Better health and ageing for all Australians

Private health insurance

Private health insurance - glossary of commonly used terms

Terms used in public health insurance.

In this section:

30% Rebate

The Federal Government has introduced a 30% Rebate on private health insurance to help you and your family, and the many Australians with private health cover, to meet the cost.

The Rebate means if you pay a $1000 premium on private health insurance, you will receive $300 back from the Federal Government.

As well as receiving the Rebate, private health insurance also gives you peace of mind and the freedom to choose your own doctor and decide when you go into hospital. By making private health insurance more affordable for more Australians, the Rebate will help Australia's unique mix of public and private health care continue to be viable.

Benefit limitation period

You can elect to pay a lower premium for your private health insurance cover in return for agreeing to be covered for lesser benefits. You could elect to pay a lower premium and take out a hospital cover policy with one or more benefit limitation periods.

A benefit limitation period is where you are only entitled to restricted benefits for a particular condition or treatment for a set period of time. For example, you may decide to take out a private health insurance policy that may pay full benefits for various conditions or treatments but only pays restricted benefits for knee replacement surgery for the first 2 years of membership to that policy. After 2 years membership on the policy you would normally be entitled to full benefits for knee replacement surgery.

However, where a waiting period already applies for a particular condition or treatment, (for example, a pre-existing condition 12 month waiting period), some funds may commence the benefit limitation period from the end of this initial waiting period. If the waiting period was 12 months and you elect a 2 year benefit limitation period for this condition or treatment, you would not be entitled to receive full benefits for 3 years from when your membership on that cover commenced.

You should check with your health fund to ensure that you fully understand the implications of benefit limitation periods in your health cover.

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Community rating

Community Rating is the fundamental regulatory requirement on the operation of health funds. The intent of community rating is to facilitate affordable access to private health care for all Australians. It Means that everyone pays the same premium for their health insurance.

It differentiates private health insurance from other types of insurance in which the risk is rated in relation to an individual's circumstances of a particular group.

Health funds will be prohibited from any activity that constitutes improper discrimination against a person who seeks to become, or who is, a contributor (or dependant) to a health fund.

Improper discrimination includes discrimination on the basis of health status (except, for example, in the first 12 months for pre existing ailments), age (except for differences in State based contribution rates and benefits), any other characteristic of a person that is likely to lead to an increased requirement for treatment (such as occupation or leisure pursuits), or claims history.


Co-payment (some funds also refer to a co-payment as an "overnight excess" or "patient moiety")

You can elect to pay a lower premium for your private health insurance cover in return for agreeing to be covered for lesser benefits. You could elect to pay a lower premium and take out a hospital cover policy with a co-payment.

With a co-payment, the member agrees to pay an agreed amount each time a service is provided. For example, a policy may have a co-payment clause that requires the member to pay the first $50 for each day's hospital accommodation. If your policy has such a co-payment and you were in hospital for 5 days, you would have to pay $250 ($50 x 5). The total amount of co-payment a member can pay in a year is often limited to a set maximum amount.


Excess

See Front-end deductible

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Exclusion

You can elect to pay a lower premium for your private health insurance cover in return for agreeing to be covered for lesser benefits. You could elect to pay a lower premium and take out a hospital cover policy with one or more exclusions.

If your private health insurance policy features an exclusion for a particular condition you are not covered for treatment as a private patient in a public or private hospital for that condition. For example, if you purchase a private health insurance policy that excludes maternity, hip replacements and knee replacements, and you go into hospital as a private patient for one of these conditions, your health fund will not pay any benefits towards your hospital and medical costs.

If you are unsure which conditions are excluded on your policy you should ask your health fund.

Front-end deductible (also known as an excess)

You can elect to pay a lower premium for your private health insurance cover in return for agreeing to be covered for lesser benefits. You could elect to pay a lower premium and take out a hospital cover policy with a front-end deductible.

A front-end deductible is an amount of money a member agrees to pay for a hospital stay before health fund benefits are payable. For example, if your policy has an excess of $200, you will be required to pay the first $200 of your hospital costs should you go to hospital as a private patient. A front-end deductible could apply every time that you go to hospital in a year, or it may be capped at a total amount that you would ever have to pay in a year. If you are unsure how the excess on your policy works you should ask your health fund.

Most health funds do not require you to pay the excess amount if you have day surgery.


Gap

The 'medical gap' is the difference between the doctor's fee for services provided in hospital and the combined Medicare benefit and health insurance benefit. The patient must pay this amount, unless the health fund has a negotiated agreement or gap cover scheme in place.

You may also need to make a payment from your own pocket for non-medical hospital services, consultations in a specialist's rooms, or ancillary services.

Medicare Benefits Schedule (MBS)

The Government sets a schedule of medical fees - called the Medicare Benefits Schedule - based on a fair price and how much Australia can afford to pay for the total health system. Whether you are a member of a health fund or a private patient paying for all your own costs, the Government provides a rebate on nearly all medical fees. This rebate is currently 75% of the MBS fee for in-hospital medical fees and 85% of the MBS fee for medical fees incurred out of hospital.

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Overnight excess

See co-payment.


Patient moiety

See co-payment.


Pre-existing ailment

Health funds are able to impose a maximum 12-month waiting period for hospital treatment for ailments, illnesses or conditions that are considered to be pre-existing.

The National Health Act 1953 specifies a pre-existing ailment as an ailment, illness or condition, the signs or symptoms of which, in the opinion of a medical practitioner appointed by the health fund, existed at any time during the six months prior to the member joining a hospital table or upgrading to a higher level of cover.

What this means in real terms is that:

  • the sign or symptom of the pre-existing illness, ailment or condition should have been reasonably apparent or reasonably evident to the contributor; or
  • there must be something that would have been apparent to a reasonable GP on a routine external examination if the contributor had been examined.

If you require hospital treatment, but you have less than 12-months membership on your current hospital table, a 12-month waiting period could apply if your condition was pre-existing. The decision about whether your condition is pre-existing is made by your health fund. It is important to check this with your health fund prior to your admission to hospital. Remember that your health fund will need at least a week or so to advise you about whether the pre-existing ailment 12-month waiting period applies.


Public hospital (or basic default) table

Some health funds offer policies that have restricted benefits for all conditions. This policy is sometimes called a public hospital table or a basic default table. Under this policy you will be covered for treatment as a private patient in a public hospital, but may face considerable out-of-pocket costs if you were to be treated in a private hospital.

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Restricted benefits

You can elect to pay a lower premium for your private health insurance cover in return for agreeing to be covered for lesser benefits. You could elect to pay a lower premium and take out a hospital cover policy that only pays a minimum level of benefits for certain conditions, ie that has restricted benefits.

If your policy has restricted benefits for some conditions, you may be covered for treatment as a private patient in a public hospital for these conditions, but only some of the costs will be covered if you are treated in a private hospital. For example, some health funds do not pay benefits for theatre fees, intensive care units, coronary care units, labour wards or same day theatre.

If you are unsure about whether restricted benefits apply to your policy you should ask your health fund.


Suspension of private health cover

A suspension of health cover means that, with the agreement of your health fund, you may stop paying your premiums for an agreed period of time. However, you will not be able to claim any benefits from the health fund for the period of your suspension. You are still considered to be a member of the health fund while your cover is suspended. This means that at the end of the suspension period, you can start paying premiums again without having to serve new waiting periods or be penalised under Lifetime Health Cover.

Health funds determine their own criteria for a suspension of membership. Some of the circumstances for which health funds may grant suspensions include working or studying overseas, financial hardship or temporary unemployment. These circumstances can vary between health funds. Any period of suspension granted by a health fund will not affect your status under Lifetime Health Cover.


Waiting period

A waiting period is the length of time a contributor may have to wait before being eligible for health fund benefits.

The Government has set maximum waiting periods for benefits for hospital treatment. The maximum waiting periods that health funds can apply are:

  • 12 months for treatment related to a pre-existing ailment
  • 12 months for obstetrics and pregnancy related services; and
  • 2 months for all other services.

Health funds can waive these waiting periods if they choose to do so. Health funds are able to determine their own waiting periods for ancillary (also known as extras) services. You should check with your health fund if you are unsure what waiting periods apply to your level of cover.