What Is Private Health Insurance In Australia: A Complete Guide

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People want to know if they need private health insurance when they have Medicare in Australia.


Around half of the Australian population has private health insurance. It gives a broader range of healthcare benefits that are not available with Medicare. 


Finding out which private health insurance is best for you financially and health-wise is vital.


In this blog, you will learn everything about what private health insurance in Australia is, its services, its pros and cons, and how it functions within the health system.



1. What Is Private Health Insurance In Australia?


Private health insurance cover patient costs for treatments in a private hospital. It can cover 'extras' – other medical treatments and services not covered by Medicare, such as physiotherapy, dental, and eye treatments.


Private health insurance lets you choose your doctor for treatment in a private or public hospital. You need to find a registered health insurer, check their offerings, select a policy, and pay premiums to remain covered to get health insurance benefits.


Private health insurance comes with a rule where policyholders can switch to any other policy with a different insurance provider without additional waiting times and changes in policy benefits.


The new policy will offer them the same benefits they used to get in their earlier policy.


Compared to house and motor insurance, private health insurance is community-rated. It implies:


  • The cost of a particular policy is the same for everyone 

  • No health insurer can deny insuring you or selling the policy that you wish to buy

  • You have all rights to renew your policy



2. How Is Private Health Insurance Funded In Australia?


Australia's Healthcare System has two main components: the private health system and the public health system. 


Publicly financed healthcare services include Medicare and the Pharmaceutical Benefits Scheme, funded through government programs.


On the other hand, private health insurance receives funding in two ways:


  • Out-of-pocket payments by people who buy their insurance 

  • Through employer-sponsored health insurance plans


In the latter option, the employer decides its employees' benefits and the coverage amount. When the employee participates in the Employer-Sponsored health insurance plan, the employer pays a premium depending on their needs. 


They obtain an insurance card that offers access to hospitals, doctors, and other healthcare providers, forming part of the insurance plan.



3. Why Do You Need Private Health Insurance?


Australians prefer private health insurance as Medicare covers only basic medical expenses. With Medicare, you may need to wait for a long time for specific surgeries and may find limited doctors, hospitals, and admission time options.


However, private health insurance comes with many benefits making you a private patient for the hospital and expenses incurred during the treatment. In addition to these, you also get other benefits such as:


  • A broader coverage includes managing chronic diseases such as heart/cardiovascular health, diabetes management/education, and more.

  • A broader selection of specialized medical professionals

  • Access to an extensive range of hospitals

  • No need to pay for the Medicare Levy Surcharge

  • Shorter wait times for prearranged surgery

  • Cover the cost of a private room for treatments included on your cover.

  • Avoid paying physiotherapy, optical and dental treatment fees by choosing the "Extras" cover.



4. How Does Private Health Insurance Work?


Health insurers offer policies with varying levels of coverage.


Usually, the higher-cost policies cover more services than the affordable ones as they cover limited benefits in a private hospital. All hospital insurance policies have the following categories: Basic, Gold, Silver, or Bronze.


You can manage your policy cover by choosing higher or lower premiums for reduced cover. You can opt for co-payment or pay an amount of the premium cost through an excess to lower the premium payment.


Private health insurance providers usually cover three different services:



  • Hospital Cover With Varying Levels of Inclusions and Exclusions


  • General Treatment or Extra Cover


  • Ambulance Cover: Some private health insurers also provide ambulance cover as a third type of insurance in states where the government doesn't cover ambulance transport costs. The cost of ambulance services covered varies across jurisdictions.



Most private health insurers offer a joint policy that includes hospital and extra services, or you can buy them as individual policies. Private health insurance is available for singles, families, and couples.


Let us look at the inclusions and exclusions in detail:





Hospital health insurance cover" covers the following expenses: 


  • In-hospital treatment, such as operating theatre, therapy, and accommodation fees, in either private or public hospitals

  • Hospital-in-the-home care such as wound care, IV therapy, and early discharge. 


You can choose your doctor, and you can also select treatment in a private or public facility.


Let us look at the type of treatment you can get under different scenarios when admitted to a hospital:


Type of Accommodation Choice of Doctor Choice of Hospital
Public patient in a public hospital No No
Private patient in a public hospital Yes No
Private patient in a private hospital Yes Yes



Besides the hospital cover for intentional or emergency operations, "Extras" help manage the costs of everyday non-hospital medical services not covered by Medicare.


It includes the following: optical, physiotherapy, dental, ambulance, osteopathy, mental health, chiropractic services, prosthesis, and other therapies.





Private health insurance can not cover services outside the hospital not listed on the Medicare Benefits Schedule. It includes services like cosmetic surgery and diagnostic testing provided by medical specialists and general practitioners.


Also, private health insurance doesn't cover pre-existing illnesses within the waiting period. So, when a person buys new private health insurance or switches their health insurance policy, they may need to serve a waiting period to claim benefits for that treatment. 


The waiting period is specified by the insurer and regulated by the legislation.


In addition to the above, private health insurance doesn't cover the following:


  • Visits to the General Practitioner

  • Consultations with a specialist in their rooms

  • Diagnostic tests 

  • Treatments that are not listed under Medicare. These include elective cosmetic surgery and other optional medical services not essential to maintaining your health.

  • Long-stay patients stay for over 35 days at a stretch. As health insurance regulations don't allow providers to insure for this cost, you will need to pay more for the hospital accommodation after the initial period.

  • Some hospital policies cover the expenses of shared room accommodation, but not a single room. So, before you plan to admit to a single room, you must check with the insurer whether your policy fully covers the cost in a public/private hospital. 



5. Do I Need Private Health Insurance If I Have Medicare In Australia?


Medicare is the universal healthcare system available to all citizens and permanent residents in Australia. The free or low-cost health care option offers accessible medical, hospital, and subsidized medication under the Pharmaceutical Benefits Scheme.


However, nearly 50% of the population also buys private health insurance to supplement the benefits of Medicare. 


The question is private health insurance worth it? To understand this, we need to determine what additional benefits private health insurance provides over Medicare coverage.


  • Medicare doesn't cover expenses incurred in the use of ambulance services. However, when you buy a private health insurance product, you get Ambulance coverage in the form of hospital coverage, extras coverage, or standalone products. 


  • Medicare doesn't cover hospital expenses such as accommodation fees incurred when you get the treatment in a private hospital. It doesn't allow the patient to choose the doctor, hospital, and time of admission to get the treatment. However, in the case of private health insurance, you get hospital coverage for treatment in a private hospital. You can decide your preferred hospital, doctor, and time of admission.


  • Medicare doesn't offer most dental treatments and exams, such as occupational therapy and physiotherapy. With private health insurance, you can get "Extra" coverage that covers the expenses incurred for your pre-selected health services. They include dental, home nursing, podiatry, chiropractic, and optical.


  • Medicare doesn't cover cosmetic surgeries. However, private health insurance can cover laser eye surgery or elective cosmetic surgeries not listed on the Medicare Benefits Schedule. Yet, the coverage is limited based on your policy.


So, do you need private health insurance in Australia? Yes, Medicare offers limited benefits and doesn't offer comprehensive coverage for various health needs, such as ambulance cover, dental treatments, and private hospital treatment.



6. Private Health Insurance Compare Tool


When comparing private health insurance in the market, websites like iSelect offer free-to-use insurance comparison tools and services for finding a suitable policy from insurance providers.


Here are things to consider when weighing up your private health insurance options:


  • The reputation of the insurance service provider

  • Your Age

  • Postcode

  • Family status (Do you want an individual policy or a family insurance policy)

  • Life stage (unmarried, turning 31, planning kids, raising kids, getting older)

  • Your budget

  • What is important to you:


  1. Hospital cover (any major procedures you need to cover, like dialysis, joint replacements, heart surgery, and more)

  2. Extras cover (any specific services such as physiotherapy, dental, optical, pregnancy)

  3. Ambulance cover


  • Waiting period

  • Customer Service

  • Other features or benefits you need

  • Ease of switching health insurance



Some of the top private health insurance plans are:


  • AHM Lite Package Bronze Plus

  • Medibank Bronze Plus Progress & Essential Extras 75

  • Bronze Hospital Plus $750/$1500 & Flex 60

  • GMHBA Bronze Essential Hospital & GMHBA Essential Extras

  • HCF My Future 750 Basic Plus

  • Basic Hospital Plus $750/$1500 Excess & Basic Extras

  • HCF Hospital Bronze Plus $750 Excess & HCF Starter Extras

  • HCF hospital bronze plus $750 excess & HCF starter extras (with optical)

  • Medibank Bronze every day & Essential Extras 60

  • Bronze Hospital Plus $750/$1500 Excess & Basic Extras

  • GMHBA Bronze Essential Hospital & GMHBA Essential Extras

  • HCF Hospital Standard Silver Plus & HCF Starter Extras

  • HCF hospital standard silver plus & HCF starter extras (with optical)

  • Medibank Bronze every day & Essential Extras 75



7. What Is The Best Private Health Insurance In Australia?


Bupa private health insurance is the leading private health insurance company. It has more than 70 years of experience in insuring and assisting Australians. Here are some of the reasons to choose it:


  • A wide range of health plans meets the needs of every person. Bupa offers a quote tool to compare policies and products to find the best Bupa health plan.


  • The vast network of Australia-wide Bupa-recognised hospitals helps you lower or eliminate out-of-pocket expenses.


  • Bupa Plus offers Member rewards and discounts from more than 40 partners across well-being, health, nutrition, travel, entertainment and more.



8. Advantages Of A Private Health Insurance


There are several benefits of owning a private health insurance policy:


  • Benefit 1: More access to hospital services and health cover


  • Benefit 2: Claim for reimbursement on non-Medicare health services such as dental, optical, chiropractic, and physiotherapy


  • Benefit 3: You wait for planned surgeries less, such as cataract surgery, joint replacements, etc. It usually takes more time in the public system.


  • Benefit 4: Facility to choose your doctor, hospital, and when you want to admit to the hospital


  • Benefit 5: Community-rated - It gives the right to everyone to buy and renew the policy at a price that is the same for all


  • Benefit 6: Pay less tax or Medicare levy surcharge. You may have to pay up to 1.5% of your taxable income (Medicare levy surcharge) when you don't have private hospital cover.


  • Benefit 7: Get an income-tested rebate from the Australian Government. Only those with private health insurance that offers hospital coverage, Extras coverage, or both and whose income is below a specified limit are eligible for a rebate.



There Are Two Ways To Claim The Rebate: 


  • Pay the entire premium and claim the discount at the end of the financial year as a tax offset. It reduces the payable tax amount.


  • Pay a reduced insurance premium, for which they get compensated directly by the Government of Australia (PHIO 2019).


Avoid paying Lifetime Health Cover if you are below 31 years. This step is supposed to motivate the young population to buy and maintain their private hospital insurance policy before the 31.



  • Benefit 8: Private hospital rooms offer more comfort and convenience.



9. Disadvantages Of Private Health Insurance In Australia


Having learned the benefits, let us discover a few cases when private health insurance may not be suitable:


  • The high average annual premium cost of health insurance products

  • Complex to understand

  • Private health insurance is not beneficial when treating health conditions listed under "Excluded treatments."

  • Private health insurance covers only part of the treatment cost, so you may still have substantial out-of-pocket expenses.



10. Who Can Help With A Private Health Insurance Problem?


You can directly contact your health insurer to resolve any queries or issues about private health insurance.


If you aren't satisfied with their resolution, you can seek further assistance by contacting the Private Health Insurance Ombudsman.


The body manages consumer complaints concerning private health insurance and assists consumers in disputes with insurers.



11. Conclusion


Health insurance is often a complicated and confusing topic. The wide range of policies and their degree of inclusions and exclusions can be overwhelming.


Hopefully, this blog has helped you better understand private health insurance in Australia to make better decisions about whether it is a need for you or not.


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