN
QWhat is ambulance cover and do I need it?
Ambulance insurance covers the costs of being treated by paramedics or transported in an ambulance. If you are weighing up whether or not you need it, then here are a few facts to consider.
More than three million people across Australia were helped by paramedics in 2015-16, according to a recent Productivity Commission report.
Given that Australia’s population is roughly 24 million people, then arguably one in eight required ambulance assistance over the past couple of years.
Not all states require you to pay an ambulance callout fee, but if they do then these fees range from $372 in NSW to $1174 in Victoria. People living in Queensland and Tasmania have their ambulance costs covered by their state governments.
For ACT and NSW residents, ambulance cover is often included as part of your private health insurance policy. Residents in all other states may organise cover through their state-based ambulance authority or rely on their health insurance policy. ABIGAIL KOCH
QI’ve just moved to Australia and I’m over 31. Can I avoid the lifetime health cover loading?
The LHC loading is there to penalise people for taking out health insurance later in life and relying longer on the public system. Migrants face the same penalties, even though they weren’t a burden on our healthcare system – they weren’t even living here!
New arrivals have one year from the day they get full Medicare benefits to take out private health insurance, otherwise they will have to pay the premium loading if they eventually do take out cover. If you missed the date and do take out cover, your premiums will be 2% higher for every year you’re aged over 30.
The rules don’t take into consideration when you came to Australia, or whether you held private health insurance in your former country. The only way to avoid it is to take out a hospital policy before the one year is up, or never take one out at all. DANIEL GRAHAM QI am going overseas for a few months. Can I put my health insurance on hold? If you’re heading overseas you can put your health cover on hold. However, each provider will have rules relating to how long and how often you can do this. Provided you stick to the rules relating to your policy, it won’t affect your lifetime health cover (LHC) loading. For a short trip of just a few months your health insurer will most likely agree to suspend your policy for those few months and then reinstate it on your return. However, if your fund doesn’t agree to suspend your policy then keep in mind that the LHC scheme does allow an individual to go for up to three years without cover before applying any loading to premiums, so an option may be to consider cancelling your policy and reinstating it (perhaps with another provider who may be inclined to say yes next time) on your return.
If you are looking to cancel your private health insurance while travelling overseas, another important consideration is that you may be liable to pay the Medicare levy surcharge (MLS). It’s a good idea to contact your health fund to work out the amount of premium you expect to save by cancelling or suspending your cover and compare that with the surcharge you may have to pay. JOSH CALLAGHAN QWhen does my child come off a family policy and need to get their own cover? This really depends on your fund, as it varies a lot between policies and insurers. Some policies only cover adult children up to 18, while others will cover any dependent children until 21, 22, 23 or even 25 as long as they are a full-time student or apprentice. With some funds you’ll need to pay a dependent extension of around 25% to cover any adult kids who aren’t students.
Make sure you check your own policy as otherwise your children could find themselves uninsured (and with no ambulance cover) without even realising it! Once your kids are adults, encourage them to sort out their own policy before they turn 31 as otherwise they’ll have to pay the lifetime health cover loading if they decide to take it out later in life. LAURA CROWDEN
For the answers to more health insurance questions – such as the difference between an excess and a co-payment, whether you should have hospital and extras with the same insurer, how to reduce gap fees what to do if your insurer won’t pay a claim and more – visit moneymag.com.au/ health insurancequestions.