How do clearance certificates work when switching between health fund providers?
If you need more out of your private health insurance, it’s essential to understand the process that must be undertaken when deciding to switch private health insurers.
Making the change can be daunting, particularly when faced with potential ‘waiting times’ until your new policy and benefits kick-in. It’s important to understand the cover you require and what benefits you’re entitled too. We’ll show you how to avoid the health insurance headaches and go about getting a clearance to make a suitable switch.
What is a clearance letter?
Changing your health care fund is simple, but there’s a catch, you’ll need a clearance certificate before you can. When trying to transfer from your Australian health fund to another, you’ll need a Clearance Certificate from your previous insurer before you can transfer between health funds.
Medicare provides universal access to health benefits but there are also three other private health insurance options, to give you more cover for items that aren't on Medicare.
What is the clearance certificate used for?
A Clearance Certificate is also be called a Transfer Certificate and gives a record of your health insurance cover. It has the following details on it.
- Type of cover (e.g. hospital, general treatment, combined)
- Level of cover
- Your commencement date
- Your cancellation date
- Your Lifetime Health Cover (LHC) Certified Age of Entry
- A history of your recent claim.
The aim of the clearance certificate is to protect insurance providers from consumers trying to cheat the system. In the past, insurance companies have seen consumers lodging large claims shortly after joining and then cancelling their membership. This increases premiums for others in that particular fund.
How do I obtain my clearance certificate?
You have two options. You can get your newly chosen fund provider to get your clearance certificate or you can speak to your current insurance provider and they will be able to give you a clearance to switch funds. If you want to handle this yourself, you’ll need to complete the document and send the certificate back yourself.
For example, private health insurer Bupa can arrange the transfer for you. All you need to do is contact the company and provide the following details.
- Name of your current health insurer and your membership number
- Consent to contact your current health insurer and arrange for cancellation
- Your current health insurer should then send you, and Bupa, a copy of your certificate, which outlines all the details of your membership with them.
Waiting periods and portability
The government has imposed ‘waiting periods’ to stop consumers cancelling soon after joining. This is an amount of time you are forced to wait until your account becomes active or new benefits start.
You may have to serve the waiting periods for any extra benefits or services on your new product. For any new or upgraded items, you will have to serve the waiting periods. For any services where you have not served the full waiting period, you will be required to pay the cost of your treatment with the new fund.
The maximum waiting periods that funds can impose for hospital treatment are:
- 12 months for pre-existing conditions
- 12 months for obstetrics (pregnancy)
- 2 months for psychiatric care, rehabilitation or palliative care, even for a pre-existing condition and 2 months in all other circumstances.
How portability works
It’s important to understand the process of ‘portability’. There are rules and regulations before you can switch or change policies surrounding your fund. The Private Health Insurance Act 2007 includes some specific rules to protect consumers wanting to change hospital products (either to another product in the same fund or to another fund).
These ‘portability’ rules mean that if you choose to transfer to another fund you won’t have to serve the normal waiting periods again, before benefits can be paid to you. If your new plan includes new or higher benefits that were not part of your old policy, you will have to wait for those benefits to commence.
Changing hospital cover
There are many different health funds and insurance products designed to meet your respective needs, so it’s vital you review your health insurance on a regular basis. This will ensure your fund fits your circumstances and financial position.
Here’s some simple questions to ask yourself before changing your hospital cover to a new fund.
- How long do I have to wait before benefits can be paid?
- If I go to hospital will I have to pay an excess or make any co-payments?
- How much will I need to pay and how often?
- Are there any treatments I won’t get full hospital benefits for?
- Are you happy to take the risk of not being fully covered for those treatments?
- Does this fund have agreements with private hospitals I might need to attend? If not, you might not get full cover at those hospitals.
- How does the fund’s gap cover scheme work?
- Find out what you can do to minimise any gap you might have to pay for the doctors’ bills when you go to hospital.
- Will this product exempt me from the Medicare Levy Surcharge? If not, you might have to pay an extra tax on your income.
- How much will it cost me?
Clearance Certificates and Your Lifetime Health Cover Loading
Your Clearance Certificate also confirms your Lifetime Health Cover (LHC) loading. LHC is a Government initiative designed to encourage people to take out hospital insurance earlier in life and to maintain their cover. The LHC rules determine how much you pay for hospital cover on top of the standard rates. If you do not have a clearance certificate as proof of your previous membership, you may be charged a higher premium as though you were purchasing private hospital cover for the first time.
All Australians over the age of 31 are required to take out some form of LHC. If you don’t want to pay a LHC loading you need to buy hospital cover before your LHC deadline. Your deadline ends at the start of July following your 31st birthday; or for new migrants, 12months from your registration for Medicare. LHC loadings apply only to hospital cover. They do not apply to private health insurance general treatment cover.
What will I be charged after my 31st birthday?
If you take out hospital cover before your 31st birthday, you won’t have to pay the 2 percent LHC loading for each year after that point in time. For example, if you take out hospital cover at age 40, you’ll be forced to pay an extra 20 percent on top of the cost of your hospital cover. The loading does however stop when it hits a maximum of 70 percent more.
Different types of health cover available
- Hospital Cover. Here you have the right to choose your own doctor, and decide whether you will be treated at a public or a private hospital that your doctor attends.
- General treatment cover (Also called ancillary cover or extras cover). This provides insurance against some or all costs of treatment by ancillary health service providers and includes services like dental treatment or chiropractic treatment.
- Ambulance (This is combined cover). Medicare does not cover the cost of emergency or other ambulance services. You can organise cover for this service as part of your hospital or general treatment plan, or as stand-alone cover
Review your health insurance regularly to reap the rewards into the future
There are many different health-care insurers in Australia, so it’s important you regularly assess which fund is most suited to your needs. By regularly reviewing your cover, you could save money in the long run. This will see you escape mounting debt created by your health-care costs
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