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How does private health insurance work?

Hospital cover varies — you may not be covered for some services or only partly be covered. You may have to pay for out-of-pocket expenses, an excess or co-payments. Extras cover also varies — most don’t cover all costs. Waiting periods can apply to both types of cover.

Types of cover

Private health insurance policies offer hospital cover and extras cover. If you want both, you can take out a combined policy or mix and match separate policies that meet your needs.

You can also take out ambulance cover if your state or territory government doesn’t offer it.

Hospital — what services and costs are covered?

Hospital cover helps with the costs of treatment as a private patient in hospital.

If you have private hospital cover, you can choose to be treated as a private patient in a:

  • public hospital
  • private hospital
  • day hospital facility

Doctor and specialist services covered

Depending on the hospital cover you take out, private health insurance covers some or all of the medical services that Medicare covers. See the list of Medicare Benefits Schedule (MBS) services, which includes an MBS fee for each service.

Medicare covers 75% of the MBS fee and private health insurance covers at least 25%. If your doctor or specialist charges more than the MBS fee for their service, you may have to pay the extra out of your own pocket.

Hospital services covered

Depending on the hospital cover you take out, private health insurance covers some or all of:

  • hospital accommodation (including meals) costs
  • theatre costs

Out-of-pocket costs

Gaps are the difference between:

  • what a hospital, doctor or specialist charges for a service
  • the amount that Medicare and your health insurer pays for that service

If your health insurer does not have a gap cover agreement with your doctor or hospital, you have to pay for gaps out of your own pocket (in most cases).

Example:

Your surgeon charges $1500 for an operation in a private hospital. Your health insurer does not have a gap cover agreement with your surgeon.

Medicare covers $750 of the cost and your health insurer pays $250. This leaves a $500 gap that you have to pay out of your own pocket.

Find out if you have to pay for gaps

It’s your right to get an estimate of how much your treatment will cost — this is called informed financial consent. Before you go to hospital as a private patient, check if there may be any gaps by talking to:

  • the doctors or specialists who will treat you in hospital
  • the hospital you’ll be treated in
  • your health insurer

To find out more:

Restrictions and exclusions

Restrictions are services that a policy partly covers.

For example, if your policy restricts hip replacement:

  • you’re covered as a private patient in a public hospital
  • you’re partly covered as a private patient in a private hospital — this means your health insurer will only pay a small part of your hospital accommodation fees and you’ll have to pay for all other costs

Exclusions are services that a policy does not cover. This means your health insurer will not pay for any of the costs of the service.

For example, some policies don’t cover services like:

  • heart surgery
  • knee and hip replacements
  • cataract surgery
  • pregnancy and birth-related services

Make sure you check for these when you choose a policy. To find out more, read policy exclusions and restrictions.

Did you know?

Four tiers of hospital cover — Gold, Silver, Bronze and Basic — will be introduced with reforms that take effect on 1 April 2019. This will help make it easier to understand and compare hospital cover. 

Excess and co-payments

In exchange for lower premiums for hospital cover, some policies give you the option to agree to:

  • co-payments — this means you contribute to the cost of each service you claim
  • an excess — this means you pay an amount when you claim a hospital stay

An excess may apply every time you — or other family members covered by the same policy — go to hospital in a year, or may be capped at a total amount that you pay in a year.

Examples

  • Under your policy, you have a co-payment of $50 for each day of a hospital stay. For a 2-day hospital stay, you pay $100.
  • You have an excess of $200. If you’re treated as a private patient in hospital, you pay the first $200 of your hospital costs before your health insurer pays any benefits.

Extras — what services and costs are covered?

Extras cover helps with the cost of health services that Medicare does not cover, such as:

  • physiotherapy
  • chiropractic treatment
  • home nursing
  • dental treatment
  • orthodontics
  • speech therapy
  • glasses and contact lenses

Levels of cover

Policies offer different levels of extras cover. Some may cover many services while some may only cover a few.

Make sure you understand what’s covered when you choose private health insurance.

Limited cover for costs

Extras cover only partly covers the cost of most services. Many policies only allow you to claim:

  • a certain percent of costs for each service — for example, cover for 50% of the cost for each dental treatment
  • a certain amount for the same service each year — for example, cover for up to $500 each year for dental treatments

Make sure you understand what’s covered when you choose private health insurance.

What isn’t covered?

By law, private health insurance does not offer cover for out-of-hospital medical services including:

  • GP visits
  • consultations with specialists in their rooms
  • diagnostic imaging and tests

Medicare covers these services.

Waiting periods

If you take out private health insurance or increase your cover, you may have to wait for a while before you can claim costs. Waiting periods can vary for different services. Your policy will list the waiting periods that apply to you.

If you’re sick when you take out health insurance, you may need to wait before you’re covered for treatment for that sickness. The waiting period for pre-existing conditions is usually 12 months.

The waiting period makes sure people can’t make a claim and then drop their cover straight away. This type of claiming would lead to higher premiums for everyone.

Find out more about waiting periods.

Exemptions (mental health)

If you have already served a two-month waiting period for limited psychiatric benefits, you can upgrade your hospital cover for psychiatric care without serving a waiting period. You can do this once in your lifetime.

Find out more about mental health exemptions for higher benefits.

Premiums

Your premiums depend on the policy you take out. Your premiums will be higher if you want:

  • cover for more health services such as extras
  • top or comprehensive cover
  • zero excess or co-payments

Government rebates and loadings may also affect your premiums:

Last updated: 
11 April 2019

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